TARUN DAS Lecture External Debt-2

8/9/2019 TARUN DAS Lecture External Debt-2

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UNITAR Lecture-2 External Debt - Tarun Das 1

External Debt

Inter-country Comparisons

Presented by

Tarun Das

Economic Adviser, Ministry of Finance, India and

Resource Person forUNITAR


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1.1International Comparison of

top 10 debtor countries in 2003

Country and Rank in Total external Share of Debt to GNP

terms of stock of debt concessional ratio

external debt (US$ billion) debt (per cent) (per cent)

1. Brazil 235 1 30

2. China 194 17 15

3. Russian Federation 176 1 50

4. Argentina 166 1 104

5. Turkey 146 4 77

6. Mexico 140 1 23

7. Indonesia 134 27 80

8. India 114 38 22

9. Poland 95 7 40

10.Philippines 63 23 77


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1.2 International Comparison of

top 10 debtor countries in 2003

Country and Rank in Ratioof short term Debt service

terms of stock of debt to (per cent) ratio

external debt Total debt Foreign exch. (per cent)

1. Brazil 8.3 39.8 63.8

2. China 32.7 17.5 7.3

3. Russian Federation 17.6 39.3 11.8

4. Argentina 13.8 162.4 37.9

5. Turkey 15.8 64.7 38.5

6. Mexico 6.6 15.5 20.9

7. Indonesia 17.0 63.2 26.0

8. India 4.2 4.6 18.1

9. Poland 20.5 57.4 25.1

10.Philippines 9.9 39.0 22.1


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1.3 Indebtedness and IncomeGroup Classification

Severely Indebted:

Either PV/XGS> 220%

Or PV/GNP > 80%

Low Income:

PC-GNP less than $765

Middle Income : PC-GNPbetween $766 and $9385

Moderately Indebted:

Either 132%


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1.4 Selected countries in Asia

SeverelyIndebted lowIncome (SILI)

countries

SeverelyIndebted middleIncome (SIMI)

countries

Bhutan

Kyrgyz RepLao PDR

Myanmar

Tajikistan

Indonesia

KazakhstanMaldives

Samoa

Turkey


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ModeratelyIndebted lowIncome (MILI)

countries

ModeratelyIndebted middleIncome (MIMI)

countries

Cambodia

Mongolia

Pakistan

PN Guinea

Solomon Island

Uzbekistan

Malaysia

Philippines

Russian Fed

Sri Lanka

Turkmenistan


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Less Indebted lowIncome (MILI)

countries

Less Indebted middleIncome (MIMI)

countries

Bangladesh

India

Nepal

Vietnam

Armenia

Azerbaijan

China

Fiji

Iran Ism Rep

Thailand

Tonga

Vanuatu


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1.7 International Comparison oftop 10 debtor countries in 2003

Country and Rank in Present Value PV/ GNP PV to Indebtedness

terms of present of external debt ratio exports and income

value of external debt ( S$ billion) (per cent) ratio (%) Classification

1. Brazil 254.1 54 323 Severe/ Middle

2. China 188.5 15 48 Less/ Middle

3. Russian Federation 186.5 117 531 Severe/ Middle

4. Argentina 184.2 52 135 Moderate/ Middle

5. Turkey 157.1 25 83 Less / Middle

6. Mexico 153.0 81 243 Severe/ Middle7. Indonesia 136.9 82 200 Severe/ Middle

8. India 100.3 19 106 Less/ Low

9. Poland 93.5 48 147 Moderate/ Middle

10.Philippines 65.4 80 147 Moderate/ Middle


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1.8International Comparison ofSouth Asian countries in 2003

Country and Rank in Present Value PV/ GNP PV to Indebtedness

terms of present f external deb ratio exports and income

value of external debt (US$ billion) (per cent ratio (%) Classification

1. India 100.3 19 106 Less/ Low2. Pakistan 29.7 41 189 Moderate/ Low

3. Bangladesh 12.8 25 128 Less/ Low

4. Srl Lanka 8.4 51 110 Moderate/ Middle

5. Nepal 2.1 38 131 Less / Low

6. Bhutan 0.4 74 252 Severe/ Low

7. Maldives 0.2 35 41 Severe/ Middle


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1.9International Comparison ofPacific countries in 2003

ountry nd nk i Present V lue PV/ G P PV to Indebtedness

termsof resent ofexternal debt ratio exports and income

alueofexternal de billion) percenratio %) Classification

1. iji . 15 24 Less / Low2.Papua Guine 2.5 80 104 Moderate/ Low

3. amoa 0.4 122 209 Severe/ Medium

4.Solomon Island 0.2 60 176 Moderate/ Low

5. onga 0.084 40 74 Less / Medium

6.

Vanuatu 0.095 28 46 Less/ Medium


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1.10 Selected Asian countriesCountry PV PV XGS PV GNI

$Bln (%) (%)

1 Armenia 0.7 85 29 LIMI

2 Azerbaijan 1.4 47 23 LIMI

3Cambodia 2.7 107 70 MILI

4 Iran 10 30 8 LIMI

5 Kazakhstan 23 183 95 SIMI


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($ Bln) (%) (%)

1 Kyrgyz Rep 1.6 221 98 SILI

2 Lao PDR 2 356 91 SILI

3Malaysia 50 45 56 MIMI

4 Mongolia 1 149 95 MILI

5 Myanmar 6 187 MILI


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($ Bln) (%) (%)

1 Tajikistan 1 112 77 SILI

2 Thailand 51 59 41 LIMI

3 Turkmenistan* MIMI

4 Uzbekistan 5 142 47 MILI5 Vietnam 14 67 39 LILI


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1.13-A Indonesia-External Debt Indicators ($ BLN)

