Chapter

IV. External and Domestic Performance: Progress Toward External Viability and Sustained Growth

Author(s):
F. Rozwadowski, Siddharth Tiwari, David Robinson, and Susan Schadler
Published Date:
June 1993
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The structural reforms and macroeconomic policies in ESAF-supported programs were intended to promote two fundamental objectives: to make significant progress toward external viability and to create conditions for sustained growth. The first part of this section assesses the ESAF countries’ progress toward external viability—an overall external position and structure of the balance of payments consistent with sustainable inflows of normal financing. The second part assesses progress in creating conditions for sustained growth by reviewing developments in savings and investment, external trade, inflation, and ultimately growth itself. These two objectives for ESAF-supported arrangements—external viability and sustainable economic growth—are mutually supportive and must be assessed jointly. To be sustained, external viability requires resistance to pressure for the growth of absorption to exceed the growth of output, but this resistance is possible only if output and living standards grow at socially acceptable rates. At the same time, strong growth in output will not endure if it relies on unsustainable financing inflows.

Progress Toward External Viability

Most of the 19 countries under review entered the SAF/ESAF period with exceptionally weak external positions. Attaining external viability for them meant not just lowering external borrowing requirements but reducing a large external debt overhang. For most of the countries, these objectives were critical to regaining normal relations with creditors and, eventually, achieving access to commercial financing.

In most of the ESAF countries, conventional criteria for assessing progress toward external viability (Box 2) were not applicable because of the severity of these countries’ initial debt problems: none of them had significant access to commercial financing beyond trade credits; nearly all had extremely high (and often rising) debt and debt-service ratios; most had been obliged to reschedule debt: few were meeting all contractual debt-service obligations: and all were resorting to exceptional financing in some form. These characteristics suggest two conclusions. First, traditional indicators of external viability—secondary market prices of debt and access to spontaneous commercial borrowing—were either not applicable or so far out of reach as to be meaningless. Second, in the bulk of the countries, debt burdens—that is, debt stocks relative to the resource base—were excessive, so that making progress toward external viability would certainly entail their reduction.

Box 2.Criteria for Assessing External Viability

There are no clear-cut criteria for assessing external viability because viability depends on the willingness of creditors to finance a country’s current account deficits. Often, judgments on viability are based on market tests: access to spontaneous commercial borrowing, developments in secondary market prices of debt, or reliance on exceptional financing. A concept closely related to viability and central to an assessment of medium-term prospects is that of the sustainability of a country’s external position—the capacity of a country to finance a continuation of recent trends in the current account deficit without compromising its ability to meet debt-service payments. Sustainability can be evaluated in terms of the evolution of ratios of debt and debt service to some domestic resource base, for example, exports of goods and non factor services.1 When these ratios are rising and/or so high as to render a country unable to meet its contractual debt-service payments, the external position is unlikely to be sustainable: when contractual debt-service obligations are met and debt and debt-service ratios are stable or falling, the external position is more likely to be sustainable.

1 In this paper debt and debt service are viewed relative to exports rather than GDP for two reasons: first, export data are more accurate and comprehensive than GDP data; and second, changes in real exchange rates, which were large during this period, produce sharp changes in ratios of debt to GDP, reflecting the “capital loss” on debt relative to nontratied goods.

In these circumstances, two yardsticks for measuring progress toward viability seem appropriate: the extent to which debt-service ratios were reduced, and the reduction in reliance on exceptional financing, defined as the accumulation of arrears to external creditors, rescheduling of interest and/or principal repayments, and balance of payments support from multilateral organizations. Obviously, the two yardsticks are related to one another, since a large or growing debt burden may be an important cause of a country’s need for exceptional finance. Conversely, a high or rising debt ratio may be a leading indicator of future recourse to exceptional financing. It is informative, however, to use both yardsticks because a growing recourse to exceptional financing may signal difficulty in obtaining financing in spite of a low or falling debt ratio.

The high level of grants and the concessionality of the ESAF countries’ debt raises a further question: even if normal relations with creditors could be established and the debt burden reduced to a sustainable level (given concessional terms), would donors continue to provide grants and concessional financing on the scale experienced in the past? For the countries under review, external viability would be out of reach if financing needs had to be met exclusively by debt on market-related terms. Thus, progress toward viability is assessed here in terms of reducing debt and debt-service burdens to manageable levels, assuming that concessional inflows and grants will remain important.

Evolution of Debt-Service Burdens

Measuring the debt burden in the ESAF countries presents several problems. The conventional index of the debt burden—the stock of debt relative to the resource base—fails to capture the effect of debt relief in the form of more concessional terms: lower interest rates and longer grace and repayment periods. For this reason, an attractive alternative for ESAF countries would be to compare the present value of future debt-service commitments with the present value of future export receipts. This approach, however, suffers from its sensitivity to the discount rate assumed (which should be greater than the concessional, effective interest rate on debt), the uncertainty about future export receipts, and the exceptionally complex data requirements for the calculation. Moreover, in many of the ESAF countries, the immediate problem is to reduce the cash flow on debt service.11

This paper, therefore, views the debt burden in terms of the ratios of scheduled total debt-service payments (i.e., principal plus interest) to exports and the ratio of scheduled interest payments to exports. These measures are readily accessible and capture changes in concessionality. It is useful to look at both ratios because they measure different aspects of the debt burden: the debt service to exports ratio reflects the gross impact of debt on foreign exchange cash flow, while the interest to exports ratio measures the economic cost of the debt. (When principal payments are routinely rolled over, the interest ratio is also a good measure of the net impact of debt on the foreign exchange cash flow.) In the present context, the two measures generally tell the same story, both because they were influenced in the same way by developments in exports and because increases in the concessionality of interest rates were typically reinforced by lengthened repayment periods.

