Perspectives presents emerging issues and ideas on which action has to be initiated by managers in industry, government, educational institutions and other organizations.

Currency Swaps : An Instrument of International Finance

Sivaprakasam Sivakumar and Anita Mathew

A currency swap involves exchange of principal and interest payments in two different currencies between two parties. Swaps are off balance sheet transactions and have grown at a phenomenal rate.

This article by Sivaprakasam Sivakumar and Anita Mathew focuses on the development of the swap market, presents an overview of currency swaps, and analyses the participants. It also discusses the basic types of swaps, assesses the risks and regulatory means of minimizing the risks, focuses on the practical applications, and evaluates the relevance of swaps to India.

Sivaprakasam Sivakumar is a doctorate student in the Department of Economics at the University of Nebraska-Lincoln, USA and Anita Mathew is an Assistant Manager at The ICICI Limited, Madras.

Vol. 21, No. 2, April - June 1996

Currency Swap

Swaps are privately negotiated customized transactions. Swaps are "off balance sheet transactions." Inacurrency swap, one party agrees to exchange principal and make regular interest payments in one currency to a counter party for principal and periodic interest payments in another currency. Swaps are useful in hedging exchange rate and interest rate risks by taking advantage of arbitrage opportunities that arise due to the prevailing imperfections in capital markets. The objectives of this study are:

* Develop a basic understanding about the development of the swap market, present an overview of currency swaps, and analyse the participants in currency swaps.

* Study in detail the basic types of swaps and creation of synthetic instruments.

* Assess the risk exposure of swaps and explore the various regulatory means of minimizing the potential risks of swaps.

* Focus on the practical applications of swaps for fund raising and use by central banks.

* Evaluate the relevance of currency swaps to India.

Development of the Swap Market

Currency swaps evolved from back to back loans. In a back to back loan, two parties in different countries make loans to one another, of equal value, each denominated in the currency of the lender and each maturing on the same date. The two loans are covered by separate agreements. The initial loan will be transacted at the spot rate, the interest payments and principal repayment would be carried out at formal rates. The back to back loan had the following drawbacks:

* Each loan was a new obligation on the balance sheet.

* Since each loan agreement was separate, in the event of non-performance by a counterparty, the other party

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is still obligated to continue payments. Currency swaps were the solution to the above problems. The currency swap between IBM and World Bank in 1981 lent credibility to this financial instrument and played a crucial role in the rapid development of the currency swap market.

Overview of Currency Swaps

Table 1 indicates that though the volume of transactions of each derivative product has increased, the proportion of each derivative product has remained constant. The International Swaps and Derivatives Association (ISD A) is the industry association for the world's leading participants in privately negotiated swaps and related derivatives transactions. The association was chartered in 1985 and has over 270 members from around the world. The main purpose of the association is to encourage prudent and efficient development of the privately negotiated derivatives business.

The ISD A in its global swaps transactions survey of 1994, reports transactions by currency and the results of the survey are presented in Table 2. The volume of currency swap transactions increased by a meagre 1.7 per cent from 1993 to 1994. The dollar is the most popular currency medium for currency swaps followed by the Japanese yen, the Deutsche mark and the Swiss franc. ISDA published the results of a market survey that measured world-wide transactions in swaps and other privately negotiated derivatives for the first six months of 1995. The data were collected from 61 dealer members of ISDA and collated by the public accounting firm of Arthur Andersen. The salient features are:

Measured in US dollars, of notional principal,1

transactions outstanding as of June 30th 1995 in interest rate swaps, currency swaps, caps, collars, floors, and swaptions reached $13.923 trillion up from $11.303 trillions as of December 31st 1994.

Table 3 compares the breakup of currency swaps. The outstanding volume of currency swaps rose by 13.7 per cent in the first half of 1995. The interesting feature is that the Japanese yen is becoming an increasingly popular currency for swaps.