Year 1980 1990 2000 2003

EDT 20.9 69.9 144.4 134.4

LTD 18.2 58.2 110.9 101.2

PG 15 48.0 69.8 73.4

Use of IMF 0 0.5 10.8 10.3

Short-term 2.8 11.1 22.6 22.9

GNI 74.8 109.2 139.3 199

XGS 29.9 74.3 71.1


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1.13-B Indonesia-

External Debt Indicators ($ BLN)

1980 1990 2000 2003

TDS 3.1 9.9 16.7 18.5

Interest 1.5 4.0 7.4 4.2Pr.Rep 1.6 6.0 9.3 14.3

MGS 33.1 66.9 63.9

RES 6.8 8.7 29.4 36.3

BCA -3.0 8.0 7.5


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1.13-C Indonesia-

External Debt Indicators (%)

1990 1999 2000 2003

EDT/ XGS 234 194 190

EDT/ GNI 28 64 104 68

TDS/ XGS 33 23 26

INT/ XGS 13 10 4

INT/ GNI 1.9 3.6 5.3 2.3

RES/ EDT 32.5 12.4 20.3 27.8


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1.13-D Indonesia-

External Debt Indicators

1990 1999 2000 2003

RES/ EDT 32.5 12.4 20.3 27.8RES/ MGS ( 3.1 5.3 6.7

Short/EDT 13.3 15.9 15.7 17.8

Conc/ EDT 36.4 26.4 21 27.4Multi/EDT 8.8 20.4 13.8 14.1


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2 International best practices

1 New Zealand - The New Zealand DebtManagement Office (NZDMO

2 Australia- The Australian Office of Financial Management (AOFM)

3 Ireland- The National TreasuryManagement Agency (NTMA)

4 The Maastricht Treaty of the EuropeanUnion

5 Fund-Bank Conditionality6 Heavily Indebted Poor Country (HIPC)

Initiatives


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3.1 Debt management objectives

and priorities (% of respondents)

(a) Minimise financial costs and risks-38%

(b) Funding management-26%

Management of debt- 15%

(d) Development of financial markets-9%

(e) Others 13%


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3.2. Establishment of benchmarks

for risk management(% of respondents)1.Countries establishing guidelines for

risk management 45%

2. Countries establishing benchmarks forforeign currency debt 24%

3.Countries establishing benchmarks for

portfolio performance 21%4. Countries establishing benchmarks fordomestic currency debt 13%


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3.3 Risk managementguidelines

(a) Limit currency risk 35%

(b) Avoid excessive short-term debt/ to smooth maturity profile 29%

(c) Debt in least volatile currency24%

(d) Limit on debt with floating

interest rate 18%(e) Debt matching reserves 12%

(f) Others 18%


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3.4. Analyticaltechniques

foru

ndertakingriskanalysis (%)(a) Not using any analytical

techniques32%

(b) Value-at-Risk (VAR)/ Cost-at-Risk (CAR) - 23%

(c) Debt sustainability indicators-16%

(d) Others 29%


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3.5 Constraints for

establishing benchmarks5.

( ) L ck f t t licy 2

( ) L ck f t t x rtis

2

(c) cc ss t fi ci l rk ts 1

( ) L ck f t it ri 10

( ) iffic lt c ic vir t 10

(f) th rs 21


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3.6 Sovereign Debt

Management6. Use of derivatives to hedge currency

and interest rate risks

( Currency swaps 31%( Interest rate swaps 24%

( Use of exchange commodity futures andoptions 7%

7. Constraints for using derivatives( Lack of technical knowledge 71%

( Undeveloped financial markets 17%

( Legal constraints 12%


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3.8 Sovereign Debt

Management8.Institutions managing the

foreign currency debt

( Ministry of Finance 51%

( Jointly by the Ministry of Financeand the Central Bank 3 %

( Central Bank 11%

( Independent Debt Office 95


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3.9 Sovereign Debt

Management9. Coordination of both public and

public debt

( Ministry of Finance 35( Jointly by the Ministry of Finance (MOF)

and the Central Bank (CB) 24

( Partly by MOF and partly andindependently by the CB 24

( Debt Management Committee 18


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3.10.Highest authority forapproval of debt

Authority Dom.debt Ext.debt

( Finance minister/ Governor of the

Central Bank 72% 49%

( Parliament 6% 21%

( Interministerial board 8% 12%

( President/ Prime Minister 6% 9%

( DG of independent authority8% 9%


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3.11Average time taken for

approval of external debt

( One day or less 10%

( Less than a week 13%

( More than a week, but less than three

months 65%

( More than three months 13%


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3.12. Management of

Contingent liabilities

( Subnational entities are allowed to raise their

own funding abroad 69%( Central govt provides explicit guarantees for

IBRD loans 68%

( Central govt bears fully the exchange rate

risk for IBRD loans 41%( Central govt shares partially the exchange

rate risk 11%


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3.13. Efficiency of Middle

Office (% of respondent)

( Use of Market Information system (MIS)

76%( Access to internet 91%

( No Middle Office Unit 43%

( Distinct Middle Office Unit 43%( Middle Office placed under the direction of

the Front Office 3%


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3.14. Main constraints for

external debt management

( Lack of proper organisational structure 31%

( Macroeconomic risk 14%

( Lack of technical staff in the middle office

12%

( Lack of technical staff in the back office 6%( Lack of legal framework 6%

( Limited local debt market 6%


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Thank you

Have a Good Day

TARUN DAS Lecture External Debt-2

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