Most of the ESAF countries showed significant progress in reducing their debt-service burdens (Table 4). In 14 countries the debt-service ratio either fell below its level prior to the SAF/ESAF period or—for Lesotho—remained very low after a slight increase; in 8, the ratio fell by more than a third. In five countries, however, the debt-service ratio increased, in a few by large amounts. The changes in the ratios of interest to exports were less pronounced—but in the same direction—as those in the debt-service ratio except in Guyana and Tanzania, where there were large reductions in the debt-service ratio but not in the interest ratio.12

Table 4.Debt-Service Ratios(In percent of exports of goods and nonfactor services)
Scheduled Debt-Service PaymentsScheduled Interest Payments
Pre-SAF or pre-ESAF1SAF2ESAF3Most recent year4Pre-SAF or pre-ESAF1SAF2ESAF3Most recent year4
I. Countries with low or falling debt-service ratios
Bangladesh27.426.620.717.69.18.75.85.3
Bolivia84.379.651.149.237.031.522.520.0
Gambia, The27.231.019.115.314.318.88.96.3
Ghana45.654.445.729.515.313.511.710.4
Guyana106.885.959.739.745.341.0
Lesotho4.73.83.93.91.51.51.31.3
Malawi32.734.720.517.612.47.1
Mauritania38.338.723.234.513.816.012.111.7
Mozambique5291.3269.3197.4172.885.491.464.354.0
Niger51.252.050.347.319.720.517.613.4
Senegal26.033.428.723.712.313.610.89.2
Sri Lanka26.624.820.120.19.37.97.37.3
Tanzania559.649.441.541.521.023.022.022.0
Togo30.021.014.813.911.89.17.46.6
Mean60.857.045.739.322.021.317.815.4
II. Countries with high and rising debt-service ratios
Burundi18.738.330.630.67.213.710.110.1
Guinea523.927.730.430.48.89.79.59.5
Kenya30.227.532.533.411.311.011.912.6
Madagascar71.583.473.976.138.044.338.938.5
Uganda44.154.481.8102.510.515.329.035.8
Mean37.746.349.854.615.218.819.921.3
Source: IMF staff estimates.

Average of three years preceding first SAF- or ESAF-supported program.

Average over period commencing with first SAF-supported program and ending in year before first ESAF-supported program.

Average over period commencing with first ESAF-supported program.

Calendar year 1991 or fiscal 1991/92.

Data available only for one year prior to SAF.

Source: IMF staff estimates.

Average of three years preceding first SAF- or ESAF-supported program.

Average over period commencing with first SAF-supported program and ending in year before first ESAF-supported program.

Average over period commencing with first ESAF-supported program.

Calendar year 1991 or fiscal 1991/92.

Data available only for one year prior to SAF.

Why did some countries succeed in reducing their debt-service ratios while others did not? To what extent did these outcomes reflect changes in lending terms of creditors, increases in export prices, or the fruits of adjustment policies? These questions are best approached by splitting changes in the debt-service ratio into two components: changes in the ratio of debt service to debt (which corresponds rather closely to changes in the terms on debt) and changes in the ratio of debt to exports. The rest of this section examines the evolution of these components for the countries under review. Its broad conclusion is that while all benefited from more favorable lending terms, the principal differences among them were in the evolution of export prices and the results of adjustment policies.

Terms of Borrowing

All 19 ESAF countries received concessional interest rates: effective interest rates (measured as the ratio of scheduled interest payments to debt) were typically about 4 percentage points below long-term market rates during the ESAF period (Table 5). Moreover, during the SAF/ESAF period as a whole, effective interest rates fell for all the countries except Guyana. For most countries, this drop was less than the parallel decline in long-term market interest rates in creditor countries, although for a few it was considerably larger. Much of the variation among the ESAF countries in the spread between effective and market interest rates reflected their different choices from the menu of Paris Club options available under the so-called Trinidad terms and enhanced concessions. Ex post real effective interest rates—measured in terms of changes in export unit values—also fell on average, although again there was a wide range of developments: in general, this drop reflected both the drop in the nominal interest rate and the fact that export prices had fallen prior to the SAF/ESAF period by even more than they did during the period.