The Swap-market Participants

The broad classes of participants in the swap market are end users and intermediaries. An end user is a 1 The reference amount used to calculate cash flows

under derivative contracts and in no way a measure-ment of the risk of the transactions. Risk is measured by replacement value which is the cost of unwinding the existing contract.

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counterparty who engages in a swap to hedge his currency exposure for some economic reason. An intermediary (or a dealer) enters into a swap for earning fees or trading profits.

Banks and corporations around the world, thrift institutions and insurance companies, government agencies, and international agencies are all active. The basic advantages of a swap are: Scope for Medium-term and Long-term Hedging : The short-term hedging methods used in trade finance in the forex market are efficient. However, beyond the one year maturity period, the forex markets are thin and non-existent. The basic advantage of a swap is that it provides the firms long-term hedging cover against exchange rate risk by adding liquidity and contributing to the development of long-term forward markets for the major trading currencies. Arbitrage: Each capital market has unique perceptions of its participants. The creditworthiness is assessed differently. Many US Corporations can borrow at significantly lower rates than the World Bank in the Swiss franc market, despite the fact that the World Bank is the largest non-resident borrower in that market. This differential assessment of creditworthiness in different credit markets is the driving force behind the swap. This provides opportunities for companies to borrow at rates, which otherwise would not have been possible. Asset and Liability Management: Let us assume that a manufacturer from Switzerland has been awarded a contract to build an automated food processing line2 for a McDonalds in the US. The Swiss company has now dollar receipts whereas the cost of production of the complete automated system takes place in Switzerland and the company has liabilities in domestic currency. Here comes the "mismatch" : their company has assets in dollars while liabilities are in Swiss francs. The company can alleviate its exposure due to this currency mismatch by swapping with an US company/bank or financial institution. The crux of the swap is that you get to reduce your exposure with an additional benefit of obtaining foreign borrowing at competitive rates. Hedging Currency Exposure : Take the example of a UK company that has UK pound sterling income but its liabilities outstanding are in Euroyen. Assume that Japanese interest rates are raising while UK rates are falling. The yen is strengthening against the pound. The UK company is steadily losing as its receipts are decreasing in value while its payments are getting costlier. This UK company can enter into a cross currency 2 It is assumed that the Swiss manufacturer will

assemble the line in Switzerland and export it to the US in a completely knocked down condition.

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swap in which it pays pound sterling LIBOR and receives fixed rate Euroyens in return. This hedges its currency risk. The UK company gets to pay in pounds when the interest rates are falling. The counterparty also stands to gain because they will get access to Euroyens at rates lesser than they would have otherwise got. Hence it is a win-win situation. Intermediaries : In the early days, most intermediaries acted merely as "brokers" bringing together two swap parties and arranging swaps. Nowadays, most large intermediaries act exclusively as counterparties; this is a more acceptable counterparty credit risk to both end users in the swap chain. The largest intermediaries are commercial banks and investment banks and they have different approaches to the swap market. Commercial banks tend to view swaps as an extension of more conventional banking business. Investment banks tend to view swaps as tradable securities. They concentrate their efforts to standardize the swap contracts to improve the liquidity of the market. Investment banks are able to offer competitive rates because of their trading and hedging expertise. The dealers almost have continuous quotations for standard types of swaps, generally with bid/offer spread of 10-15 basis points.

Mechanics of Swap

The diverse requirements of corporate treasurers, bank liability managers, finance ministers, and portfolio managers account for the rapid growth of the swap market. Basically, the currency swap can be subdivided into: * Fixed rate currency swap * Currency coupon swap. Fixed Rate Currency Swap

A fixed rate currency swap involves exchange between two counterparties of fixed rate of interest in one currency in return for fixed rate of interest in another currency.

It basically involves three steps: initial exchange of principal, periodic interest payment, and re-exchange of principal on maturity.

The use of currency swaps can be demonstrated with the following example. An US multinational wants to finance the expansion plans of its subsidiary in Japan using its dollar funding pool. An intermediary (bank) can suitably structure the deal so that the intercompany loan can be made at an attractive Japanese yen interest rate.

