world’s debt crises

8/8/2019 WORLD’S DEBT CRISES

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WORLD¶S DEBT CRISISWORLD¶S DEBT CRISIS



PlanPlan

1. Exter nal debt, its structure1. Exter nal debt, its structure2. Indica tors of debt sust a ina bility2. Indica tors of debt sust a ina bility

3. Exter nal debt m anag eme n t3. Exter nal debt m anag eme n t4. Third wor ld debt4. Third wor ld debt5.Uk r a ine¶s exter nal debt5.Uk r a ine¶s exter nal debt



Epigr a phEpigr a ph³Exter nal debt is like a ³Exter nal debt is like a third world war third world war ± ± a differe nt kind of a differe nt kind of wa r, o ne where chi ldre n die inste a d of so ldiers . Inste a dwa r, o ne where chi ldre n die inste a d of so ldiers . Inste a d

of wa r wou nded fi lling the hospit als, it is the sic k an dof wa r wou nded fi lling the hospit als, it is the sic k an dunderfed th a t overcrowd the w a rds, whi le the job lessunderfed th a t overcrowd the w a rds, whi le the job lesswan der the streets i n se a rch of wor k. No brid ges or wan der the streets i n se a rch of wor k. No brid ges or

roa ds a re b lown up, but f a ctories, schoo ls an d hospit alsroa ds a re b lown up, but f a ctories, schoo ls an d hospit alsa re c losed dow n. No roc kets a re fired, but we al th isa re c losed dow n. No roc kets a re fired, but we al th isplundered . Exter nal debt is a perm an ent b loodplundered . Exter nal debt is a perm an ent b lood--letting letting from the vei ns of L a tin Americ a tha t were cut ope n fivefrom the vei ns of L a tin Americ a tha t were cut ope n fivece nturies ag o.ce nturies ag o.

Br az il r ank s a mong the te n richest cou ntries i n theBr az il r ank s a mong the te n richest cou ntries i n thewor ld. But her vei ns too h a ve bee n cut ope n , an d thewor ld. But her vei ns too h a ve bee n cut ope n , an d thecreditors a re suc king her dry of the precious b loodcreditors a re suc king her dry of the precious b loodproduced by the toi l of our peop le .´produced by the toi l of our peop le .´

Ma rcos Arrud a. Exter nal debt . Br az il an d Inter na tional Finan cial CrisisMa rcos Arrud a. Exter nal debt . Br az il an d Inter na tional Finan cial Crisis



Ma p of cou ntries by exter nal debtMa p of cou ntries by exter nal debtba sed o n 2005 CIA f a ctboo k ba sed o n 2005 CIA f a ctboo k

figuresfigures



1. Exter nal debt, its structure1. Exter nal debt, its structure



Exter nal debtExter nal debt

Exter nal debt (or forei gn debt) is th a t pa rtExter nal debt (or forei gn debt) is th a t pa rtof the tot al debt i n a cou n try tha t is owedof the tot al debt i n a cou n try tha t is owedto creditors outside the cou n try. to creditors outside the cou n try. The debtors c an be the gover nme n t,The debtors c an be the gover nme n t,corpor a tions or priv a te househo lds . Thecorpor a tions or priv a te househo lds . Thedebt i ncludes mo ney owed to priv a tedebt i ncludes mo ney owed to priv a te

commerci al bank s, other gover nme n ts, or commerci al bank s, other gover nme n ts, or in ter na tional finan cial institutio ns such a sin ter na tional finan cial institutio ns such a sthe I MF an d Wor ld Bank.the I MF an d Wor ld Bank.



1. Exter nal debt1. Exter nal debt"Gross exter nal debt, a t an y g iven time, is the"Gross exter nal debt, a t an y g iven time, is theoutst an ding a mou n t of those a ctual curre n t, an doutst an ding a mou n t of those a ctual curre n t, an dnot co nting en t, lia bilities th a t require p a yme n t(s)not co nting en t, lia bilities th a t require p a yme n t(s)of principal an d/or in terest by the debtor a t someof principal an d/or in terest by the debtor a t somepoin t(s) in the future an d th a t a re owed topoin t(s) in the future an d th a t a re owed tononreside n ts by reside nts of an eco nomy .³nonreside n ts by reside nts of an eco nomy .³

Source: Exter nal Debt St a tistics .Q uide for users an d compi lers . Source: Exter nal Debt St a tistics .Q uide for users an d compi lers . IMF,2003 .IMF,2003 .

http://www .imf .or g /exter nal /pubs/ft/eds/e ng /guide/http://www .imf .or g /exter nal /pubs/ft/eds/e ng /guide/



Key e leme n ts of the defi n itionKey e leme n ts of the defi n ition

of exter nal debtof exter nal debt1)1) Outst an ding an d Actu al Curre n tOutst an ding an d Actu al Curre n t

Lia bilities: For this purpose, the decisiveLia bilities: For this purpose, the decisiveconsider a tion is whether a creditor ow nsconsider a tion is whether a creditor ow nsa cla im on the debtor . a cla im on the debtor .

Debt lia bilities include a rre a rs of Debt lia bilities include a rre a rs of principalprincipalin terest .in terest .




of exter nal debtof exter nal debt(c) Reside nce: To qu al ify a s exter nal (c) Reside nce: To qu al ify a s exter nal debt, the debt lia bilities must be owed by a debt, the debt lia bilities must be owed by a reside n t to a nonreside n t. reside n t to a nonreside n t. Reside nce is determi ned by where theReside nce is determi ned by where thedebtor an d creditor h a ve their ce n ters of debtor an d creditor h a ve their ce n ters of eco nomic in teresteco nomic in terest -- typically,typically, where they where they are ordinarily located are ordinarily located -- an dan d not by their not by their nationality.nationality.




of exter nal debtof exter nal debt(d) Curre n t an d Not Co n ting en t:(d) Curre n t an d Not Co n ting en t:Contingent liabilitiesContingent liabilities a re not included i n a re not included i n

the defi n ition of exter nal debt . the defi n ition of exter nal debt . Contingent liabilitiesContingent liabilities -- a rr ang eme n ts u nder a rr ang eme n ts u nder

which o ne or more co nditions must bewhich o ne or more co nditions must befulfilled before a finan cial tr an sa ction tak esfulfilled before a finan cial tr an sa ction tak esplace . place .



