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Mr. Eduard H. Brau, R. C. Williams, Mr. Peter M Keller, and Mr. M. Nowak

Abstract

Experience with multilateral debt restructurings with official creditors and with international banks in the second half of the 1970s was described in External Indebtedness of Developing Countries, issued in 1981.1 The present paper reviews recent developments, covering the period through early October 1983. It discusses the external debt problems that countries have experienced and the arrangements made for restructuring official and commercial bank debt. The paper does not deal with the broad economic conditions that are essential if debtor countries are to be successful in their adjustment efforts over the medium term. These conditions will include, inter alia, adequate flows of official and private capital on reasonable terms, economic policies in the industrial countries that will promote a noninflationary recovery and a resurgence of world trade, and greater access to markets for developing countries.

Mr. Eduard H. Brau, R. C. Williams, Mr. Peter M Keller, and Mr. M. Nowak

Abstract

The sharp increase in the frequency and severity of external debt servicing difficulties has taken place against the background of a rapid rise in foreign borrowing by developing countries in recent years. Over the seven years from the end of 1974 through the end of 1981, i.e., prior to the emergence of widespread major debt servicing difficulties, the total external debt of non-oil developing countries increased at a compound annual rate of 20 percent (Table 1). In real terms—deflated by the unit value index for the exports of these countries, for example3—this debt increased at an annual rate of 10 percent. As a result the ratio of external debt to exports of goods and services rose from 1.0 to 1.2, and the ratio of external debt to gross national product (GNP) from 0.22 to 0.30.

Mr. Eduard H. Brau, R. C. Williams, Mr. Peter M Keller, and Mr. M. Nowak

Abstract

The approach taken by most countries experiencing severe difficulties in servicing their external debt has been to request creditors to restructure debt service payments falling due or in arrears. Typically, the external debt accumulated by a country had been incurred against a relatively large number and a wide range of creditors, such as private suppliers, commercial banks, governments (either directly or indirectly, through export insurance schemes or other forms of official guarantee), and multilateral development institutions. As debt service problems experienced by countries generally did not relate to specific loans by individual creditors but were symptomatic of more general balance of payments problems, the requests for debt rescheduling were normally directed to most creditors having significant claims on the country.

Mario Pessoa, Andrew Okello, Artur Swistak, Muyangwa Muyangwa, Virginia Alonso-Albarran, and Vincent de Paul Koukpaizan
The value-added tax (VAT) has the potential to generate significant government revenue. Despite its intrinsic self-enforcement capacity, many tax administrations find it challenging to refund excess input credits, which is critical to a well-functioning VAT system. Improperly functioning VAT refund practices can have profound implications for fiscal policy and management, including inaccurate deficit measurement, spending overruns, poor budget credibility, impaired treasury operations, and arrears accumulation.This note addresses the following issues: (1) What are VAT refunds and why should they be managed properly? (2) What practices should be put in place (in tax policy, tax administration, budget and treasury management, debt, and fiscal statistics) to help manage key aspects of VAT refunds? For a refund mechanism to be credible, the tax administration must ensure that it is equipped with the strategies, processes, and abilities needed to identify VAT refund fraud. It must also be prepared to act quickly to combat such fraud/schemes.
Mr. Ari Aisen and Michael Franken
This paper empirically estimates the main determinants of bank credit growth during the 2008 financial crisis. Using a sample covering over 80 countries, this paper finds that larger bank credit booms prior to the crisis and lower GDP growth of trading partners are among the most important determinants of the post-crisis bank credit slowdown. Structural variables such as financial depth and integration were also relevant. Finally, countercyclical monetary policy and liquidity played a critical role in alleviating bank credit contraction after the 2008 financial crisis, suggesting that countries should pursue appropriate institutional and macroeconomic frameworks conducive to countercyclical monetary policies.
Mr. Paolo Mauro and Yishay Yafeh
This paper analyzes the Corporation of Foreign Bondholders (CFB), an association of British investors holding bonds issued by foreign governments. The CFB played a key role during the heyday of international bond finance, 1870-1913, and in the aftermath of the defaults of the 1930s. It fostered coordination among creditors, especially in cases of default, arranging successfully for many important debt restructurings, though failing persistently in a few cases. While a revamped creditor association might once again help facilitate creditor coordination, the relative appeal of defection over coordination is greater today than it was in the past. The CFB may have had an easier time than any comparable body would have today.
Marijn A. Bolhuis and Brett Rayner
We leverage insights from machine learning to optimize the tradeoff between bias and variance when estimating economic models using pooled datasets. Specifically, we develop a simple algorithm that estimates the similarity of economic structures across countries and selects the optimal pool of countries to maximize out-of-sample prediction accuracy of a model. We apply the new alogrithm by nowcasting output growth with a panel of 102 countries and are able to significantly improve forecast accuracy relative to alternative pools. The algortihm improves nowcast performance for advanced economies, as well as emerging market and developing economies, suggesting that machine learning techniques using pooled data could be an important macro tool for many countries.
Mr. Eduard H. Brau, R. C. Williams, Mr. Peter M Keller, and Mr. M. Nowak

Abstract

The history of official multilateral debt renegotiations dates back to 1956 when a number of European countries met in Paris to reschedule Argentina’s foreign debt. Between 1975 and early October 1983 (the period reviewed in this section), there were 37 official multilateral debt reschedulings involving 19 debtor countries that are members of the Fund (Table 7). These countries were all non-oil developing countries, including 11 classified as low income. While basically all geographic areas were represented in the group, by far the largest group consisted of African countries. The amount of debt relief provided amounted to less than US$500 million for all countries, except Mexico, Romania, Sudan, Turkey, and Zaïre.

Mr. Eduard H. Brau, R. C. Williams, Mr. Peter M Keller, and Mr. M. Nowak

Abstract

Experience with multilateral debt restructurings with official creditors and with international banks in the second half of the 1970s was described in External Indebtedness of Developing Countries, issued in 1981. The present paper reviews recent developments, covering the period through early October 1983.