This is exactly the kind of problem which currency swap solves. The benefits are twofold: firstly, the US parent can ensure that it gets to borrow at the most

Vol. 21, No. 2, April - June 1996

competitive rates and secondly, it minimizes foreign currency risk (Figure 1).

Figure 1: Fixed Rate Currency Swap

Initial Exchange of Principal : The bank exchanges with the US parent an amount of Japanese yen equal to the principal of the intercompany loan in return for an equivalent amount of US dollars based on the spot rate. The Japanese yen amount is then passed on by the US parent to its Japanese subsidiary by means of an intercompany loan. Periodic Interest Payments : As time passes, the US parent then pays fixed Japanese yen as interest regularly to the bank (matched with the payment dates and amounts underlying the intercompany loan) in return for receiving fixed US dollar interest. Re-exchange of Principal on Maturity : At maturity, the Japanese subsidiary repays the Japanese yen princip al amount which is passed on to the bank in exchange for the US dollar principal amount. Currency Coupon Swap A currency coupon swap is a combinaion of interest rate swap and fixed rate currency swap. The only difference

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between this and the earlier fixed rate curency swap is that the fixed interest rate in one currency is exchanged for floating rate interest in another currency.

Let us examine how this works by means of an example. An US firm/corporation wants to enter into a major leasing contract for a capital project to be located in Japan. Assume that the prevailing tax laws of Japan provide tax advantages for lease contracts in Japanese yen. The American corporation wants to take advantage of the tax laws as it would reduce its lease rentals. On the flip side, designating a lease contract in Japanese yen would expose it to risk in fluctuations of both interest rates and exchange rates (see Figure 2).

Figure 2: Currency Coupon Swap

Now, a bank can suitably structure a currency coupon swap to enable the US corporation to obtain cost benefits available from the Japanese lease and at the same time convert the underlying lease finance into a fully hedged fixed rate dollar liability. The bank pays the US corpo-ration on an operting basis the accurate amount due in yen based on Japanese lease in return for the corporation paying an amount of fixed US dollars to the bank.

The bank is hedged by entering into a series of currency coupon swaps of different maturities and principal amounts to match the structure of payments of the US corporation.

A quick comparison between the fixed rate currency swap and currency coupon swap reveals that the risk could be slightly less in the latter. A fixed rate currency swap is exposed to: * Exchange rate movements

* Interest rate movement in currency 1

* Interest rate movement in currency 2

* Time to maturity. The value of the contract at any point in time is the

difference between the contracted and the current market exchange and interest rates. But, in the case of the currency coupon swap, the floating rate payment is reset

and floating payment principal is not dependent upon long-term interest rates and is valued closer to the exact principal amount. The exchange rate exposure is the same for these two types of swaps. The interest rate exposure could be potentially higher in case of fixed rate currency swaps should the interest rates move in opposite directions. In the currency coupon contract, as the interest rate is set at regular intervals rather than at the end of transaction, it is more efficient.

Circus Swaps

The circus swap is just a combination of plain vanilla interest rate swap and currency coupon swap. Here, we are just combining a fixed for floating interest rate swap with a fixed for floating currency swap. When the two fixed for floating swaps have "LIBOR" (London Inter Bank Offer Rate) in their floating rate legs, then it is called a "circus swap." It is done in a two stage process. We will illustrate an application of this in our discussion of complex structures using swaps.

However, it is important to realize that we have synthetically created a fixed for fixed currency swap by a combination of two real structures. An US firm located in Japan exports to the US. Hence, its liabilities are in Japanese yen, while its income stream is in dollars, and the mismatch is to be resolved by a swap. Figure 3 broadly explains the contract.