Con ting en t lia bilitiesCon ting en t lia bilitiesa re lia bilities th a t ma y or m a y not be i ncurred by an a re lia bilities th a t ma y or m a y not be i ncurred by an en tity depe nding on the outcome of a future eve n t suchen tity depe nding on the outcome of a future eve n t sucha s a court c a se . These lia bilities a re recorded i n a a s a court c a se . These lia bilities a re recorded i n a comp an y's a ccou nts an d show n in the b alan ce sheetcomp an y's a ccou nts an d show n in the b alan ce sheetwhe n both prob a ble an d re a so na bly estim a ble . whe n both prob a ble an d re a so na bly estim a ble .

A foot note to the b alan ce sheet describes the na ture an d A foot note to the b alan ce sheet describes the na ture an dexte n t of the co nting ent lia bilities . The like lihood of lossexte n t of the co nting ent lia bilities . The like lihood of lossis described a s prob a ble, re a so na bly possib le, or is described a s prob a ble, re a so na bly possib le, or remote . The a bility to estim a te a loss is described a sremote . The a bility to estim a te a loss is described a sknown , re a so na bly estim a ble, or not re a so na blyknown , re a so na bly estim a ble, or not re a so na blyestim a ble .estim a ble .



Con ting en t lia bilitiesCon ting en t lia bilitiesExa mp lesExa mp les

outst an ding lawsuitsoutst an ding lawsuits Accou n ts p a ya ble Accou n ts p a ya ble

Legal lia bilityLegal lia bilityLiquida ted d a mag esLiquida ted d a mag esTortTortBills Discou n ted with b ankBills Discou n ted with b ank

Unl iquida ted d a mag esUnl iquida ted d a mag esDestructio n by F loodDestructio n by F loodproduct w a rr an typroduct w a rr an ty



Exter nal debtExter nal debt

exter nal debt is c lassified i n to four he a dsexter nal debt is c lassified i n to four he a ds(1) pub lic an d pub licly gua r an teed debt,(1) pub lic an d pub licly gua r an teed debt,

(2) priva te non(2) priva te non--gua r an teed credits,gua r an teed credits,(3) ce n tr al bank deposits(3) ce n tr al bank deposits(4) loan s due to the I MF. (4) loan s due to the I MF.



Who Do You Pa y Exter nal DebtWho Do You Pa y Exter nal Debt

To?To?1. 1. Th e official creditorsTh e official creditorsthe richest c a pital ist cou ntries, m a inly the Un ited St a tes,the richest c a pital ist cou ntries, m a inly the Un ited St a tes,Ja pan , Germ an y, Fr an ce, E nglan d,Swit zer lan d, C ana da Ja pan , Germ an y, Fr an ce, E nglan d,Swit zer lan d, C ana da an d The Nether lan ds . an d The Nether lan ds .

2. 2. Th e private creditors.Th e private creditors.priva te commerci al bank s such a s Citib ank , Deutschepriva te commerci al bank s such a s Citib ank , Deutsche

Bank , AMRO, Cr dit A gricole, Un ion of Swiss B ank s an dBank , AMRO, Cr dit A gricole, Un ion of Swiss B ank s an dothers . others .

3. 3. Mu ltilateral creditorsMu ltilateral creditorsWor ld Bank ,the I MF (Inter na tional Moneta ry Fu nd) an d theWor ld Bank ,the I MF (Inter na tional Moneta ry Fu nd) an d the

IDB (Inter IDB (Inter--American Deve lopme nt Bank ). Americ an Deve lopme nt Bank ).



2.Indica tors of exter nal 2.Indica tors of exter nal debt sust a ina bilitydebt sust a ina bility



Exter nal debt sust a ina bilityExter nal debt sust a ina bility

S u stainable debtS u stainable debt is the leve l of debtis the leve l of debtwhich allows a debtor cou n try to meet itswhich allows a debtor cou n try to meet itscurre n t an d future debt service ob liga tionscurre n t an d future debt service ob liga tionsin full, without recourse to further debtin full, without recourse to further debtre lief or reschedu ling , a voiding re lief or reschedu ling , a voiding a ccumu la tion of a rre a rs, whi le allowing an a ccumu la tion of a rre a rs, whi le allowing an a ccept a ble leve l of eco nomic growth . a ccept a ble leve l of eco nomic growth . (UNCTAD/UNDP , 1996 )(UNCTAD/UNDP , 1996 )



Indica tors of exter nal debtIndica tors of exter nal debt

sust a ina bility (debt burde n r a tios)sust a ina bility (debt burde n r a tios)D ebt S tockD ebt S tockForei gn Debt/GD P Forei gn Debt/GD P Forei gn Debt/Exports of G&SForei gn Debt/Exports of G&S

Gover nme nt Debt/GD P Gover nme nt Debt/GD P Gover nme nt Debt/Curre nt Reve nueGover nme nt Debt/Curre nt Reve nueD ebt S tr u ct u reD ebt S tr u ct u re

Forei gn ShortForei gn Short--term Debt/Forei gn Debtterm Debt/Forei gn Debt

Concessio nal Debt/Forei gn DebtConcessio nal Debt/Forei gn DebtGover nme nt Forei gn Debt/Gover nme nt Forei gn Debt/Gover nme nt DebtGover nme nt DebtGover nme nt ShortGover nme nt Short--term Debt/Gover nme n t Debtterm Debt/Gover nme n t Debt



Liquidity mo n itoring indica torsLiquidity mo n itoring indica tors

A seco nd set of i ndica tors focuses o n the A seco nd set of i ndica tors focuses o n theshortshort--term liquidity requireme n ts of theterm liquidity requireme n ts of thecou n try with respect to its debt servicecou n try with respect to its debt serviceob liga tions . ob liga tions .

