Chapter

4. Presentation of the Gross External Debt Position

Author(s):
International Monetary Fund
Published Date:
June 2003
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Introduction

4.1 This chapter provides a table for the presentation of the gross external debt position and related memorandum tables. Data compiled using the concepts outlined in the previous chapters and presented in the format of this table are essential to providing a comprehensive and informed picture of the gross external debt position for the whole economy, and so their dissemination on a frequent basis is encouraged (see also Box 4.1).

Box 4.1SDDS and GDDS Specifications Regarding Dissemination of External Debt Statistics

In the aftermath of the 1994–95 international financial crisis, the Interim Committee (now called the International Monetary and Financial Committee) of the IMF’s Board of Governors endorsed the establishment of a two-tier standard to guide member countries in the provision of economic and financial data to the public. The first tier, named the Special Data Dissemination Standard (SDDS), was approved by the IMF’s Executive Board on March 29, 1996. The other tier, named the General Data Dissemination System (GDDS), was approved on December 19, 1997.1

The purpose of the SDDS is to guide IMF member countries in the provision to the public of comprehensive, timely, accessible, and reliable economic and financial statistics in a world of increasing economic and financial integration. The SDDS is geared to those countries that have, or might seek, access to international capital markets. Subscription to the SDDS is voluntary. By subscribing to the SDDS, members undertake to provide the supporting information to the IMF and to observe the various elements of the SDDS.

With respect to the external debt data category, the SDDS prescribes the dissemination of quarterly data with a one-quarter lag, covering four sectors (general government, monetary authorities, the banking sector, and other). Furthermore, the data are to be disaggregated by maturity—short- and long-term—and provided on an original maturity basis and by instrument, as set out in BPM5. The SDDS encourages countries to disseminate supplementary information on future debt-service payments, in which the principal and interest components are separately identified, twice yearly for the first four quarters and the following two semesters ahead, with a lag of one quarter. The data should also be broken down into sector—general government, monetary authorities, the banking sector, and other sectors. The dissemination of a domestic/foreign currency breakdown of external debt with quarterly periodicity and timeliness is also encouraged.

The GDDS is a structured process focused on data quality that assists countries in adapting their statistical systems to meet the evolving requirements of the user community in the areas of economic management and development. Participating countries voluntarily commit to adhering to sound statistical practices in developing their statistical systems.

The core data category for external debt in the GDDS includes public and publicly guaranteed debt, and the associated debt-service schedule. Recommended good practice would be that the stock data, broken down by maturity, be disseminated with quarterly periodicity and timeliness of one or two quarters after the reference date. In addition, the associated debt-service schedules should be disseminated twice yearly, within three to six months after the reference period, and with data for four quarters and two semesters ahead. Data on nonguaranteed private debt and debt-servicing schedules, with annual periodicity, are encouraged data categories to be disseminated within six to nine months after the reference period.

1 On March 29, 2000, the IMF’s Executive Board made a number of amendments to the SDDS, which included the introduction of a separate data category for external debt. At the same time, the Board amended the GDDS to include public and publicly guaranteed external debt and a debt-service schedule as a core data category.

4.2 In disseminating data on the gross external debt position, compilers are encouraged to provide methodological notes explaining the concepts and methods used in compiling the data. For any presentation of gross external debt position it is particularly important for the compiler to indicate whether traded instruments are valued at nominal or market value,1 and whether interest costs that have accrued but are not yet payable are included, or not.

Presentation Table

4.3 The presentation of the gross external debt position is set out in Table 4.1.

Table 4.1.Gross External Debt Position: By Sector
End-Period
General Government
Short-term
Money market instruments
Loans
Trade credits
Other debt liabilities1
Arrears
Other
Long-term
Bonds and notes
Loans
Trade credits
Other debt liabilities1
Monetary Authorities
Short-term
Money market instruments
Loans
Currency and deposits2
Other debt liabilities1
Arrears
Other
Long-term
Bonds and notes
Loans
Currency and deposits2
Other debt liabilities1
Banks
Short-term
Money market instruments
Loans
Currency and deposits2
Other debt liabilities1
Arrears
Other
Long-term
Bonds and notes
Loans
Currency and deposits2
Other debt liabilities1
Other Sectors
Short-term
Money market instruments
Loans
Currency and deposits2
Trade credits
Other debt liabilities1
Arrears
Other
Long-term
Bonds and notes
Loans
Currency and deposits2
Trade credits
Other debt liabilities1
Nonbank financial corporations
Short-term
Money market instruments
Loans
Currency and deposits2
Other debt liabilities1
Arrears
Other
Long-term
Bonds and notes
Loans
Currency and deposits2
Other debt liabilities1
Nonfinancial corporations
Short-term
Money market instruments
Loans
Trade credits
Other debt liabilities1
Arrears
Other
Long-term
Bonds and notes
Loans
Trade credits
Other debt liabilities1
Households and nonprofit institutions serving households (NPISH)
Short-term
Money market instruments
Loans
Trade credits
Other debt liabilities1
Arrears
Other
Long-term
Bonds and notes
Loans
Trade credits
Other debt liabilities1
Direct Investment: Intercompany Lending
Debt liabilities to affiliated enterprises
Arrears
Other
Debt liabilities to direct investors
Arrears
Other
Gross External Debt
  • The first level of disaggregation is by institutional sector. The primary disaggregation is by the four sectors of the compiling economy described in the previous chapter—general government, monetary authorities, banks, and other sectors. A disaggregation of the other sectors into nonbank financial corporations, nonfinancial corporations, and other sectors (households and nonprofit institutions serving households) is provided.