Figure 3: Circus Swap

Swaps : Foundations of Financial Engineering

A synthetic instrument is a combination of instruments that replicates the cash flows associated with a real instrument. We will demonstrate with a simple example how swaps can be combined to produce complex structures. The evolution of financial engineering in the 1980's was largely due to the scope for innovation and creativity in solving problems arising from uncertainties in the world financial markets. In designing a complex swap structure, we use simple structures as building

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portfolio consisted of interest rate swaps while the other had currency swaps. They found that the average credit exposure was 1.85 per cent for interest rate swaps and 1.65 per cent for currency swaps. The credit exposure was higher in the case of currency swaps as not only periodic interest rate payments are made, but actual exchange of principal amounts occur. The simple rule of this credit exposure is 2-3 per cent of notional principal times the number of years. This can be derived more precisely by using simulation approach with assumptions on exchange rate movements and interest rate movements. Most swap dealers monitor actual swap exposure as prices change. Management is informed regularly of the potential exposure if some or all counterparties were to default. Performance failures in the swap market have been extremely rare. The probable reason being that each party is not entering into a swap to speculate on volatile interest and exchange rates. They are entering into it for various advantages explained earlier. There must be some means by which the parties mutually agree to reset the values if the fluctuation in the interest rates and exchange rates crosses reasonable limits.

Systemic Risk

Systemic risk arises when random shocks create the risk of destabilizing disruptions, where a problem in one market spreads across the financial markets. History offers us evidence of such shocks like stock market crash, collapse of the fixed rate exchange regime, overshooting of the dollar, and Gulf war.

The threat of systemic risks imposes negative externalities on the financial system. Swaps do not expose banks to huge losses; if prudent provisioning and active risk management is undertaken, losses can be minimized. But, when there is a random shock, it leads to default by various parties. Since derivatives like swaps, options, and futures link various markets like commodity, currency, and stock markets, chances of disruption of financial relationships are very high.

The true significance of this risk is not clear. The reason being in case of externalities (following the Coase theorem which states that by " assigning and enforcing property rights we can internalize external costs and benefits and then allow private individuals to bargain among themselves to achieve a social optimum"), the applicability of Coase theorem necessitates low transaction costs. We can easily see that these conditions are broadly met in currency swaps. But, due to the random nature of shocks, it is impossible to:

* Ascertain the cost imposed by the default swap party on financial markets.

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* Even if the costs are computed, it is usually difficult to retrieve the amount in the event of a default.

Hence, the possibility of systemic risks induces the need to develop an organization to keep track of swap transactions. As of date, there is no official record of swap transactions. The reporting of swaps to an exchange or federal reserve will assist in tracking down obligations of counterparties to mitigate the impact of shocks to financial markets.

Swaps (off balance sheet activity) expose banks to risk. But, it is very important to remember that the default risk in a swap is less than that of a straight loan, by the very nature of the swap product. The procedure for assessing capital requirements for a swap product is a four step process (Figure 5). -

* Determine the principal on the swap (for our example, we assume $10 million).

* At the initiation, the currency swap has zero value. The mark to market takes on the value as time passes. Let us choose an arbitrating mark to market value of $75,000 and an add-on factor which ranges from 0 to 5 per cent, depending on the type of swap and term of swap. In case of a currency swap, it is 5 per cent because currency swaps involve exchange of principal upon maturity and are deemed more volatile than interest rate contracts. We now compute the credit risk equivalent which is the sum of mark to market and add on.

Figure 5: Determination of Capital Requirements Under New Guidelines for Off Balance Sheet

Activity

Mark to Market Plus-Addon Factor

* We apply risk weightage factor of 50 per cent typically used for swaps by banks. The risk weighted asset is $287,500.

* The capital adequacy ratio is 8 per cent of risk weighted asset. The bank must keep $13,000 (8 per cent of $ 287,500) to support this particular swap. As changes in interest rates and foreign exchange rates take place, the value of the swap will change continuously. This implies that capital requirements also evolve over time reflecting the underlying riskiness of the swap.