These i ndica tors a re usefu l ea r lyThese i ndica tors a re usefu l ea r ly--wa r n ing sign s of debt service prob lems,wa r n ing sign s of debt service prob lems,but also hi ghlight the imp a ct of thebut also hi ghlight the imp a ct of thein tertempor al tr a dein tertempor al tr a de--offs a rising from p a stoffs a rising from p a stborrowi ng decisio ns .borrowi ng decisio ns .



Liquidity mo n itoring indica torsLiquidity mo n itoring indica tors

Forei gn Debt Service/GD P Forei gn Debt Service/GD P Forei gn Debt Service/ExportsForei gn Debt Service/Exports

Forei gn Debt Service/Offici al ReservesForei gn Debt Service/Offici al ReservesGover nme n t Debt Service/GD P Gover nme n t Debt Service/GD P Gover nme n t Debt Service/Curre n tGover nme n t Debt Service/Curre n t

Reve nueReve nue



The dy na mic r a tiosThe dy na mic r a tiosMore forw a rd lookingMore forw a rd lookingpoin t out how the debt burde n will evo lvepoin t out how the debt burde n will evo lve

over time, g iven the curre n t stoc k of da ta over time, g iven the curre n t stoc k of da ta an d a ver ag e in terest r a te .an d a ver ag e in terest r a te .show how the debt burde n r a tios wou ldshow how the debt burde n r a tios wou ld

chang e in the a bse nce of rep a yme n ts or chang e in the a bse nce of rep a yme n ts or new disburseme n ts, indica ting the st a bilitynew disburseme n ts, indica ting the st a bility

of the debt burde n. of the debt burde n.



Debt dy na mic r a tioDebt dy na mic r a tio

(1+ i)(1+ i)%% DBDB = ________= ________ - - 11

(1+g )(1+g )%% DBDB -- the dy na mic r a tio (the perce ntag e ch ang e in the dy na mic r a tio (the perce ntag e ch ang e in the domestic debt burde n),the domestic debt burde n),I I -- the a ver ag e nominal interest r a te o n the debt stoc k,the a ver ag e nominal interest r a te o n the debt stoc k,

g g the growth r a te of nominal GDPthe growth r a te of nominal GDP



3. Exter nal debt3. Exter nal debtmanag eme n tmanag eme n t



Finan cial distressFinan cial distress

is a term i n Corpor a te Fi nan ce used tois a term i n Corpor a te Fi nan ce used toindica te a co ndition whe n promises toindica te a co ndition whe n promises tocreditors of a comp an y a re bro ken or creditors of a comp an y a re bro ken or honored with difficu lty. honored with difficu lty.



IIPIIP -- INTERNATIONALINTERNATIONALINVESTMENT P OSITIONINVESTMENT P OSITION

A cou n try's in ter na tional investme nt positio n A cou n try's in ter na tional investme nt positio n (IIP ) is a finan cial st a teme n t setti ng out the v alue(IIP ) is a finan cial st a teme n t setti ng out the v aluean d compositio n of tha t cou n try's exter nal an d compositio n of tha t cou n try's exter nal finan cial a ssets an d lia bilities .finan cial a ssets an d lia bilities .

In ter na tional Investme n t P osition = domestic allyIn ter na tional Investme n t P osition = domestic allyowned forei gn a ssetsowned forei gn a ssets - - foreign owned domesticforeign owned domestica ssets .a ssets .



Debt restructuri ngDebt restructuri ng

a process th a t allows a priva te an d pub lica process th a t allows a priva te an d pub liccomp an ycomp an y ± ± or a soverei gn en tityor a soverei gn en tity ± ± f a cing ca shf a cing ca shf low prob lems an d finan cial distress, to reducef low prob lems an d finan cial distress, to reducean d re negotia te its de linque n t debts i n order toan d re negotia te its de linque n t debts i n order toimprove or restore liquidity an d reh a bilita te soimprove or restore liquidity an d reh a bilita te sotha t it can co n tinue its oper a tions .tha t it can co n tinue its oper a tions .Comp an ies use debt restructuri ng to a voidComp an ies use debt restructuri ng to a voiddef a ult on existi ng debt or to t ak e a dvan tag e of def a ult on existi ng debt or to t ak e a dvan tag e of a lower i n terest r a te .a lower i n terest r a te .



Debt m anag eme n tDebt m anag eme n t

-- Ma r ketMa r ket--ba sed debt reductio n by b ank sba sed debt reductio n by b ank s

-- securiti za tionsecuriti za tion

-- debt re lief debt re lief



Ma r ket b a sed reductio n schemesMa r ket b a sed reductio n schemes

debt-for-equity sw a ps

the seco nda ry ma r ket s ale of debts,debt buy-b a cks

the exch ang e of debts for co llater al izedsecurities .



DebtDebt--for for--equity sw a pequity sw a p

A de al , whe n creditors gener ally ag ree to A de al , whe n creditors gener ally ag ree tocan ce l some or all of the debt i n exch ang ecan ce l some or all of the debt i n exch ang efor equity i n the comp an y.for equity i n the comp an y.



