Methodology
Current annual cost = debt stock × current average rate.
Post-refinancing cost = debt stock × [(1 − refinancing share) × current rate + refinancing share × new rate].
Annual cost change = debt stock × refinancing share × (new rate − current rate).
For a debt stock of 1 trillion, with 20% refinanced from an assumed 2.5% average cost to 4.0%, annual interest expense increases by 3 billion.
This is a static, full-year repricing scenario. It assumes constant debt stock and that the refinanced tranche previously carried the portfolio-average rate. It is not a sovereign fiscal forecast.
How to interpret the result
Does a 150 bp rate increase immediately affect all sovereign debt?
No. Fixed-rate debt typically reprices as it matures. This model applies the new rate only to the selected refinancing share.
Reference
IMF – Fiscal Monitor and public-debt analysis
Educational model. Inputs are illustrative; verify market conventions and contractual terms before use.