Swaps are beneficial to banks, but they must be encouraged carefully. Following capital adequacy norms for off balance sheet activities like swaps can greatly reduce credit risks. Since the swap market is unregu-lated, there is acute lack of data on the extent of credit risk faced by this market. Provisioning for risk weighted assets at least makes a beginning towards better management of credit risk.

Practical Applications of Currency Swaps

Swaps have a wide range of applications. We will focus on the use of swaps for fund raising and the specialized use by central banks.

Fund Raising

Currency swap opportunities depend on the investment climate for issuing debt, liquid swap market, currency stability, attractive structure, and maturity. An appropriate example to illustrate the above conditions is the Swedish Krona deal in 1988. The World Bank issued a five year Swedish Kroner 500 million Eurobond at a coupon of 10.5 per cent and an AIBD yield of 10.07 per cent. The bond was underwritten and the swap arranged by the Skandinaviska Enskilda Banken (SE Banken). The terms of the swap were not made public but reliable sources based on interviews with World Bank staff and independent swap dealers suggest that the swap enabled the World Bank to access floating rate dollars at about 100 basis points below LIBOR. Investors were attracted because:.

* World Bank is a highly rated AAA borrower. * Swedish Kroner is a strong currency and it even

appreciated by 7 per cent against the deutsche mark.

* Though the Swedish bond market is not liquid, the 10.5 per cent coupon rate and the large size of the issue

* were sufficient to quell doubts about the bonds' tradability.

The Swedish Government restricts foreigners from owning Swedish Government bonds. The significant advantage was that, when the Swedish authorities agreed

to allow World Bank Euro Krona issues, investors bid up the price of the issue. The net result was a yield about 100 basis points below that of a comparable Swedish Government bond. SE banken, due to lack of a liquid swap market, created Krona receipts by holding Swedish Government bonds.

This bond portfolio was financed by borrowing dollar LIBOR. The probable structure is given in Figure 6.

Figure 6: Probable Structure: The World Bank Swedish Krona Swap

The above example clearly illustrates how swaps serve as a link between preferences of investors and the needs of borrowers.

Currency Swaps by Central Banks

Finland is a text book example given for central banks' active use of swaps. As pointed out earlier, swaps play a vital role in matching assets and liabilities. A more precise means of stating this is that central banks can adjust the exchange rate and interest rate sensitivity of their liabilities to closely match their assets. The Ministry of Finance in Finland has used swaps to lower its cost of debt, lower its exposure, and manage the structural composition of its liabilities. During the period from 1987 to 1990, Finland entered into 50 swaps with a principal equivalent to USD 50-200 million. They have swapped approximately 30 per cent of their foreign debt.

The main feature is that the structure of the liabilities must move toward the composition of the official currency basket. The technique to be employed by the central bank is to access the cheapest off shore debt markets and convert them into the desired currency via swaps. This would enable the central bank to move in a direction wherein the foreign debt portfolio of the central bank is similar in composition to the official foreign currency basket. In Finland, the actual share of Japanese yen in external debt was 23 per cent in 1989; currency swaps were used to reduce the effective share to 12 per cent in 1989 and 5 per cent in 1990.

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Relevance of Currency Swaps to India

The Reserve Bank of India set up in November 1994 an expert group (Chairman: Shri OP Sodhani) to reco-mmend measures for the growth of an active, efficient, and orderly foreign exchange market and to suggest introduction of new derivative products. The whole range of derivative products like options, futures, and swaps offer significant advantages from the perspective of a developing country like India.

Imports

Petroleum imports for the year 1993-94 (provisional estimates) cost USD 5,756 million in a total import bill of USD 23,306 million (approximately 25 per cent). Policy makers can explore the possibility of allowing the use of commodity swaps (or the combination of commodity, interest rate, and currency swaps) to import petroproducts. The availability of reliable price indices like West Texas Intermediate, Brent, and Dubai, make the operationalizing of a commodity swap much easier. By hedging price fluctuations, India can save valuable forex.