Debt re lief Debt re lief

pa rtial or tot al for g iveness of debt, or thepa rtial or tot al for g iveness of debt, or thes lowing or stoppi ng of debt growth, oweds lowing or stoppi ng of debt growth, owedby individuals, corpor a tions, or na tions . by individuals, corpor a tions, or na tions .



4. Third wor ld debts4. Third wor ld debts

G lobal D evelopment FinanceG lobal D evelopment Finance

http://siteresources .wor ldbank. or g/http://siteresources .wor ldbank. or g/NEWS/Resources/ gdf20 10.pdf NEWS/Resources/ gdf20 10.pdf

http://www.unesc a p.or g /pdd/pub lica tions/themestudy2005/ch 6.pdf



Deve loping cou n tries' debtDeve loping cou n tries' debt

exter nal debt i ncurred by the gover nme n ts of exter nal debt i ncurred by the gover nme n ts of Third Wor ld cou n tries, gener ally in quan titiesThird Wor ld cou n tries, gener ally in quan titiesbeyo nd the gover nme n ts' po litical a bility tobeyo nd the gover nme n ts' po litical a bility to

rep a y. rep a y. "Un pa ya ble debt" is a term used to describe"Un pa ya ble debt" is a term used to describe

exter nal debt whe n the i n terest o n the debtexter nal debt whe n the i n terest o n the debtexceeds wh a t the cou n try's po litician s thi nk theyexceeds wh a t the cou n try's po litician s thi nk theycan co llect from t a xpa yers, b a sed o n thecan co llect from t a xpa yers, b a sed o n thena tion 's gross domestic product, thus preve n ting na tion 's gross domestic product, thus preve n ting the debt from ever bei ng rep a id.the debt from ever bei ng rep a id.



The c a uses of debtThe c a uses of debtThe lega cy of co lon ial ismThe lega cy of co lon ial ism ²² for ex a mp le, thefor ex a mp le, the

deve loping cou n tries¶ debt is p a rtly the resu lt of deve loping cou n tries¶ debt is p a rtly the resu lt of the tr an sfer to them of the debts of thethe tr an sfer to them of the debts of the

co lon izing sta tes, i n billions of do llars, a t veryco lon izing sta tes, i n billions of do llars, a t veryhigh in terest r a tes .high in terest r a tes .

Odious debtOdious debt

Mism anag ed spe nding an d lending by the WestMism anag ed spe nding an d lending by the Westin the 196 0s an d 70sin the 196 0s an d 70s



Odious debtOdious debt

In in ter na tional law, odious debt is a legal theoryIn in ter na tional law, odious debt is a legal theorywhich ho lds th a t the na tional debt i ncurred by a which ho lds th a t the na tional debt i ncurred by a reg ime for purposes th a t do not serve the bestreg ime for purposes th a t do not serve the bestin terests of the na tion , such a s w a rs of in terests of the na tion , such a s w a rs of agg ressio n , shou ld not be e nforce a ble . agg ressio n , shou ld not be e nforce a ble .

Such debts a re co nsidered by this doctri ne to beSuch debts a re co nsidered by this doctri ne to beperso nal debts of the re g ime th a t incurred themperso nal debts of the re g ime th a t incurred theman d not debts of the st a te .an d not debts of the st a te .



Soverei gn def a ultSoverei gn def a ult

a f a ilure by the gover nme n t of a soverei gn a f a ilure by the gover nme n t of a soverei gn sta te to p a y ba ck its debt i n full.sta te to p a y ba ck its debt i n full.

La tin Americ an debt crisis ( 198 0s)La tin Americ an debt crisis ( 198 0s)199 4 eco nomic crisis i n Mexico199 4 eco nomic crisis i n Mexico1998 Russi an finan cial crisis1998 Russi an finan cial crisis

Ar gentine debt restructuri ng (2002) Ar gentine debt restructuri ng (2002)2010 Europe an soverei gn debt crisis2010 Europe an soverei gn debt crisis



Some fi guresSome fi gures

Every Br az ilian bor n in 1998 alrea dy be a rs o n Every Br az ilian bor n in 1998 alrea dy be a rs o n his or her shou lders a debt burde n of US$his or her shou lders a debt burde n of US$1 ,374 .1 ,374 .

The mi lita ry re g ime m anag ed to mu ltiply Br az il¶sThe mi lita ry re g ime m anag ed to mu ltiply Br az il¶sexter nal debt by 42 i n 21 yea rs, c a ta pu lting itexter nal debt by 42 i n 21 yea rs, c a ta pu lting itfrom US$2 .5 bi llion in ea r ly 196 4 to US$ 105 in from US$2 .5 bi llion in ea r ly 196 4 to US$ 105 in 198 5. In 198 4, out of every US $ 1 ,619 per 198 5. In 198 4, out of every US $ 1 ,619 per inha bitan t tha t Br az il produced, US $ 7 81 wereinha bitan t tha t Br az il produced, US $ 7 81 werepled ged to the exter nal debtpled ged to the exter nal debt



Hea vily Indebted P oor Cou ntriesHea vily Indebted P oor Cou ntriesHIP CHIP C

H eavily Indebted Poor Co u ntriesH eavily Indebted Poor Co u ntries ( H IPC)(H IPC)a re a group of 40a re a group of 40 least developed least developed countries (LDC)countries (LDC) (29 of which a re in Sub(29 of which a re in Sub--Sa ha r an Africa ) with high leve ls of Sa ha r an Africa ) with high leve ls of poverty an d debt overh ang which a repoverty an d debt overh ang which a ree lig ible for speci al a ssist an ce from thee lig ible for speci al a ssist an ce from the

In ter na tional Moneta ry Fu nd (IMF) an d theIn ter na tional Moneta ry Fu nd (IMF) an d theWor ld Bank.Wor ld Bank.