    Intercompany lending between entities in a direct investment relationship is separately presented because the nature of the relationship between debtor and creditor is different from that for other debt, and this affects economic behavior. Whereas a creditor principally assesses claims on an unrelated entity in terms of the latter’s ability to repay, claims on a related entity may be additionally assessed in terms of the overall profitability and economic objectives of the multinational operation.

  • The second level of disaggregation is by the maturity of external debt—short-term and long-term on an original maturity basis. A maturity attribution is not provided for intercompany lending, but in separately identifying arrears (see below), which by definition are short-term liabilities, a partial short-term attribution is provided.2

  • The third level of disaggregation is by type of debt instrument. The debt instruments are described in Chapter 3.

4.4Other debt liabilities (other liabilities in the IIP), and intercompany lending are explicitly subdivided between arrears and other. Arrears are separately identified because such information is of particular analytical interest to those involved in external debt analysis, since the existence of arrears indicates the extent to which an economy has been unable to meet its external obligations. All other debt liabilities and intercompany lending that are not arrears are classified as other.

4.5 For some economies arrears are very significant. For such economies, a further disaggregation of arrears into arrears of principal, arrears of interest, interest on arrears of principal, and interest by institutional sector is encouraged. Also, if the amounts of technical and/or transfer arrears are significant, it is encouraged that data on these amounts be separately identified and disseminated by the compiling economy.

4.6 The chapter also presents tables for memorandum items, data on which, depending on an economy’s circumstances, can enhance the analytical usefulness of the data presented in the gross external debt position.

Memorandum Items

4.7 To enhance analytical usefulness, various memoranda data series might be presented along with the presentation of the gross external debt position. The first memorandum item discussed below covers outstanding liabilities arising from periodic interest costs that have accrued and are not yet payable. The other three memorandum items—financial derivatives, equity liabilities, and debt securities issued by residents that are involved in reverse security transactions between residents and nonresidents—provide information on instruments that are not captured in the gross external debt position but that potentially could render an economy vulnerable to solvency and, particularly, liquidity risks.

Periodic Interest Costs That Have Accrued and Are Not Yet Payable: Outstanding Liabilities

4.8 A memorandum table is set out in Table 4.2 for the presentation of data on outstanding liabilities arising from periodic interest costs that have accrued and are not yet payable. Periodic interest costs are those interest costs that result in an interest payment, as defined in Chapter 2. In attributing these liabilities by sector and maturity in this table, compilers should be consistent with their approach in compiling gross external debt position data. For example, interest costs attributed to short-term government debt in the gross external debt position should be attributed to general government, short-term in this table. A more detailed disaggregation of these interest cost liabilities by type of instrument could be provided, if necessary.

Table 4.2.Periodic Interest Costs That Have Accrued and Are Not Yet Payable: Outstanding Liabilities
End-Period
General Government
Short-term
Long-term
Monetary Authorities
Short-term
Long-term
Banks
Short-term
Long-term
Other Sectors
Short-term
Long-term
Direct Investment: Intercompany Lending
Debt liabilities to affiliated enterprises
Debt liabilities to direct investors
Total Economy

4.9 Separate data on outstanding liabilities arising from periodic interest costs that have accrued and are not yet payable allow for the calculation of the gross external debt position excluding these liabilities, which in turn facilitates comparisons both across countries and across time—that is, allows comparisons with gross external debt position data that might exclude such liabilities produced either by other countries, or by the same country in earlier time periods. Information on such liabilities also provides a broad indication of the scale of short-term interest payments to be made (the more frequent these data are disseminated, the more relevant this information), and can help clarify national practice on the treatment of accrual of interest costs.