Table 5.Scheduled Debt Service Relative to External Debt(In percent)
Effective Nominal Interest Rate1Effective Real Interest Rate2Principal Payments3
Pre-SAF or pre-ESAF4SAF5ESAF6Most recent year7Pre-SAF or pre-ESAF4SAF5ESAF6Most recent year7Pre-SAF or pre-ESAF4SAF5ESAF6Most recent year7
1. Denominated in SDRs
Gambia, The4.25.43.83.321.52.50.92.53.93.54.54.7
Kenya5.74.95.35.514.3–0.48.06.29.47.39.29.1
Lesotho2.52.62.02.0–1.32.80.10.15.34.24.14.1
Madagascar6.56.16.05.49.925.014.113.44.56.54.7
Malawi5.13.62.59.2–1.8–5.35.85.45.45.3
Mauritania3.94.54.03.73.18.51.0–3.37.06.33.47.1
Mean4.64.74.13.89.46.43.72.36.05.35.55.8
Market rate (SDR)8.57.57.87.7
II. Denominated in U.S. dollars
Bangladesh2.22.01.41.35.3–2.2–0.11.24.34.13.63.1
Bolivia7.65.14.64.715.012.37.513.69.77.86.06.8
Burundi2.32.21.31.3–1.19.10.90.93.73.92.62.6
Ghana4.84.23.63.34.61.89.76.39.712.810.66.0
Guinea5.83.43.43.45.80.211.711.74.96.37.47.4
Guyana2.95.25.24.70.95.58.34.62.4
Mozambique4.74.63.63.5–3.64.10.80.911.39.07.67.6
Sri Lanka4.13.63.63.69.61.42.72.77.57.76.36.3
Tanzania3.74.33.83.87.44.19.29.26.84.93.33.3
Uganda3.94.13.33.44.137.823.314.712.810.55.96.3
Mean4.23.73.43.45.27.66.66.67.97.45.85.2
Market rate (U.S. dollar)810.08.58.07.7
III. Denominated in CFA francs
Niger7.26.64.53.48.79.014.17.311.510.28.48.6
Senegal5.04.74.64.54.010.7–0.51.15.56.87.67.1
Togo5.95.04.64.113.16.62.50.89.16.54.54.5
Mean6.05.44.64.08.68.85.43.18.77.86.86.7
Market rate (French franc)810.68.58.07.7
Overall mean4.64.33.83.67.17.85.54.77.46.95.95.6
Sources: International Monetary Fund, International Financial Statistics yearbook (Washington), various issues; and IMF staff estimates.

Interest due in percent of debt stock.

Deflated by export prices.

Principal payments due in percent o f debt stock.

Average over three years preceding first SAF- or ESAF-supported program.

Average during period fro m first SAF-supported program to year preceding first ESAF-supported program.

Average during period fro m first ESAF-supported program to present.

Calendar year 1991 or fiscal year 1991/92.

Long-term government bond rates as reported in International Financial Statistics. The rate for the SDR is proxied by a simple average of long-term bond rates in the United States, France, and Japan. The rates reported are averages across countries of the rates in effect during the relevant periods.

Sources: International Monetary Fund, International Financial Statistics yearbook (Washington), various issues; and IMF staff estimates.

Interest due in percent of debt stock.

Deflated by export prices.

Principal payments due in percent o f debt stock.

Average over three years preceding first SAF- or ESAF-supported program.

Average during period fro m first SAF-supported program to year preceding first ESAF-supported program.

Average during period fro m first ESAF-supported program to present.

Calendar year 1991 or fiscal year 1991/92.

Long-term government bond rates as reported in International Financial Statistics. The rate for the SDR is proxied by a simple average of long-term bond rates in the United States, France, and Japan. The rates reported are averages across countries of the rates in effect during the relevant periods.

Longer grace periods and maturities of new borrowing and rescheduling brought about a reduction in the ratio of principal payments to debt in all but four countries.13 The average reduction amounted to about 2 percentage points and, therefore, quantitatively contributed more than lower interest rates to the reduction in debt-service ratios. While this drop simply reflected a shift toward greater back-loading of repayment schedules, the fact that all countries were borrowing at below-market interest rates meant that any lengthening in repayment periods increased the grant component of borrowing.

Evolution of Debt Ratios

The evolution of the ratio of debt to exports (even calculated at the face value rather than present value) is critical to the countries under review for two reasons: first, given the limited scope for more concessional terms, restoring debt-service ratios to manageable levels almost always requires a reduction in the debt ratio; and second, once debt-service ratios reach a manageable level, sustainability requires a stable ratio of debt to exports, assuming unchanged terms on new debt.

During the SAF/ESAF period, ratios of debt to exports fell in almost half of the countries under review. Specifically, in 8 of the 19. debt ratios fell, reversing what had been (except in Togo) an increasing trend (Chart 8). These eight countries were fairly evenly spread across the spectrum of debt distress prior to the SAF/ESAF period: Bangladesh, The Gambia, Malawi. Senegal, and Togo were among the better-positioned countries in terms of the level of debt and their records on debt servicing at the outset of the period, but Bolivia. Guyana, and Mozambique were among the most heavily indebted. In another five countries, debt ratios were stabilized after years of increases. In the six remaining countries, debt ratios continued to rise. However, in a few, debt and debt-service ratios had been quite low at the outset of the SAF/ESAF period owing to creditors’ reluctance to lend when economic policies were weak. The strengthening of policies during arrangements with the IMF prompted a resumption of lending that pushed up debt and debt-service ratios.

Chart 8.Gross External Debt

(End of period; percent of exports)

1 Ratio of debt to exports that would have resulted if there had been no debt cancellation.

2 No SAF arrangement.

The conventional framework for evaluating the sustainability of debt (Box 3) indicates four sources of changes in the ratio of debt to exports: (1) the cancellation of debt maturing in the future, (2) the growth of exports of goods and services relative to the effective interest rate on external debt, (3) the accumulation of new debt owing to an excess of the primary current account deficit and accumulation of reserves over non-debt-creating inflows, and (4) changes in the exchange rates between a numeraire currency and the currencies in which debt is actually denominated. These influences and the resulting change in debt ratios are shown in Table 6 and Appendix Table A13.14 From these tables, four broad conclusions emerge.

