Chapter

5. Public and Publicly Guaranteed External Debt

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

5.1 For countries in which there is a particular interest in public sector debt, this chapter provides a table for the presentation of the gross external debt position in which the role of the public sector is highlighted. The data for this table should be compiled using the concepts outlined in Chapters 2 and 3, except the debt of resident entities should be attributed according to whether the debtor is publicly owned or not, and if not, by whether the debt instrument is guaranteed or not by a public sector entity. For convenience, this presentation is described as being a “public-sector-based approach” and is consistent with the framework of the World Bank’s Debtor Reporting System.

5.2 In economies where public sector external debt is dominant, the presentation table provided in this chapter could be the primary one used for disseminating data. Indeed, in circumstances where the public sector is centrally involved in external debt borrowing activity, both as a borrower or guarantor, it is essential. As private sector debt becomes more important in the economy, more detailed breakdowns of private sector debt are required, such as provided in the previous chapter, but the presentation set out in this chapter would remain relevant for monitoring external debt liabilities of the public sector.

5.3 Because the concepts for its measurement remain consistent throughout the Guide, the gross external debt position for the whole economy—depending on whether traded debt instruments are valued at nominal or market value—should be the same regardless of whether the presentation table in this or the previous chapter is used to disseminate such data.

5.4 In disseminating data, 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, and whether interest costs that have accrued but are not yet payable are included, or not.

Definitions

5.5 For the presentation of the external debt position in a public-sector-based approach, the first determination is whether or not a resident entity is in the public sector.1 In comparison with the institutional sector approach outlined in Chapter 3, the public sector includes the general government, monetary authorities, and those entities in the banking and other sectors that are public corporations. A public corporation is defined as a nonfinancial or financial corporation that is subject to control by government units, with control over a corporation defined as the ability to determine general corporate policy by choosing appropriate directors, if necessary. Control can be established through government ownership of more than half of the voting shares or otherwise controlling more than half of the shareholder voting power (including through ownership of a second public corporation that in turn has a majority of the voting shares).2 In addition, it may be possible to exercise control through special legislation, decree, or regulation that empowers the government to determine corporate policy or to appoint directors. Any domestic institutional unit not meeting the definition of public sector is to be classified as private sector. In terms of institutional sector attribution, the classification of a public corporation as a monetary authority (central bank), bank, nonbank financial corporation, or non-financial corporation depends on the nature of the activity it undertakes.

5.6Publicly guaranteed private sector external debt is defined as the external debt liabilities of the private sector, the servicing of which is contractually guaranteed by a public entity resident in the same economy as the debtor.3 The private sector can include resident entities in the banks and other sectors. External debt of the private sector that is not contractually guaranteed by the public sector resident in the same economy is classified as nonguaranteed private sector external debt. If external debt of the private sector is partially guaranteed by the public sector resident in the same economy, such as if principal payments or interest payments alone are guaranteed, then only the present value of the payments guaranteed should be included within publicly guaranteed private sector external debt, with the nonguaranteed amount included within nonguaranteed private sector external debt.

Presentation of Public and Publicly Guaranteed External Debt Position

5.7 The presentation of the gross external debt position on the basis of a public-sector-based approach is set out in Table 5.1.

Table 5.1.Gross External Debt Position: Public and Publicly Guaranteed Debt and Nonguaranteed Private Sector Debt
End-Period
Public and Publicly Guaranteed Debt
Short-term
Money market instruments
Loans
Currency and deposits1
Trade credits
Other debt liabilities2
Arrears
Other
Long-term
Bonds and notes
Loans
Currency and deposits1
Trade credits
Other debt liabilities2
Direct investment: Intercompany lending
Debt liabilities to affiliated enterprises
Arrears
Other
Debt liabilities to direct investors
Arrears
Other
Nonguaranteed Private Sector External Debt
Short-term
Money market instruments
Loans
Currency and deposits1
Trade credits
Other debt liabilities2
Arrears
Other
Long-term
Bonds and notes
Loans
Currency and deposits1
Trade credits
Other debt liabilities2
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 sector. The primary disaggregation is between public and publicly guaranteed debt, and nonguaranteed private sector external debt. Because of the nature of the relationship between debtor and creditor, intercompany lending between entities in a direct investment relationship is separately identified under each category, but when combined equals direct investment: intercompany lending for the total economy as presented in the previous chapter.

  • The second level of disaggregation is by the maturity of external debt—short-term and long-term on the basis of original maturity. 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.4

  • The third level of disaggregation is by type of debt instrument, as described in Chapter 3. Arrears are separately identified, because such information is of particular analytical interest.

5.8 Memoranda data, on a public sector basis, on outstanding liabilities arising from periodic interest costs that have accrued and are not yet payable, financial derivatives, equity liabilities, and reverse security transactions could be provided along with Table 5.1. These memorandum items are described in Chapter 4.

5.9Table 5.2 separates public sector external debt and publicly guaranteed private sector external debt. Such a separation allows identification of external debt owed by the public sector and, combined with the information in Table 5.1, external debt of the private sector.

Table 5.2.Gross External Debt Position: Public Sector Debt and Publicly Guaranteed Private Sector Debt
End-Period
Public Sector External Debt
Short-term
Money market instruments
Loans
Currency and deposits1
Trade credits
Other debt liabilities2
Arrears
Other
Long-term
Bonds and notes
Loans
Currency and deposits1
Trade credits
Other debt liabilities2
Direct investment: Intercompany lending
Debt liabilities to affiliated enterprises
Arrears
Other
Debt liabilities to direct investors
Arrears
Other
Total
Publicly Guaranteed Private Sector External Debt
Short-term
Money market instruments
Loans
Currency and deposits1
Trade credits
Other debt liabilities2
Arrears
Other
Long-term
Bonds and notes
Loans
Currency and deposits1
Trade credits
Other debt liabilities2
Direct investment: Intercompany lending
Debt liabilities to affiliated enterprises
Arrears
Other
Debt liabilities to direct investors
Arrears
Other
Total

5.10 Further, as defined in paragraphs 5.5 and 5.6 above, public sector data can be attributed to general government, monetary authorities, banks, and other sectors, while private sector information can be attributed to banks and other sectors. In this regard, it is recommended that if detailed records are kept, the institutional sector of the debtor be identified, so as to allow an economy that is presenting data on a public sector basis to also compile data on an institutional sector basis.

For more details, please refer to the World Bank’s Debtor Reporting System Manual (World Bank, 2000), available on the Internet at http://www.worldbank.org/data/working/DRS/drs_manual.doc.

This definition is derived from the 1993 SNA and the IMF’s Government Finance Statistics Manual (IMF, 2001). It is consistent with ESA95 (Eurostat, 1996) and ESA95 Manual on Government Deficit and Debt (Eurostat, 2000), which also provide additional guidance on recognizing such corporations.

External debt for which guarantees are provided to the creditor by a public sector entity resident in a different economy from that of the debtor is not covered under this definition.

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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