HIP CHIP C



HIP CHIP C Af ghan istan Af ghan istan

Ben inBen inBoliviaBoliviaBur kina Fa soBur kina Fa soCa meroo nCa meroo nCe ntr al African Repub licCe ntr al African Repub licCha d*Cha d*Repub lic of the Co ng oRepub lic of the Co ng o

Democr a tic Repub lic of theDemocr a tic Repub lic of theCong oCong oComoros*Comoros*Côte d'Ivoire*Côte d'Ivoire*EthiopiaEthiopia

Ga mbiaGa mbia

GhanaGuinea *Guinea -Biss a u*GuyanaHa itiHondur a sLiberiaMa daga sc a r

Mala wiMal iMa uritan iaMoza mbique



HIP CHIP CNica r ag uaNica r ag uaNiger Niger Rwan daRwan daSão Tomé an d P ríncipeSão Tomé an d P ríncipe

Se negalSe negalSierr a LeoneSierr a LeoneTanzan iaTanzan iaTo go*To go*Ugan daUgan daZa mbiaZa mbia

Eritrea , Kyr gyz Repub lic, Som al ia an d Sud an a re bei ng considered for e ntry into the pro gr a m.



The HIP C pro gr a mThe HIP C pro gr a minitia ted by I MF an d the Wor ld Bank in 1996 initia ted by I MF an d the Wor ld Bank in 1996

provides debt re lief an d lowprovides debt re lief an d low--interest loan s to c an ce l or interest loan s to c an ce l or reduce exter nal debt rep a yme nts to sust a ina ble leve ls . reduce exter nal debt rep a yme nts to sust a ina ble leve ls . to be co nsidered for the i nitia tive, cou ntries must f a ce an to be co nsidered for the i nitia tive, cou ntries must f a ce an unsust a ina ble debt burde n which c ann ot be m anag edunsust a ina ble debt burde n which c ann ot be m anag edwith tr a ditional me an s .with tr a ditional me an s .A ssistance is conditional A ssistance is conditional on the na tional gover nme n tson the na tional gover nme n tsof these cou ntries meeti ng a r ang e of eco nomicof these cou ntries meeti ng a r ang e of eco nomicmanag eme nt an d perform an ce t a r gets .manag eme nt an d perform an ce t a r gets .

H IP C's thresho ld requireme nts: the r a tio of debtH IP C's thresho ld requireme nts: the r a tio of debt--toto--exports exceeded 200exports exceeded 200- -250% or the r a tio of debt250% or the r a tio of debt--toto--gover nme nt reve nues exceeded 2 80% .gover nme nt reve nues exceeded 2 80% .



M inim u m req u irements for participationM inim u m req u irements for participationin t h e programin t h e program ..

1) a co u ntry m u st s h ow its debt is u ns u stainable;1) a co u ntry m u st s h ow its debt is u ns u stainable;debtdebt- -toto--export ratio = 150%, a debtexport ratio = 150%, a debt- -toto--governmentgovernment- -reven u es ratio = 250%.reven u es ratio = 250%.

2) t h e co u ntry m u st be s u fficiently poor to q u alify for 2) t h e co u ntry m u st be s u fficiently poor to q u alify for loans from t h e World Bank's Internationalloans from t h e World Bank's InternationalD evelopment Association or t h e I M F's PovertyD evelopment Association or t h e I M F's PovertyRed u ction and G rowt h Facility (PR G F, t h e s u ccessor Red u ction and G rowt h Facility (PR G F, t h e s u ccessor to E S AF), w h ic h provide longto E S AF), w h ic h provide long- -term, interestterm, interest- -freefreeloans to t h e world's poorest nations.loans to t h e world's poorest nations.th e co u ntry m u st establis h a track record of reformsth e co u ntry m u st establis h a track record of reforms

to h elp prevent f u tu re debt crisesto h elp prevent f u tu re debt crises



Funding Funding

total cost of providi ng debt re lief to the 40total cost of providi ng debt re lief to the 40HIP C cou n try is estim a ted to a rou nd $7 1 HIP C cou n try is estim a ted to a rou nd $7 1 billion (in 2007 do llars) .billion (in 2007 do llars) .Hal f of the fu nding is provided by the I MF,Hal f of the fu nding is provided by the I MF,

Wor ld Bank , an d other mu ltila ter al Wor ld Bank , an d other mu ltila ter al or gan iza tions, whi le the other h al f isor gan iza tions, whi le the other h al f isprovided by the creditor cou n triesprovided by the creditor cou n tries



In 198 5, La tin Americ a ha d a exter nal debt of In 198 5, La tin Americ a ha d a exter nal debt of US$3 90 billion.US$3 90 billion.By 1996 , despite the m an y billions rep a id over By 1996 , despite the m an y billions rep a id over

those twe lve ye a rs, the debt h a d rise n tothose twe lve ye a rs, the debt h a d rise n toUS$ 657 bi llion.US$ 657 bi llion.In 198 5 Br az il¶s exter nal debt tot alled US$ 105In 198 5 Br az il¶s exter nal debt tot alled US$ 105billion. Betwee n 198 5 an d 1998 Br az il pa id ba ck billion. Betwee n 198 5 an d 1998 Br az il pa id ba ck US$2 82 billion in in terest an d a mortis a tion. US$2 82 billion in in terest an d a mortis a tion.

In in terest alone the bi ll wa s US$ 126 billion. In in terest alone the bi ll wa s US$ 126 billion. Nonethe less, by 1998 the debt h a d swo llen toNonethe less, by 1998 the debt h a d swo llen toUS$243 bi llion.US$243 bi llion.