Table 6.Analysis of Change in External Debt to Export Ratios
External Debt to Exports1Influences on External Debt to Export Ratio During SAF/ESAF Period

(Annual averages, in percent)
Prior to first SAF or ESAF2Most recent year2Percent change3Non-interest current account deficit4Official grants and other non-debt-creating flows4,5Debt cancellation4,5Increase in gross reserves4Effective interest rate6Cross exchange rate changes7Export volume growth3Export price increase3Number of years
I. Countries with falling debt ratios8
* Gambia, The381207–9.710.8–18.7–1.45.03.9–1.46.82.86
* Guyana903775–7.41.8–2.9–6.61.65.21.73.54.32
* Togo212166–5.910.5–12.0–3.32.04.2–1.84.01.44
* Bolivia523422–4.26.9–6.3–8.94.71.67.8–2.25
* Senegal271215–3.89.1–6.0–4.21.34.1–2.81.00.76
* Malawi345297–3.720.3–17.5–0.80.44.0–0.37.25.44
* Bangladesh493406–3.213.5–7.42.72.33.59.72.96
* Mozambique1,8161,566–2.920.6–14.9–3.61.55.212.23.15
Mean618507–5.111.7–10.7–3.61.84.20.16.62.35
II. Countries with stable debt ratios8
* Sri Lanka225216–1.09.9–7.52.54.70.65.62.14
Kenya239231–0.99.5–7.8–3.8–0.55.2–0.31.81.64
Guinea305293–0.811.2–5.7–2.71.13.64.31.15
* Mauritania328323–0.38.0–7.1–3.50.13.6–1.2–2.00.55
* Ghana3313380.48.7–8.5–2.93.24.01.89.8–3.15
Mean286280–0.59.4–7.3–2.61.34.20.23.90.4
III. Countries with rising debt ratios8
* Tanzania5686111.514.3–13.0–0.11.73.53.80.42.05
Madagascar6647322.03.0–3.6–3.4–0.25.5–0.96.4–6.85
* Lesotho52655.8125.2–120.6–0.311.83.00.64.50.34
* Niger2953956.013.3–10.6–6.70.25.1–1.80.1–6.05
Burundi35281915.138.6–27.2–4.64.53.23.32.4–3.66
Uganda2731,09232.023.1–12.4–0.30.54.92.41.2–13.95
Mean
(excluding Lesotho)43073011.318.5–13.4–3.01.44.41.42.1–5.65
Overall mean4514821.018.9–16.3–3.02.14.20.54.6–0.45
Source: IMF staff estimates.Note: Countries marked with an asterisk (*) have a low or falling debt-service ratio.

Stock of medium- and long-term external public and publicly guaranteed debt (including use of IMF resources) as percent of exports of goods and nonfactor services.

End of calendar or fiscal year. Most recent year is 1991 or 1991/92.

Annual average using geometric mean.

Average flow during SAF/ESAF period as percent of debt stock prior to first SAF- or ESAF-supported program. Negative numbers denote net inflows.

Debt reduction affecting current maturities is included in official grants and other non-debt-creating inflows.

Average interest due during period as percent of initial debt stock.

Average changes in cross exchange rates over SAF/ESAF period as percent of initial debt stock. Negative numbers denote depreciations of currency values relative to the numeraire.

Countries listed in ascending order of the annual percent change in their debt to export ratios.

Source: IMF staff estimates.Note: Countries marked with an asterisk (*) have a low or falling debt-service ratio.

Stock of medium- and long-term external public and publicly guaranteed debt (including use of IMF resources) as percent of exports of goods and nonfactor services.

End of calendar or fiscal year. Most recent year is 1991 or 1991/92.

Annual average using geometric mean.

Average flow during SAF/ESAF period as percent of debt stock prior to first SAF- or ESAF-supported program. Negative numbers denote net inflows.

Debt reduction affecting current maturities is included in official grants and other non-debt-creating inflows.

Average interest due during period as percent of initial debt stock.

Average changes in cross exchange rates over SAF/ESAF period as percent of initial debt stock. Negative numbers denote depreciations of currency values relative to the numeraire.

Countries listed in ascending order of the annual percent change in their debt to export ratios.

Box 3.Evolution of the Ratio of Debt to Exports

The influences underlying movements in the ratio of debt to exports can be viewed in a framework familiar from assessing the sustainability of domestic public debt. This framework derives from a basic identity expressing the change in the value of gross debt (B) in terms of six components: the noninterest current account deficit (NICAD); official grants and other net non-debt-creating inflows (NDC); debt cancellation (F); the accumulation of gross official reserves (∆R); nominal interest payments (iBt–1); and a cross exchange rate term ∆CE to capture the effects of changes in the exchange rates between the numeraire currency and other currencies in which a country’s debt is denominated.

Expressing debt as a percent of export values and taking percentage changes produces an expression that permits the easy classification of the factors contributing to the rate of increase in the debt ratio (bt).

where g is the increase in export values and Z is a sum of cross-product terms. In Table 6 the increase in export values is separated into price and volume components.

First, in most of the eight countries that managed to reduce their debt ratios, more than 10 percent of the initial stock of debt was canceled: in four of these countries, debt cancellation was sufficient, or more than sufficient, to account for the total reduction in the debt ratios.15 Notably, however, significant debt cancellation, equivalent to over 10 percent of initial debt, also took place in the countries where the debt ratio increased or was roughly unchanged. Thus, while debt cancellation was a central determinant of the reductions in debt ratios that occurred, it did not differ significantly between countries that reduced their debt burdens and those that did not.

Second, what did differ significantly between the two groups of countries was the growth of exports of goods and services—the change in the resource base against which debt is measured in this analysis. Both volume and price developments contributed to the large differences in export growth across countries. In countries where debt ratios fell, export volume growth averaged almost 7 percent annually—more than three times the rate in the countries where debt ratios rose. The divergence in export price changes was even larger. Export prices rose at an annual rate in excess of 2 percent in the countries where debt ratios fell, compared with an annual decline of 5½ percent in countries where ratios rose. In fact, among the six countries where export prices fell over the period, only Bolivia and Ghana managed to avoid an increase in their debt ratios.

