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Maximilien Kaffo Melou, Mariusz A. Sumlinski, and Chris Geiregat
We analyse the debt dynamics in countries that benefited from the HIPC/MDRI debt relief initiatives with a view to applying a probabilistic approach to estimating future debt paths for those countries. We extend the probabilistic approach to public debt sustainability analysis (DSA) proposed by Celasun et al. (2006). This required addressing the twin challenges of a the time period that is too short to conduct country-by-country estimations and the presence, suggested by econometric evidence, of a break–point around 2006 in the dynamics of debt accumulation. To overcome the data limitations, we pool the data and estimate a panel VAR, thus taking advantage of the large cross–section. To account for the break–point, while applying a probabilistic approach to forecasting debt paths, we use the post–break–point information so as not to bias the forecasts of debt paths. As an illustration of the approach we apply the methodology to eight countries with different debt profiles.
Ms. Corinne C Delechat, Ms. Camila Henao Arbelaez, Ms. Priscilla S Muthoora, and Svetlana Vtyurina
Banks’ liquidity holdings are comfortably above legal or prudential requirements in most Central American countries. While good for financial stability, high systemic liquidity may nonetheless hinder monetary policy transmission and financial markets development. Using a panel of about 100 commercial banks from the region, we find that the demand for precautionary liquidity buffers is associated with measures of bank size, profitability, capitalization, and financial development. Deposit dollarization is also associated with higher liquidity, reinforcing the monetary policy and market development challenges in highly dollarized economies. Improvements in supervision and measures to promote dedollarization, including developing local currency capital markets, would help enhance financial systems’ efficiency and promote intermediation in the region.
International Monetary Fund
This report provides an update on the status of implementation, impact and costs of the Enhanced Heavily Indebted Poor Country (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI). With a view to the upcoming Financing for Development meetings in Doha, the report not only reports on recent progress since mid-2007, but also on developments since the Monterrey Consensus recommendations on external debt relief.
Rupa Duttagupta and Mr. Paul Cashin
This paper uses a Binary Classification Tree (BCT) model to analyze banking crises in 50 emerging market and developing countries during 1990-2005. The BCT identifies key indicators and their threshold values at which vulnerability to banking crisis increases. The three conditions identified as crisis-prone-(i) very high inflation, (ii) highly dollarized bank deposits combined with nominal depreciation or low liquidity, and (iii) low bank profitability-highlight that foreign currency risk, poor financial soundness, and macroeconomic instability are key vulnerabilities triggering banking crises. The main results survive under alternative robustness checks, confirming the importance of the BCT approach for monitoring banking system vulnerabilities.
International Monetary Fund
This paper provides an update on the delivery of HIPC Initiative debt relief by non- Paris Club official bilateral creditors and proposes measures to increase their participation. It finds that non-Paris Club creditors have provided about one third of the total HIPC Initiative debt relief expected from them, with significant variations among creditors. Although the response rate to the survey sent by staffs of the Bank and the Fund to creditors was higher than in previous years, the information received is still limited and partial, and the estimate of debt relief delivered remains preliminary.
International Monetary Fund
This report provides an update on the status of implementation, impact and costs of the enhanced Heavily Indebted Poor Country (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI) since mid-2006. It also discusses the status of creditor participation in both initiatives and the issue of litigation of commercial creditors against HIPCs.
International Monetary Fund
The table provides information on HIPC (Heavily Indebted Poor Country) Initiative debt relief provided by each non-Paris Club official bilateral creditor to post-completion point HIPCs. It tracks the HIPC Initiative debt relief granted by these creditors so far. The table will be updated annually in the context of the "HIPC Initiative Status of Implementation Report." It will also be updated when creditors and debtors provide comprehensive information for updating the estimates of HIPC Initiative debt relief provided.
International Monetary Fund
This report reviews progress and issues in implementing the enhanced Heavily Indebted Poor Countries (HIPC) Initiative and reports on the implementation of the Multilateral Debt Relief Initiative (MDRI) by IDA, the IMF, and AfDF. It concludes that the volume of debt relief has increased significantly since the inception of the HIPC Initiative in 1996, thereby reducing HIPCs’ debt service burdens and allowing them to finance increased poverty reduction efforts. It also provides updated information on the costs of debt relief under the HIPC Initiative and the MDRI. Finally, it reviews the status of creditor participation and delivery of debt relief under the two initiatives, highlighting the challenges to increase the participation by non–Paris Club official bilateral and commercial creditors in the HIPC Initiative.
International Monetary Fund
This supplement summarizes new information available to staff since the issuance of The Multilateral Debt Relief Initiative: A First Assessment of Eligible Countries (December 8, 2005). It focuses on the six members (Ethiopia, Madagascar, Mauritania, Nicaragua, Rwanda, and Senegal) for which staff recommends that remedial actions be taken before the Board determines whether they qualify for debt relief from the Fund under the Multilateral Debt Relief Initiative.