Introduction to the External Debt Statistics Guide
Course on External Debt Statistics Joint Africa Institute, Tunis, Tunisia November 7-18, 2005
International crises…
Following the Mexican crisis (mid-1990s), the idea of data dissemination standards arose, leading to the creation of the IMF’s Data Dissemination Standards in 19961/. From the crises in East Asia (1997/98), there were calls for strengthening the data on financial variables. Providing timely, reliable, and comprehensive data is essential for sound policy-making. Problems of data availability and lack of transparency hinder market participants in making realistic assessments of economic fundamentals. _______ 1/ Available at http://dsbb.imf.org/Applications/web/dsbbhome/
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…increased the need for external debt data
In the 1980s there was virtually no comparable data on external debt available with adequate timeliness and periodicity. International crises in the 1990s increased the need for strengthening data on financial variables. External debt (especially private sector short-term debt) was identified as one of the key areas for improvement. Public external debt data remains important. However, continued liberalization of markets has raised the profile of private sector external debt statistics. The international community saw the need for: a new guide on external debt statistics; strengthening the IMF’s data dissemination standards1/ Importance of good data on external debt. _________________ 1/ Special Data Dissemination Standard (SDDS) and General Data Dissemination System (GDDS)
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Task force (1/2)
The Inter-Agency Task Force on Finance Statistics (TFFS) produced the “External Debt Statistics: Guide for Compilers and Users” (the Guide). The TFFS was set up in 1992 and is one of the interagency task forces formed under the aegis of the United Nations Statistical Commission. In 1998, the TFFS decided to coordinate work among agencies to improve the methodological soundness, transparency, timeliness, and availability of external debt data. The Guide is available in Chinese, English, French, and Spanish at http://www.imf.org/np/sta/ed/guide.htm1/ ____________ 1/ Translations into Arabic and Russian are expected to be available during 2006.
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Task force (2/2)
The work on the Guide involved representatives from nine international organizations: Bank for International Settlements (BIS) The Commonwealth Secretariat European Central Bank (ECB) Eurostat International Monetary Fund (IMF) Organisation for Economic Co-operation and Development (OECD) Paris Club Secretariat United Nations Conference on Trade and Development (UNCTAD) World Bank Consultation with countries through seminars and the public comment period on a draft.
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II. The need for a new external debt guide
Previous guidance
The previous international guidance on external debt statistics (known as the Grey Book) was published by the BIS, IMF, OECD, and the World Bank in 1988. Since the publication of the Grey Book, there have been: new international statistical guidelines for national accounts and balance of payments statistics established in 1993; a substantial growth in private sector financial flows, especially to private sector debtors; and associated with these financial flows, an increased use of instruments such as debt securities and derivatives to manage and redistribute risks.
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The Guide provides guidance on…
The concepts, definitions, and classifications of gross external debt of the public and private sectors. The sources and techniques for compiling these data. The analytical use of external debt data.
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Structure of the Guide (1/3)
The Guide is organized in four parts: The first part provides a comprehensive conceptual framework, with particular emphasis on definition, accounting principles, measurement, and presentation tables of external debt (chapters 2 to 9). It also includes frameworks for debt reorganization and contingent liabilities. The second part provides advice on the principles and practices for compilation, including case studies of experiences of eleven countries in various aspects of the compilation of external debt data (chapters 10 to 14).
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Structure of the Guide (2/3)
The third part refers to the use of external debt statistics for debt sustainability and external debt analysis (chapters 15-16) The fourth part outlines work of international agencies related to external debt statistics and technical assistance provided by those institutions in the field (chapters 17-19)
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Structure of the Guide (3/3)
Additionally, the appendices of the Guide provide glossaries of terms and of financial instruments, and cover the relation between the international investment position (IIP), the balance of payments transactions, and the national accounts, among other major topics.
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Part one: Conceptual framework (1/3)
The conceptual framework used in the Guide is derived from the: System of National Accounts, 1993 (1993 SNA). Fifth edition of the Balance of Payments Manual (BPM5) also issued in 1993. The stock of external debt is presented in two types of tables: one focuses on all resident institutional sectors (as presented in the IIP). the other on the role of the public sector.