Third, noninterest current account positions—excluding grants—were on average stronger in countries where debt ratios fell or remained stable than in countries where they rose. Since exports were the principal factor differentiating the evolution of current account positions, this was a second channel through which export growth affected debt ratios. Although grants and other non-debt-creating inflows provided some offset—such inflows tended to be highest in countries with the largest deficits before grants—the offset was less than complete. Thus, differences between the three groups of countries in noninterest current accounts including grants were also significant.

Fourth, effective interest rates on external debt and changes in debt valuation owing to variations in cross exchange rates were broadly similar across the groupings of countries.

Sustainability of Debt

The assessment of debt ratios thus far has focused on how the evolution of these ratios affected the debt-service ratio and what were the sources of changes in the debt ratio. Another important question is whether the countries under review were able to create conditions in which the ratio of debt to exports would be stable without any further cancellation of debt. Even if a country was able to attain a manageable debt-service ratio, this progress would lack a sound foundation if new borrowing increased the debt stock faster than exports were growing. The framework presented in Box 3 suggests that, for the debt ratio to remain stable in the absence of debt cancellation, of changes in cross exchange rates, or of the need to raise foreign exchange reserve ratios, the excess of the noninterest current account deficit over non-debt-creating inflows must be offset by the excess of export growth over the effective interest rate.

Table 6 indicates that this criterion for the sustainability of the external position was met by ten countries—including all countries except Senegal that experienced declines in their actual debt ratios, as well as Ghana, Lesotho, and Sri Lanka. In each of these countries, the growth in the value of exports exceeded the nominal interest rate; in some, non-debt-creating inflows also exceeded the noninterest current account. These facts should not lead to the conclusion that debt positions were sustainable-several of these countries still had unmanageable debt-service burdens. However, the countries did achieve external current account positions and export growth rates that, given the levels of non-debt-creating inflows and concessional interest rates, would have stabilized or reduced the debt ratio even without debt cancellation. This achievement is important because if such a relationship between these variables could be sustained, any progress in reducing the debt-service ratio—for example, through the cancellation of debt—would not be eroded by a renewed accumulation of debt.

Reliance on Exceptional Financing

How have the changes in debt and debt-service ratios affected countries’ abilities to restore or maintain orderly relations with creditors and to finance current account deficits with normal capital inflows? Although the use of ESAF resources is itself a resort to exceptional finance, the need for other forms of exceptional finance should diminish as countries’ debt burdens become more manageable. Table 7 shows, for the SAF/ESAF period, developments in countries’ reliance on the main forms of exceptional financing: the net accumulation of arrears, rescheduling, the gross use of IMF resources, and gross adjustment lending by the World Bank. At the broadest level, overall reliance on exceptional financing measures the extent to which a country’s financing needs exceed normal inflows. More narrowly, the gap between actual and contractual debt-service payments, which is equal to the sum of rescheduling and the net accumulation of arrears, measures the extent to which countries were unable to make debt-service payments on schedule. Finally, the accumulation of arrears represents the most disorderly form of exceptional financing and is a signal of acute difficulties. Broadly, these data provide yardsticks against which to determine whether reductions in debt and debt-service ratios have been sufficient to enable countries to return to normal relations with creditors.

Table 7.Exceptional Financing(In percent of exports of goods and nonfactor services)
Exceptional Financing1Contractual Minus Actual Debt-Service Payments2Change in Arrears
Pre-SAF or pre-ESAF3SAF4ESAF5Pre-SAF or pre-ESAF3SAF4ESAF5Pre-SAF or pre-ESAF3SAF4ESAF5Stock of arrears6
I. Countries with low or falling debt-service ratios
Bangladesh6.14.85.0
Bolivia68.143.817.258.144.310.529.2–0.9–12.722.7
Gambia, The19.3–12.9–3.223.7–23.4–7.323.7–26.8–7.3
Ghana12.7–3.97.4–13.2–7.9–2.5–13.2–7.9–2.5
Guyana96.648.472.223.3–1.8–82.645.2
Lesotho0.91.1
Malawi–12.412.25.92.24.6–2.9
Mauritania21.319.219.314.815.618.1–5.23.711.831.0
Mozambique278.3257.0197.2278.3230.5174.4187.6–37.2–92.2386.2
Niger25.919.726.617.112.726.68.526.9
Senegal5.89.612.78.97.011.20.3–0.50.62.3
Sri Lanka–5.23.76.3
Tanzania40.142.344.835.433.124.3–78.72.2–14.014.0
Togo15.810.210.79.47.08.36.1–17.60.97.1
Mean40.932.929.036.526.60.710.9–7.1–13.738.2
Excluding Mozambique22.612.516.017.98.08.8–2.7–4.3–7.711.5
II. Countries with high and rising debt-service ratios
Burundi20.112.9
Guinea713.211.515.310.59.711.032.13.01.240.2
Kenya–5.36.97.30.40.41.2
Madagascar50.349.744.547.847.641.4–2.4–3.67.638.3
Uganda15.128.860.40.519.925.0–6.18.021.745.5
Mean14.723.428.111.815.415.64.71.56.225.0
Overall mean34.030.128.730.023.319.39.3–4.6–8.534.8
Excluding Mozambique20.415.919.416.210.410.7–0.6–2.5–3.915.2
Source: IMF staff estimates.

