Copyright
Occasional Paper No. 3
External Indebtedness of Developing Countries
By a Staff Team Headed by Bahram Nowzad and Richard C. Williams
and consisting of
Ulrich Baumgartner
K. Burke Dillon
G.G. Johnson
Peter M. Keller
G. Russell Kincaid
Thomas M. Reichmann
Maria Tyler
Exchange and Trade Relations Department
International Monetary Fund
Washington, D.C.
May 1981
Contents
Prefatory Note
I. Introduction
II. Dimensions of Developing Country Debt
Conceptual and statistical aspects
Overall developments, 1972–79
Non-oil developing countries
Changes in debt structure
Terms of debt
Prospects
Overview
III. Inflation and External Debt
Debt ratios
Burden of external debt, 1972–79
Inflation and the rate of amortization
IV. Survey of Recent Debt Problems
Main developments
Balance of payments background
V. Multilateral Debt Renegotiations
Basis of multilateral approach
Paris Club and similar frameworks
Summary of scope and terms of debt relief
Evolution of new guidelines
Role of the Fund
Background
Provisions of new guidelines
The Fund’s role in future debt rescheduling operations
VI. Debt Restructuring by Commercial Banks
Evolution of bank financing
Bank lending and economic management
Debt restructuring process
Financial impact of restructuring
Relationship to agreements with official creditors
Role of the Fund
Overview of some issues
APPENDICES
I. Developing Countries Covered in This Study
II. Inflation and Debt Service
III. Debt Ratios and Analysis of Debt Situations
General considerations
Descriptive function
Predictive function
Data considerations
Commonly used debt ratios
Debt service ratio
Ratio of amortization payments to disbursements
Ratio of interest payments to GDP or export earnings
Ratio of net resource transfer to GDP
Ratio of outstanding external debt to GDP or export earnings
Ratio of net external debt to GDP or export earnings
Debt capacity
LIST OF TABLES
Section
II. 1. Total External Debt of Developing Countries, End of 1979
2. Medium-Term and Long-Term Debt of 94 Developing Countries, 1972–79
3. Ratio of Developing Country Debt to Exports and Reserves, 1960 and 1970–79
4. Debt of 87 Non-Oil Developing Countries, 1972–79
5. Outstanding Debt of 94 Developing Countries by Income and Creditor Source, End of 1979
6. Outstanding Debt and Debt Service of Developing Countries with Largest Outstanding Debt, 1975–79
7. Average Terms of Debt Commitments for 94 Developing Countries, 1972–79
8. External Debt of 87 Non-Oil Developing Countries, 1978–81
III. 9. Nominal and Real Public Debt of 87 Non-Oil Developing Countries, 1972–79
10. Selected Indicators for Public Debt of 87 Non-Oil Developing Countries, 1972–79
IV. 11. Multilateral Debt Renegotiations, 1975–80
12. Comparison of External Public Debt Indicators for a Group of Twelve Countries and for Other Non-Oil Developing Countries, 1972–79
13. Comparisons of Economic Indicators for a Group of Twelve Countries and for Other Non-Oil Developing Countries, 1972–79
VI. 14. Medium-Term and Long-Term Bank Loan Commitments, 1971–78
15. Net Bank Financing and Net Balance of Payments Flow Vis-à-Vis Banks, 1973–79
16. Ratio of Net Flow Vis-à-Vis Banks to GDP and to Current Account Receipts, 1973–79
17. Basic Components of Restructuring Agreements
18. Impact of Restructuring Agreements on Net Flow Vis-à-Vis Banks During First Six Years
Appendices
II. 19. Effect of Inflation on Real Value of a Loan
LIST OF CHARTS
Section
III. 1. Public External Debt and Debt Service for 87 Non-Oil Developing Countries, 1972–79
Appendices
II. 2. Impact of Inflation on Real Burden of Debt Over Twenty Years
3. Impact of Inflation on Real Burden of Debt Over Ten Years
4. Impact of Inflation on Real Burden of Debt Over Five Years
III. 5. Model of External Debt Accumulation
Prefatory Note
This study was prepared in the Exchange and Trade Relations Department of the International Monetary Fund. Section VI was prepared in the International Capital Markets Division under the direction of Richard C. Williams; the remainder of the study was prepared in the External Finance Division under the direction of Bahram Nowzad. The members of the divisions who contributed were Ulrich Baumgartner, K. Burke Dillon, G. G. Johnson, Peter M. Keller, G. Russell Kincaid, Thomas M. Reichmann, and Maria Tyler. Technical assistance was provided by Dev Kar. The study was completed in December 1980 and does not reflect developments since that time.
Contributions and helpful comments were received from a number of colleagues. However, opinions expressed are those of the authors and do not necessarily represent the views of other staff members or of Executive Directors.