Foreign Debt

The white paper on India's external debt published on December 22,1995, points out that the stock of India's external debt at the end of March 1995 was USD 99.04 billion. The paper expresses concern that the external debt is large. India ranks third among the developing countries in terms of the absolute magnitude of debt. During the 1980s, India resorted to commercial borrowings to finance low productivity investments in the public and private sector which had low export potential. This was one of the main reasons for the balance of payments crisis in 1991. At present, India's short-term debt is only four per cent of total debt. The debt service ratio was 26.6 per cent in 1994-1995. Though India has the capacity to service the debt (by exports and invisible receipts), the foreign debt in 1994-1995 compared to 1993-1994increasedbyUSD5.61 billion (about 6.1 per cent), due to exchange rate changes in the USD. The USD depreciated against all the currencies except the Canadian dollar, the Italian lira and the Indian rupee. If the exchange rates had remained unchanged, India's external debt would have increased by only USD 974 million. This calls for greater scrutiny of the currency composition of India's debt. Table 4 illustrates the currency composition of India's external debt.

India needs to restructure the currency composition of external debt, with a view toward reducing the chances of inflating the stock of debt due to exchange rate changes. In the recent past, the intervention currency for estimating

the official value of the rupee was changed from pounds sterling to USD. A simple strategy is to base the currency composition of India's debt similar to the basket of currencies which are used to determine the value of the rupee.4 The Reserve Bank of India can enter into currency swaps with other central banks and progressively restructure the currency composition of external debt. Kroner and Classens (1991) show how a country can minimize its exposure to exchange rate and commodity price movements by optimally structuring the currency composition of external debt relative to the cost of servicing the debt. Though this may be a daunting task, it still gives risk reduction benefits. They apply their model5 to Indonesia and find that Indonesia's optimal debt portfolio consists of a much larger proportion of USD and a much smaller proportion of Japanese yen than they have in their current debt portfolio. There is an urgentneed to have an active debt management strategy. Unfortunately, the measures outlined in the white paper do not address the core issue of hedging our debt profile against exchange rate fluctuations.

Conclusion

Swaps have been growing at a mind boggling rate. The market is designing creative and complex structures to provide tailormade solutions. The regulators are unable to design systems to effectively assess risks involved in these transactions. The paradox is simple. "An engineer who builds a chemical process plant first thinks about the safety, meets the safety standards, and designs his production process accordingly, whereas financial engineers are designing creative financial products for which safety frontiers do not exist." Hence, in the event of a contingency, regulators are "caught unawares." This research essay tries to focus on the emerging complex swap products in the market and the importance of designing a regulating system. Most developing countries are liberalizing their economies by opening up their markets, privatizing, and relaxing forex controls. This implies that currency swaps will be a greater force in the derivatives market in future.

4 Information about the basket of currencies which are used in determining the value of rupee is treated confidential by the Reserve Bank of India.

5 They propose a dynamic hedging strategy, wherein the optimal portfolio depends on the conditional covariance matrix of exchange rates and the terms of trade which are changing through time. A multivariate extension of the generalized autoregressive condi tional heteroskedasticity (GARCH) model of Engle (1982) and Bollerslev (1986) is used to estimate the time-varying debt portfolios.

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Table 1 : Notional/Contract Amounts of Derivatives Held by Product Type, from September 1989 to September 1992, in Billions of US Dollars, Except where Indicated

Type of Deriva- 1989 tive Product

%of Total,

1990 2992 2992 % of % Increase Total, 1989-92

1989 1992

Forwards 3,034 42.15 4,437 6,061 7,515 42 148

Futures 1,259 17.49 1,540 2,254 3,154 18 151 Options 953 13.23 1,305 1,841 2,263 13 137 Swaps 1,952 27.13 2,890 3,872 4,711 27 141 Total 7,198 100.00 10,172 14,028 17,673 100 145

Sources: US General Accounting Office; Bank for International Settlements; International Swap Dealers Association; Federal Reserve Bank of New York; Swaps Monitor Publ. Inc., Derivatives Strategy & Tactics Inc.