Net arrears accumulation and use of IMF resources plus gross rescheduling and World Bank adjustment lending. Negative when arrears reduction and repayments to the IMF exceed rescheduling and World Bank adjustment lending.

Net arrears accumulation plus rescheduling. Negative when arrears reduction exceeds rescheduling.

Year preceding first SAF- or ESAF-supported program.

Average over period commencing with first SAF-supported program and ending in year before first ESAF-supported program.

Average over period commencing with first ESAF-supported program.

Calendar year 1991 or fiscal year 1991/1992. Arrears are at end of period.

Guinea’s arrears are as of December 1991. Arrears were cleared in November 1992.

Source: IMF staff estimates.

Net arrears accumulation and use of IMF resources plus gross rescheduling and World Bank adjustment lending. Negative when arrears reduction and repayments to the IMF exceed rescheduling and World Bank adjustment lending.

Net arrears accumulation plus rescheduling. Negative when arrears reduction exceeds rescheduling.

Year preceding first SAF- or ESAF-supported program.

Average over period commencing with first SAF-supported program and ending in year before first ESAF-supported program.

Average over period commencing with first ESAF-supported program.

Calendar year 1991 or fiscal year 1991/1992. Arrears are at end of period.

Guinea’s arrears are as of December 1991. Arrears were cleared in November 1992.

As might be expected, countries that succeeded in lowering debt-service ratios during the SAF/ESAF period also tended to reduce their reliance on exceptional financing. Among the 14 countries with low or falling debt-service ratios, the reliance on exceptional financing fell in 8 countries and was held at a relatively low level in 4 others; the gap between contractual and actual debt-service payments increased significantly in only 2 countries, both of which accumulated arrears. Conversely, the reliance on exceptional financing rose or remained high in all 5 countries with a high or rising debt-service ratio; most of these countries also experienced an increase in the gap between contractual and actual debt-service payments.

Overall Progress Toward Viability: Where Do We Stand?

A joint assessment of debt-service ratios and the reliance on exceptional financing suggests that 11 of the 19 countries under review made visible progress toward external viability.16 The success in these countries was attributable to both increased concessions on debt (cancellation and easier terms) and, in most countries, strong export growth. For the remaining eight countries, a combination of high or rising ratios of debt, interest payments, and debt service to exports and high or rising reliance on exceptional finance indicate little or no progress in relieving external pressures. Prospects for these countries are mixed. Most of these countries were among those that suffered serious deteriorations in their terms of trade and/or had difficulties sustaining reform efforts.

Developments in Official Grants

Grants represent one end of the spectrum of concessional inflows, and their evolution is complementary to any consideration of debt and debt-service burdens. For the countries under review, increased concessions on debt during the SAF/ESAF period were accompanied by an increase in the flow of grants: the ratio of grants to imports rose from an average of 23 percent in the year before SAF/ESAF arrangements to 28 percent on average during the ESAF programs (Table 8). However, the increase in aid flows was not uniform: the ratio fell in eight countries, while increases were exceptionally large in several others (Burundi. Mozambique, and Uganda).

Table 8.Official Grants(As a percent of imports)
Pre-SAF

or

Pre-ESAF1
SAF2ESAF3Most

Recent

Year4
Bangladesh23.123.019.418.9
Bolivia12.213.515.916.1
Burundi52.471.093.293.2
Gambia, The42.143.327.024.3
Ghana16.113.118.617.2
Guinea10.015.315.915.9
Guyana3.34.83.7
Kenya7.512.310.010.3
Lesotho18.118.218.718.7
Madagascar37.234.935.028.6
Malawi11.829.118.6
Mauritania26.825.824.221.1
Mozambique34.548.953.555.8
Niger40.734.139.039.4
Senegal18.021.521.819.3
Sri Lanka8.78.16.76.7
Tanzania39.639.739.439.4
Togo21.914.417.414.9
Uganda7.820.138.251.2
Mean22.726.927.827.0
Source: IMF staff estimates.

Year preceding first SAF- or ESAF-supported program.

Average during period from first SAF-supported program to year preceding first ESAF-supported program.

Average during period from first ESAF-supported program to present.

Calendar year 1991 or fiscal year 1991/92.

Source: IMF staff estimates.

Year preceding first SAF- or ESAF-supported program.

Average during period from first SAF-supported program to year preceding first ESAF-supported program.

Average during period from first ESAF-supported program to present.

Calendar year 1991 or fiscal year 1991/92.

Declines in grants relative to imports cannot be interpreted as an unambiguous sign of a less-pronounced need for aid. In several countries, such developments indicate slippages in adjustment programs or project implementation that slowed aid inflows. In countries where grants rose rapidly—Mozambique and Uganda—the reverse process was at play: a strengthening of adjustment and reform encouraged donors to support the rebuilding of urgently needed infrastructure. Indeed, in light of the investment needs in most of the countries under review, external support for development is likely to remain high as long as adjustment and reform efforts provide assurance that funds can be used efficiently.

Domestic Economic Performance

In most of the 19 ESAF countries, the conditions that had given rise to an excessive accumulation of external debt had also produced adverse domestic developments—rising inflation, low savings and investment, and weak efficiency and output growth. Consequently, successful efforts to improve a country’s external position were likely to go hand in hand with a strengthening of domestic conditions; this would create a virtuous circle, in which the easing of the external constraint would feed domestic recovery and export growth, which would further ease the external constraint. However, other scenarios were possible, and two were of particular concern. First, if efforts to move toward external viability were to focus disproportionately on demand restraint, improvements in the debt position could come at the cost of domestic growth and investment. In this case, domestic developments would be likely to prove unsustainable, and any progress toward external viability would be short-lived. Second, without adequate financial or structural adjustment, additional external financing (for example, related to an IMF-supported program) would foster an increase in demand and output but fail to strengthen debt-servicing capacity.