Jubi lee 2000Jubi lee 2000

an in ter na tional co al ition moveme n t in an in ter na tional co al ition moveme n t in over 40 cou n tries c alled for c an ce llation of over 40 cou n tries c alled for c an ce llation of third wor ld debt by the ye a r 2000 . third wor ld debt by the ye a r 2000 .

It a imed to wipe out $ 90bn of debt owedIt a imed to wipe out $ 90bn of debt owedby the wor ld's poorest na tions, reduci ng by the wor ld's poorest na tions, reduci ng the tot al to a bout $37b n.the tot al to a bout $37b n.



P ost Jubi lee moveme n tsP ost Jubi lee moveme n ts

Jubi lee South (e ncomp a ssi ng man yJubi lee South (e ncomp a ssi ng man yformer Jubi lee c a mpa ign s in Africa , Asia former Jubi lee c a mpa ign s in Africa , Asia an d La tin Americ a )an d La tin Americ a )Jubi lee Debt C a mpa ign ,Jubi lee Debt C a mpa ign ,Jubi lee Scot lan d an d Jubi lee Rese a rch in Jubi lee Scot lan d an d Jubi lee Rese a rch in UK; UK; Jubi lee USA Networ k; Jubi lee USA Networ k; Jubi lé 2000/CAD Mal i in Mal iJubi lé 2000/CAD Mal i in Mal i



Mak e P overty H istoryMak e P overty H istorya ca mpa ign in a number of cou ntries, i ncluding Austr al ia a ca mpa ign in a number of cou ntries, i ncluding Austr al ia , Cana da , De nma r k, Finlan d, Ire lan d, New Zealan d,, Cana da , De nma r k, Finlan d, Ire lan d, New Zealan d,Nigeria , Norther n Irelan d, Norw a y, Rom an ia , the Un itedNigeria , Norther n Irelan d, Norw a y, Rom an ia , the Un ited

Ar a b Emir a tes an d the Un ited King dom . Ar a b Emir a tes an d the Un ited King dom .



Global Call to Action Aga instGlobal Call to Action Aga instP overtyP overty



The G lobal Call to Action Aga instThe G lobal Call to Action Aga instP overty (GCA P )P overty (GCA P )

is a growing wor ldwide allian ce co nsisting of na tional is a growing wor ldwide allian ce co nsisting of na tional coal itions (or p la tforms) of c a mpa ign s to e nd poverty .coal itions (or p la tforms) of c a mpa ign s to e nd poverty .

Globally it is m a de up of more th an 19 00 member Globally it is m a de up of more th an 19 00 member or gan iza tionsor gan iza tions

It cla ims to h a ve involved some 3 8 million peop le in It cla ims to h a ve involved some 3 8 million peop le in a ctions in 2005 i n over 75 cou ntries an d 23 mi llion a ctions in 2005 i n over 75 cou ntries an d 23 mi llion

peop le in 200 6 (so f a r) in over 85 cou ntries, but it h a s yetpeop le in 200 6 (so f a r) in over 85 cou ntries, but it h a s yetto prove itse lf a s a sust a ina ble an d bro a dto prove itse lf a s a sust a ina ble an d bro a d--ba sed global ba sed global moveme nt.moveme nt.



The dem an ds:The dem an ds:www.whiteb an d.or gwww.whiteb an d.or g

P ub lic a ccou n ta bility, just gover nan ce an dP ub lic a ccou n ta bility, just gover nan ce an d

the fu lfillme n t of hum an rightsthe fu lfillme n t of hum an rightsTr a de justiceTr a de justice

A ma jor incre a se i n the qu an tity an d A ma jor incre a se i n the qu an tity an dqual ity of a id an d finan cing for qual ity of a id an d finan cing for deve lopme n tdeve lopme n tDebt c an ce llationDebt c an ce llation



Eurod a dEurod a d

(Europe an Networ k on Debt an d(Europe an Networ k on Debt an dDeve lopme n t) is a networ k of 58 nonDeve lopme n t) is a networ k of 58 non--gover nme n tal or gan isa tions from 19 gover nme n tal or gan isa tions from 19 Europe an cou n tries .Europe an cou n tries .this networ k rese a rches an d wor ks o n this networ k rese a rches an d wor ks o n issues re la ted to debt, deve lopme n tissues re la ted to debt, deve lopme n tfinan ce an d poverty reductio n.finan ce an d poverty reductio n.



Eurod a d¶s sta ted a imsEurod a d¶s sta ted a imspush for deve lopme n t po licies th a t support propush for deve lopme n t po licies th a t support pro- -poor an d democr a ticallypoor an d democr a tically--defined sust a ina bledefined sust a ina bledeve lopme n t str a teg ies .deve lopme n t str a teg ies .

support the empowerme n t of Souther n peop le tosupport the empowerme n t of Souther n peop le toch a rt their ow n pa th tow a rds deve lopme n t an dch a rt their ow n pa th tow a rds deve lopme n t an dending poverty .ending poverty .see k a lasting an d sust a ina ble so lution to thesee k a lasting an d sust a ina ble so lution to the

debt crisis, a ppropri a te deve lopme n t finan cing ,debt crisis, a ppropri a te deve lopme n t finan cing ,an d a sta ble in ter na tional finan cial systeman d a sta ble in ter na tional finan cial systemco nducive to deve lopme n t.co nducive to deve lopme n t.