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Part one: Conceptual framework (2/3)
From the evidence of the international financial crises of the 1990s, additional data series are vital to assist in identifying potential vulnerability to solvency and liquidity problems The Guide goes beyond 1993 SNA and BPM5 frameworks in specifying the concepts for the measurement and in providing more tables for the presentation of external debt data series, including: on a remaining maturity basis the currency of denomination the debt service payment schedule
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Part one: Conceptual framework (3/3)
The Guide also explains the concept of net external debt (comparison of the stock of external debt with holdings of external financial assets of similar instrument type), and incorporates financial derivative positions into external debt analysis.
A framework for the presentation on external debt reorganizations is provided (chapter 8). Contingent liabilities are defined, techniques of valuation discussed, and a table to measure external debt on a so-called ultimate risk basis (ultimate obligor, rather than immediate obligor reported in economic statistics) is provided (chapter 9).
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Part two: Compilation of external debt (1/3)
Compilation practice provided to help compilers: Four chapters on international best practices. One chapter of country case studies.
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Part two: Compilation of external debt (2/3)
Best practice chapters include: Overview, covering organization issues, cooperation with suppliers, adaptation of systems as liberalization progresses, importance of dissemination, etc. (chapter 10).
Public sector debt and need for a good monitoring system (chapter 11). Coverage of banks and other sectors external debt (chapter 12). • Chapter 12 also includes an appendix that explains how position data can be compiled using transaction data. Traded securities data (chapter 13).
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Part two: Compilation of external debt (2/3)
Chapter 14 on country experience covers a wide range of experience from register building in Australia, to the production of Heavily Indebted Poor Countries (HIPC) data in Uganda. Beyond subject matter, case studies provide insights into processes and procedures.
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Country Experience (1/2)
Australia
Austria Canada Chile
Experience in Compiling External Debt Data: Register Compilation and Form Design.
Measurement of the IIP. Measurement of Foreign Portfolio Investment in Canadian Bonds. Reconciliation of External Debt Statistics with BIS International Banking Statistics.
India
How Debt Information Systems are being used for External Debt Management.
Monitoring and Management of Non-Resident Deposits in India.
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Country Experience (2/2)
Israel
Mexico New Zealand Philippines Turkey Uganda
Measurement of External Debt
Registration of Private Debt Experience in Collecting Foreign Currency Hedging information System for Monitoring the External Debt of the Private Sector Measurement of Short-Term External Debt Data Requirements for the HIPC Initiative
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Part three: Use of external debt data (1/3)
Two chapters are provided to help explain the use of external data: Chapter 15 discusses the use of medium-term scenarios for debt sustainability analysis, and explains some of the most commonly used debt ratios. The concepts of solvency and liquidity risk are explained. Chapter 16 explains the complex nature of external debt analysis and the use that can be made of the series recommended in the Guide.
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Part three: Use of external debt data (2/3)
Medium-term scenarios are numerical evaluations that take account of expectations of the behavior of economic variables to determine the conditions under which debt and other indicators would stabilize at reasonable levels.
Debt ratios covered: debt to exports, debt to GDP, debt service to exports, debt to fiscal revenue, international reserves to short-term debt, etc. Scenarios and ratios can be used to analyze the debt situation and how it is evolving e.g. is the burden becoming unsustainable?
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Part three: Use of external debt data (3/3)
Composition of external debt By sector By instrument By maturity By currency etc. Importance of data on income and external assets. Relevance of financial derivatives and repurchase agreements. Creditor composition of external debt.
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Part Four: Work of International Agencies
Three chapters, covering: Description of data published by the BIS, the IMF, the OECD, and the world bank (chapter 17). Debt reporting systems (chapter 18). • Commonwealth secretariat. • UNCTAD. Technical assistance activities provided in external debt statistics (chapter 19).
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Boxes
Two boxes are particularly worth mentioning: Box 4.1 is included on the SDDS and GDDS requirements for external debt statistics Box 17.1 describing the series in the BIS-IMF-OECD-world bank statistics on external debt table
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Appendices (1/2)
There are five appendices: The first covers definitions and classifications of. • Financial instruments. • Specific transactions. The second appendix describes and explains the recording approach to reverse security transactions. The third appendix covers definitions and classifications of external debt terms.
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Appendices (2/2)
The fourth appendix explains the relationship between the national accounts and the IIP. The fifth appendix describes the heavily indebted poor countries (HIPC) initiative and debt sustainability analysis.
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Conclusion
The guide proves of value to debt compilers and users. The guide develops clear and consistent standards. Continuing courses and other activities to support external debt compilation work.
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