Research and Prevention of Local Government Debt Risk Based on the Improved KMV Model

Today, changing international relations and increased uncertainty about external pressures have put downward pressure on China's economic growth. To comply with development, some local governments have appropriately increased the taxes, raising the risk of debt default. This paper applies the improved KMV model to analyze and measure the relevant data of the Guangxi Zhuang Autonomous Region government from 2015 to 2023. The results show that the probability of government default is negligible if the debt scale of the Guangxi Zhuang Autonomous Region government is controlled below 29.217 billion yuan, 26.215 billion yuan, 24.733 billion yuan, and 27.433 billion yuan during the period of 2024 - 2027, respectively. The article concludes with a series of policy recommendations in the hope of effectively preventing and resolving local debt risks and safeguarding the healthy development of the local government economy.