Eurod a dEurod a d

ha s existed si nce 199 0 an d is re g isteredha s existed si nce 199 0 an d is re g istereda s a nona s a non--profit or gan isa tion in both theprofit or gan isa tion in both theNether lan ds an d Be lgium. Nether lan ds an d Be lgium. funded by its members ( a bout o nefunded by its members ( a bout o ne--third of third of

its bud get) an d by the Dutch Min istry of its bud get) an d by the Dutch Min istry of Forei gn Aff a irs, Swedish I n ter na tional Forei gn Aff a irs, Swedish I n ter na tional Deve lopme n t Cooper a tion Agency an d UK Deve lopme n t Cooper a tion Agency an d UK Dep a rtme n t for In ter na tional Deve lopme n t.Dep a rtme n t for In ter na tional Deve lopme n t.

S f F i E h tS f F i E h t



Sources of Forei gn Exch ang e toSources of Forei gn Exch ang e toPa y Exter nal DebtPa y Exter nal Debt

Exports Exports ± ± Forei gn Exch ang e: p a yme n t of Forei gn Exch ang e: p a yme n t of debt + pa yme n t of imports =debt + pa yme n t of imports =

insufficie n t;insufficie n t; Attr a cting Exter nal Investme n t: more Attr a cting Exter nal Investme n t: morelia bilities to p a y, incre a sing remitt an ces of lia bilities to p a y, incre a sing remitt an ces of profits an d divide nds ;profits an d divide nds ;

New Loan s: before, to i nvest i n New Loan s: before, to i nvest i n deve lopme n t la ter, to p a y in terest = moredeve lopme n t la ter, to p a y in terest = moreindebted ness i n a vicious circ le .indebted ness i n a vicious circ le .



Orig inal SinOrig inal Sin

met a phor i n eco nomics liter a ture,met a phor i n eco nomics liter a ture,proposed by B a rry Eiche ng ree n , Ric a rdoproposed by B a rry Eiche ng ree n , Ric a rdoHa usm ann , an d Ug o Pan izza in a series of Ha usm ann , an d Ug o Pan izza in a series of pa pers to refer a situ a tion in whichpa pers to refer a situ a tion in which"most cou n tries a re not a ble to borrow"most cou n tries a re not a ble to borrowa bro a d in their domestic curre ncy´.a bro a d in their domestic curre ncy´.



Emer g ing ma r ket debtEmer g ing ma r ket debt (E MD)(EMD)

bonds issued by less deve loped cou n triesbonds issued by less deve loped cou n triesis prim a rily issued by soverei gn issuers .is prim a rily issued by soverei gn issuers .

ha ve a lower credit r a ting than other ha ve a lower credit r a ting than other soverei gn debtsoverei gn debt



Cou n tries issui ng EMDCou n tries issui ng EMD Ar gen tina Ar gen tinaBr az ilBr az ilBulga riaBulga riaChileChileChinaChinaCo lombi aCo lombi aCote d'IvoireCote d'Ivoire

Dominican Repub licDominican Repub licEcu a dor Ecu a dor EgyptEgyptEl Salva dor El Salva dor FijiFijiGhanaGhanaHunga ryHunga ryIndonesi aIndonesi aIr a qIr a qLeb an onLeb an onMala ysiaMala ysiaMexicoMexico



MoroccoMoroccoNigeriaNigeriaPak istanPak istanPana maPana maP eruP eru

P hilippinesP hilippinesRussi aRussi aSerbi aSerbi aSeyche llesSeyche llesSouth Afric aSouth Afric aTunisiaTunisiaTur keyTur keyUkr a ineUkr a ineUrugua yUrugua yVe nezue laVe nezue laVietna mVietna m



P OLICY RECO MMENDATIONSP OLICY RECO MMENDATIONS

to m ak e debt fi nan ce a positive source of to m ak e debt fi nan ce a positive source of finan cing for deve lopme n t. finan cing for deve lopme n t.

(a )(a ) the cou n try leve l; the cou n try leve l; (b)(b) the bi la ter al leve l; the bi la ter al leve l; (c)(c) the re g ional leve l; the re g ional leve l;

(d)(d) the global leve l.the global leve l.



1. COUNTRY LEVEL1. COUNTRY LEVELMa in ta in ma croeco nomic st a bility on a sust a ina ble b a sis with dueMa in ta in ma croeco nomic st a bility on a sust a ina ble b a sis with duea tten tion to mo neta ry, fisc al an d exch ang e r a te po licy cohere ncea tten tion to mo neta ry, fisc al an d exch ang e r a te po licy cohere nce

an d co nsiste ncy. In pa rticula r, p a y ca refu l a tten tion to growingan d co nsiste ncy. In pa rticula r, p a y ca refu l a tten tion to growingpub lic sector fisc al deficits .pub lic sector fisc al deficits .

Deregula te an d liber al ize m a r kets c a refu lly to improve productivity Deregula te an d liber al ize m a r kets c a refu lly to improve productivityan d, for those th a t ha ve yet to liber al ize, seque nce the stepsan d, for those th a t ha ve yet to liber al ize, seque nce the stepsrequired for c a pital ma r ket liber al iza tion a ppropri a te ly.required for c a pital ma r ket liber al iza tion a ppropri a te ly.

Develop the fi nan cial system, i ncluding domestic bo nd m a r kets Develop the fi nan cial system, i ncluding domestic bo nd m a r ketsan d, in pa rticula r, the gover nme n t bond m a r ket, by cre a ting anan d, in pa rticula r, the gover nme n t bond m a r ket, by cre a ting an

environme n t co nducive to the promotio n of longenvironme n t co nducive to the promotio n of long --term i nvestme n ts .term i nvestme n ts .In this re ga rd, deve lopme n t of the deriv a tive m a r ket wi ll be alsoIn this re ga rd, deve lopme n t of the deriv a tive m a r ket wi ll be alsoneeded i n emer g ing ma r kets for ris k manag eme nt.needed i n emer g ing ma r kets for ris k manag eme nt.



