Certified Government Financial Manager (CGFM) Practice Exam 2026 – Your All-in-One Guide to Exam Success!

To evaluate long-term fiscal sustainability in government finance, analyzing the debt-to-Gross Domestic Product (GDP) ratio is a powerful technique. This method involves comparing a government’s total outstanding debt to its GDP, which provides insights into how manageable the debt load is relative to the size of the economy.

When the debt-to-GDP ratio is low, it typically indicates that a country is in a healthier fiscal position, as it suggests that its economic output is sufficient to support its debt levels. Conversely, a high ratio may signal potential challenges in repaying debt, thus raising concerns about future fiscal stability. Policymakers and analysts often use this metric to gauge whether current fiscal policies are sustainable over the long term, helping to inform budget decisions and economic strategies.

Other options, while relevant to fiscal management, do not directly assess long-term sustainability in the same way. For instance, surplus management focuses on how a government handles budget surpluses rather than on overall sustainability. Similarly, expenditure review pertains to analyzing spending practices but does not provide a comprehensive picture of long-term fiscal health. Revenue forecasting is essential for budgeting but primarily addresses short-term revenue expectations rather than ongoing sustainability.

By examining the debt-to-GDP analysis, stakeholders can better understand the relationship between debt