Financial Derivatives

4.10 A memorandum table for the presentation of position data on financial derivatives is provided in Table 4.3. Because of the use of financial derivatives to hedge financial positions as well as to take open positions, these contracts can add to an economy’s liabilities and, if used inappropriately, cause significant losses. However, in comparing financial derivatives data with external debt, the user should be aware that financial derivatives might be hedging asset positions, or a whole portfolio of assets and liabilities. In this regard, the net external debt position presentation in Chapter 7 is also relevant.

Table 4.3.Financial Derivatives Position
End-Period
Liabilities
General government
Monetary authorities
Banks
Other sectors
Nonbank financial corporations
Nonfinancial corporations
Households and nonprofit institutions serving households (NPISH)
Total
Assets1
General government
Monetary authorities
Banks
Other sectors
Nonbank financial corporations
Nonfinancial corporations
Households and nonprofit institutions serving households (NPISH)
Total
Total Economy

4.11 The table includes gross assets as well as gross liabilities because of the market practice of creating offsetting contracts, and the possibility of forward-type instruments to switch from asset to liability positions, and vice versa, from one period to the next. For instance, a borrower hedging a foreign currency borrowing with a forward contract might find that the value of the hedge switches from asset to liability position from period to period depending on the movement in exchange rates. To present only the liability position in financial derivatives along with gross external debt would imply that the foreign currency borrowing was only hedged when the forward contract was in a liability position, so creating a misleading impression. Thus, financial derivatives liability positions should be considered alongside financial derivatives asset positions. If an economy includes financial derivatives in its reserve assets data, because they pertain to reserve asset management, these financial derivatives should be excluded from this memorandum item.

Equity Liabilities

4.12Table 4.4 shows a memorandum table for the presentation of position data on equity liabilities—that is, both equity securities, and equity capital and reinvested earnings of direct investment enterprises. Similar to financial derivatives positions, equity securities can add to an economy’s liabilities and so could potentially be a source of vulnerability. Also, equity capital in direct investment enterprises, particularly branches/unincorporated enterprises, could be withdrawn.

Table 4.4.Equity Liability Position
End-Period
Banks
Other sectors
Nonbank financial corporations
Nonfinancial corporations
Total
Direct investment in reporting economy: Equity capital and reinvested earnings
Total Economy

4.13 In some instances, resident mutual funds are used as a vehicle by nonresident investors to acquire positions in domestic debt securities. If the nonresidents decide to sell these investments, the sales can have a direct impact on the domestic debt securities market. As explained in Chapter 3, such investments by nonresidents are classified as equity liabilities of the resident economy. Nonetheless, identifying equity investment in mutual funds, under nonbank financial corporations in the table, might be considered. Further, if the amounts are significant and concentrated in mutual funds that are entirely or almost entirely owned by nonresidents, memoranda data on the investments of these mutual funds might also be disseminated.

Resident-Issued Debt Securities Involved in Reverse Security Transactions

4.14 In financial markets, activity in reverse security transactions is commonplace. It is one method of providing an investor with financial leverage in the debt markets—that is, greater exposure to market price movements than the value of own funds invested. To understand the dynamics of this leverage activity, and to track developments and hence potential vulnerability, a memorandum table is provided in Table 4.5 for the presentation of position data on debt securities issued by residents that are acquired from or provided to nonresidents under reverse security transactions. Such data would also help to interpret external debt, in particular security debt data when reverse security activity is significant, and could be affecting the recorded position. For debt securities to be included in this memorandum table, the acquiring party must have full title to the securities such that they can be sold to a third party.

Table 4.5.Debt Securities Acquired Under Reverse Security Transactions:1 Positions
End-Period
Debt securities issued by residents and acquired by nonresidents from residents (+)
Debt securities issued by residents and acquired by residents from nonresidents (−)

4.15 In the table, the total value of debt securities issued by residents that have been acquired by nonresidents from residents under outstanding reverse security transactions, even if subsequently on-sold, are included with a positive sign. The total value of debt securities issued by residents that have been acquired by residents from nonresidents under outstanding reverse security transactions, even if subsequently on-sold, are included with a negative sign. This sign convention tracks the change of ownership of debt securities. Other things being equal, if nonresidents acquire these securities under reverse security transactions, the security claims on the resident economy are greater than recorded in the gross external debt position, whereas if residents acquire these securities from nonresidents under reverse security transactions, the debt security claims on the resident economy are less than recorded in the gross external debt position. Appendix II provides more information on reverse security transactions and explains how different types of reverse security transactions should be recorded in the gross external debt position and in this memorandum table.

A table reconciling nominal and market valuation of traded debt instruments is provided in Chapter 7 (Table 7.13).

If a short-/long-term maturity attribution of intercompany lending data is available to the compiler on an original maturity basis, the Guide encourages dissemination of these data.

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