Cou n try leve l recomme nda tionsCou n try leve l recomme nda tions Avoid excessive depe nde nce o n exter nal short Avoid excessive depe nde nce o n exter nal short--term borrowi ng an dterm borrowi ng an dsecure longsecure long --term finan cing.term finan cing.

Effectively mo n itor the f lows of c a pital , pa rticula r ly short Effectively mo n itor the f lows of c a pital , pa rticula r ly short--termtermpriva te c a pital.priva te c a pital.

Discour ag e the f low of specu la tive short Discour ag e the f low of specu la tive short--term c a pital in va rious w a ys,term c a pital in va rious w a ys,usi ng a differe n t ta x structure an d c a ps or m a turity restrictio ns o n usi ng a differe n t ta x structure an d c a ps or m a turity restrictio ns o n cert a in types of debt i n periods of excessive shortcert a in types of debt i n periods of excessive short- -term discour ag edterm discour ag ed

ca pital f lows .ca pital f lows .

Ma in ta in a dequ a te forei gn reserves to provide effective i nsur an ceMa in ta in a dequ a te forei gn reserves to provide effective i nsur an ceaga inst exter nal uncert a in ties . Effective ly manag e the forei gnaga inst exter nal uncert a in ties . Effective ly manag e the forei gnreserves portfo lio, p a ying a tten tion to the moveme n ts of m a jor reserves portfo lio, p a ying a tten tion to the moveme n ts of m a jor curre ncies to mi n imize the forei gn exch ang e ris ks .curre ncies to mi n imize the forei gn exch ang e ris ks .



Cou n try leve l recomme nda tionsCou n try leve l recomme nda tions Con tinuous ly exp lore opportu n ities to reduce Con tinuous ly exp lore opportu n ities to reduce

the burde n of expe nsive debt vi a ea r lythe burde n of expe nsive debt vi a ea r lyretireme nt (prep a yme nt) an d refinan cing of retireme nt (prep a yme nt) an d refinan cing of

existing highexisti ng high--cost debt th a t can be retired withoutcost debt th a t can be retired withouta dditional costs, such a s pe nal ties, provided th a ta dditional costs, such a s pe nal ties, provided th a tthis does not a dverse ly a ffect the m a turitythis does not a dverse ly a ffect the m a turityprofile .profile .

Efficien tly use forei gn a id for deve lopme n t Efficien tly use forei gn a id for deve lopme n tpurposes to mi n imize the cost of c a pital.purposes to mi n imize the cost of c a pital.



Monitor debt o n a regula r ba sis, usi ng a ppropri a te too ls, such a sMonitor debt o n a regula r ba sis, usi ng a ppropri a te too ls, such a sea r ly wa r ning systems an d debt sust a ina bility anal ysis, to e nsureea r ly wa r ning systems an d debt sust a ina bility anal ysis, to e nsuretha t the debt burde n rem a ins a t sust a ina ble leve ls .tha t the debt burde n rem a ins a t sust a ina ble leve ls .

Ensure the a va ilability of computeri zed d a ta on debt, both exter nal Ensure the a va ilability of computeri zed d a ta on debt, both exter nalan d domestic, both pub lic an d priva te, a s we ll a s the co nting entan d domestic, both pub lic an d priva te, a s we ll a s the co nting entlia bilities of the pub lic sector by cre a ting effective i nstitutio nallia bilities of the pub lic sector by cre a ting effective i nstitutio nalfr a mewor ks for the comprehe nsive an d time ly f low of informa tion.fr a mewor ks for the comprehe nsive an d time ly f low of informa tion.

Ensure grea ter tr an sp a rency in debt d a ta in line with i nter na tional Ensure grea ter tr an sp a rency in debt d a ta in line with i nter na tionalstan da rds, such a s those fou nd in Exter nal Debt St a tistics: Guidestan da rds, such a s those fou nd in Exter nal Debt St a tistics: Guidefor Compi lers an d Users .for Compi lers an d Users .

Adhere to good gover nan ce pri nciples i n contr a cting debt an d Adhere to good gover nan ce pri nciples i n contr a cting debt an dusing borrowed fu nds .using borrowed fu nds .

P romote stro ng er institutio nal a rr ang eme n ts for, an d stre ng the nP romote stro ng er institutio nal a rr ang eme n ts for, an d stre ng the ncoordi na tion of, debt m anag eme nt.coordi na tion of, debt m anag eme nt.



REGIONAL LEVELREGIONAL LEVEL

Improve the existi ng fr a mewor ks an d Improve the existi ng fr a mewor ks an da rr ang eme n ts to provide support for cou n triesa rr ang eme n ts to provide support for cou n triesf a cing difficulties i n r a ising ca pital on f a cing difficulties i n r a ising ca pital on in ter na tional ma r kets .in ter na tional ma r kets .

Enhan ce the deve lopme n t of re g ional bond Enhan ce the deve lopme n t of re g ional bondma r kets throu gh incre a sed st an da rdiza tion of ma r kets throu gh incre a sed st an da rdiza tion of issu an ce an d sett leme n t procedures .issu an ce an d sett leme n t procedures .

-- Enhan ce tech nical a ssist an ce i n debtEnhan ce tech nical a ssist an ce i n debtmanag eme n t.manag eme n t.



Gloss a ryGloss a ryHIP C In itia tiveHIP C In itia tive -- In itia tive for he a vilyIn itia tive for he a vilyindebted poor cou n triesindebted poor cou n triesIIP In ter na tional investme n t positio nIIP In ter na tional investme n t positio n

Odious debtOdious debtSouverei gn debtSouverei gn debtDebt re lief Debt re lief Finan cial distressFinan cial distressRestructuri ngRestructuri ngDebtDebt--toto--equity sw a pequity sw a p

world’s debt crises

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