Overall Developments

In fact, most indicators of economic performance improved during the SAF/ESAF period, (Table 9). Real GDP growth, which averaged about 2 percent a year prior to the respective SAF/ESAF periods, rose to 4 percent during SAF arrangements and 3 percent during the ESAF arrangements.17 Average export volume growth increased from around 2 percent to around 7 percent. Official reserves rose markedly. And average inflation, while remaining at double-digit levels, fell by one-fifth.

Table 9.Indicators of Economic Performance(Annual averages for 19 ESAF countries, in percent, unless otherwise noted)
Pre-SAF

or

Pre-ESAF1
SAFESAFMost

Recent Year2
Real GDP growth2.14.02.82.9
Export volume growth2.24.47.37.3
Inflation316.915.013.317.6
Savings/GDP6.98.78.510.2
Investment/GDP14.918.520.719.7
Current account/GDP4–12.3–15.4–18.0–16.8
Reserves (months of imports)2.32.93.33.5
Terms of trade (improvement = +)0.3–5.7–3.90.9

Average over three years preceding the first SAF- or ESAF-supported arrangement.

Calendar year 1991 or fiscal year 1991/92.

Excluding Bolivia and Uganda.

Excluding official transfers.

Average over three years preceding the first SAF- or ESAF-supported arrangement.

Calendar year 1991 or fiscal year 1991/92.

Excluding Bolivia and Uganda.

Excluding official transfers.

The average current account deficit widened, mainly on account of deteriorating terms of trade but also because of large increases in investment in a few countries. The increase in current account deficits reflected a rise in the average savings rate of a little over 1 percentage point, but an even larger increase in the average investment rate. Developments in investment ratios, however, were highly diverse; exceptionally large increases occurred in Lesotho, Mozambique, and Uganda, while changes were modest in most others. The largest improvements in each of these indicators occurred in countries that undertook forceful structural reform and that suffered the least from weakening terms of trade.

During the SAF/ESAF period, there was also some progress in addressing the vulnerability of the economies to their highly concentrated export bases (Table 10). On average, a single export accounted for 55 percent, and the leading two commodities for more than 70 percent, of export receipts in the year prior to the first SAF or ESAF program. Two responses to these conditions were needed: first, particularly when the high concentration ratios were due to narrowly focused comparative advantage, reserves needed to be accumulated to cushion the effects of unanticipated fluctuations in the terms of trade or weather; and second, to the extent that concentration stemmed from a distorted incentive structure, reforms were needed to remove disincentives to diversification. Progress in increasing official reserves was significant and broad-based; all but four countries increased the import cover of international reserves, and the average rose from 2.4 to 3.5 months of imports. Likewise, all but four countries increased their reserve cushions relative to the size of a typical fluctuation in foreign exchange receipts, as measured by the standard deviation of exports. Less was accomplished, however, on diversification. Although average export concentration ratios fell, most of the reductions occurred in countries that suffered a drop in export prices. In several countries, there are significant exports of nonfactor services such as tourism, so concentration ratios understate the diversity of foreign exchange receipts. Nevertheless, there is little evidence of an increasing relative role for the services sector.

Table 10.Resiliency of Export Revenues(Annual averages, in percent, unless otherwise noted)
Shares of the Two Top ExportsReserves (In months of imports)Standard Deviation of Export ValueReserves/Standard Deviation of Export Value
Most Important Export Commodities by Share of Total ExportsPrior to SAF/ESAF (In percent of exports)Most recent year (In percent of exports)
First exportSecond exportTotalFirst exportSecond exportTotalPre-SAF or pre-ESAFMost recent yearChangePercent of exportsMonths of importsPre-SAF or pre-ESAFMost recent year
BangladeshJute, ready-made garments5116671953722.55.32.830.21.71.53.2
Bolivia1Hydrocarbons, tin, zinc5718753218508.44.6–3.815.81.75.12.8
Burundi2Coffee, manufactures, tea84589809891.45.23.818.41.31.14.2
Gambia, The3,4Groundnuts, fish8211936517820.24.94.724.12.20.12.2
GhanaCocoa, gold6714813630662.24.22.016.61.71.32.5
Guinea5Aluminum, diamonds771289788861.13.62.511.01.50.72.3
GuyanaSugar, bauxite4236783837750.96.05.27.30.81.17.4
KenyaCoffee, tea2622482916451.71.1–0.613.90.91.91.3
Lesotho6Clothing, cereals, livestock materials272047676731.21.90.725.50.34.37.0
Madagascar4,7Vanilla, shellfish, coffee4416601711284.62.6–2.014.01.53.11.8
Malawi4,8Tobacco, tea, sugar6211736212741.83.41.620.11.81.01.9
MauritaniaIron, fish6633995048981.21.27.71.01.21.2
Mozambique9Prawns, manufactures, cashews4822703723601.63.72.124.00.43.68.3
NigerUranium, livestock products779866620865.56.51.015.11.53.64.3
Senegal4Fish, groundnuts2912412519440.18.10.70.10.1
Sri LankaGarments/textiles, tea3126573922611.62.71.113.81.11.42.4
TanzaniaCoffee, manufactures5311642220420.63.42.958.62.10.31.7
Togo4,10Phosphates, cotton, coffee4913624925747.36.3–1.07.20.89.68.3
UgandaCoffee, cotton86187684721.01.60.629.92.10.50.8
Mean5616724621672.43.61.219.01.32.23.3
Source: IMF staff estimates.