Table 2 : Currency Swaps

Currency 94 YE USD Equiv

93YE USD Equiv

Change from 93 YE %

Currency as % of Total

US Dollar 321,554 320,041 0.5 35.1

Australian Dollar 37,026 46,347 -20.1 4.0 Belgium Franc 7,999 6,793 17.7 0.9 British Sterling 42,993 44,143 -2.6 4.7 Canadian Dollar 44,859 35,333 27.0 4.9 Danish Krone 2,530 3,255 -22.3 0.3 Deutsche Mark 76,941 69,689 10.4 8.4 Dutch Guilder 9,190 9,747 -5.7 1.0 European Currency Unit 27,398 36,755 -25.5 3.0 French Franc 24,499 22,877 7.1 2.7 Hongkong Dollar 2,483 2,086 19.0 0.3 Italian Lira 25,559 22,720 12.5 2.8 Japanese Yen 169,940 158,795 7.0 18.6 New Zealand Dollar 2,015 2,436 -17.3 0.2 Spanish Peseta 16,896 16,998 -0.6 18 Swedish Krone 18,645 17,202 8.4 2 Swiss Franc 63,607 73,272 -13.2 7 Other Currencies 20,715 11,133 86.1 2.3 Total 914,845 899,618 1.7 100.00

Totals adjusted to account for both sides of a currency swap.

Source: International Swaps and Derivatives Association( ISDA).

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Table 3 : A Comparison of Breakup of Currency Swaps

1995 First Half Outstanding of Currency Swaps Currency 1994 Second

Half US $ Equity

1995 First Half US $ Equity

% Change 1995% of Total

Deutsche Mark (DEM) $76,941 $80,949 5.21 7.79

French Franc(FRF) 24,499 29,908 22.08 2.88 British Sterling(GBP) 42,993 36,620 -14.82 3.52 Japanese Yen(JPY) 169,940 256,579 50.98 24.68 US Dollar (USD) 321,554 340,228 5.81 32.72 Other Currencies(OTH) 278,919 295,465 5.93 28.42 Total $914,846 1,039,794 13.65 100.00

Table 4 : Currency-wise Composition of India's External Debt

Currency End March 1994 End March 1995

Debt Oustanding As % of Total Debt Oustanding As % of Total US $ Million US $ Million

US Dollar 38376 41.41 38755 39.11

SDKs 13818 14.91 15006 15.14 Indian Rupee 13691 14.77 14216 14.36 Japanese Yen 12740 13.75 15385 15.53 Deutsche Mark 5828 6.29 6858 6.92 Pound Sterling 3068 3.31 3315 3.36 French Franc 1663 1.79 1726 1.74 Netherland Guilder 994 1.07 1157 1.17 Swiss Franc 736 0.79 945 0.96 Canadian Dollar 693 0.75 645 0.66 Swedish Kroner 378 0.41 408 0.41 Kuwait Dinar 203 0.22 124 0.13 Denmark Kroner 154 0.17 182 0.18 Belgian Franc 139 0.15 154 0.16 Austrian Schilling 58 0.06 65 0.07 Saudi Riyal 57 0.06 42 0.04 Italian Lira 26 0.03 40 0.04 Norwegian Kroner 22 0.02 26 0.03 Finnish Marakkas 12 0.01 17 0.02 E.G. Units 8 0.01 5 0.01 Australian Dollar 7 0.01 9 0.01 UAEDirham 2 Neg 1 0.01 Singapore Dollar 1 Neg 1 0.01 Spanish Pesetas 1 Neg 1 0.01 Total 92677 100.00 99083 100.00

Note : Constituent items may not add up to the total due to rounding. Source : White Paper, 14-20 January, 1996.

Vol. 21, No. 2, April - June 1996 13

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