Zinc replaced tin as second most important export.

Tea replaced manufactures as second most important export.

Note significant unreported exports of groundnuts.

Excludes re-exports and adjustments.

lncludes exports to the former U.S.S.R.

Cereals replaced livestock materials as second most important export. In Lesotho workers’ remittances exceed exports.

Vanilla replaced coffee as the most important export.

Tea replaced sugar as second most important export.

Manufactures replaced cashews as second most important export.

Cotton replaced coffee as second most important export.

Source: IMF staff estimates.

Zinc replaced tin as second most important export.

Tea replaced manufactures as second most important export.

Note significant unreported exports of groundnuts.

Excludes re-exports and adjustments.

lncludes exports to the former U.S.S.R.

Cereals replaced livestock materials as second most important export. In Lesotho workers’ remittances exceed exports.

Vanilla replaced coffee as the most important export.

Tea replaced sugar as second most important export.

Manufactures replaced cashews as second most important export.

Cotton replaced coffee as second most important export.

The preceding paragraphs have reviewed developments through 1991 or 1991/92—the most recent year for which actual data are available. Preliminary data for 1992 paint a mixed picture of more recent performance. This appears to reflect the further deterioration in the terms of trade for many of the 19 countries, the negative effects of drought in sub-Saharan Africa, and in a few countries some slippage in policies.18 The countries most affected by the drought experienced a contraction of GDP, sharply reduced export volume growth, increasing fiscal and external current account imbalances, and rising inflation. Estimates suggest, however, that the other countries had some increase in GDP growth, roughly unchanged fiscal and external balances, and reduced inflation. In most countries, the ratio of debt to exports rose relative to 1991 levels; the exceptions were four countries where high export volume growth was sustained in the face of worsened terms of trade. While these data are still preliminary they do underscore the vulnerability of these countries to exogenous shocks and policy setbacks. Recent developments in some countries have also been affected by the importance that donors place on good governance in sustaining aid inflows.

Link Between Domestic Performance and Progress Toward External Viability

Those countries that made the most progress in improving their debt position were also those that showed the strongest improvement in their domestic economic performance (Table 11). In almost all of the 11 countries where visible progress toward external viability occurred, the growth of real GDP rose considerably between the three years prior to the first SAF or ESAF program and the three most recent years; for the group, annual average GDP growth rose by almost 2 percentage points. Outside this group—that is, among countries where there was little or no progress toward external viability—the average annual growth rate fell by over half a percentage point during the same period.

Table 11.Indicators of Macroeconomic Performance by Country(Annual averages, in percent, unless otherwise noted)
Real GDP GrowthExport Volume Growth1Import Volume GrowthInflation (CPI)Investment (In percent of GDP)Domestic Saving (In percent of GDP)
Pre-SAF or pre-ESAF2Latest three years3Latest yearPre-SAF or pre-ESAF2Latest three years3Latest yearPre-SAF or pre-ESAF2Latest three years3Latest yearPre-SAF or pre-ESAF2Latest three years3Latest yearPre-SAF or pre-ESAF2Latest three years3Latest yearPre-SAF or pre-ESAF2Latest three years3Latest year
I. Countries that made relatively more progress toward external viability
Bangladesh4.24.13.25.012.613.95.9–0.74.110.27.75.112.211.611.94.853.254.35
Bolivia–1.13.24.10.614.3–0.74.47.83.0664.017.921.48.512.813.84.57.37.5
Gambia, The–1.03.84.012.79.04.2–9.19.64.023.910.311.519.819.619.02.154.655.15
Ghana6.34.55.010.310.514.116.94.43.424.326.618.08.716.016.58.7512.3512.35
Guyana–1.76.0–8.517.5–15.5–2.1–2.850.685.6105.924.426.625.411.517.517.4
Lesotho41.42.50.315.0–9.44.13.7–2.6–7.512.315.115.524.548.058.918.2514.3517.65
Malawi2.05.67.8–0.19.95.3–0.716.719.918.713.011.915.419.718.88.912.012.0
Mozambique–3.43.12.7–19.015.225.0–0.84.04.034.041.333.28.338.642.1–0.6–12.7–10.0
Senegal0.82.42.3–1.0–0.8–3.21.74.90.211.61.02.114.813.513.52.68.68.5
Sri Lanka3.64.44.81.88.41.5–2.07.115.55.715.012.223.622.323.014.5516.3517.55
Togo2.71.56.5–0.32.312.1–1.1–3.80.70.10.525.722.119.314.712.710.2
Mean1.33.23.72.06.37.61.54.43.677.821.221.616.922.823.88.28.79.3
Median1.43.24.01.89.04.11.84.42.218.714.511.515.419.719.08.712.010.2
II. Countries that made relatively little progress toward external viability
Burundi4.63.55.06.14.325.7–5.14.49.08.79.28.916.717.316.71.7–0.6–1.7
Guinea3.11.91.91.42.33.022.419.616.215.76.155.35
Kenya5.54.02.42.60.5–3.55.8–5.4–9.28.416.219.624.022.318.017.7518.0517.65
Madagascar1.6–6.9–2.510.11.5–8.44.3–15.012.59.88.58.712.98.24.06.31.5
Mauritania1.11.82.62.4–3.6–4.03.0–1.0–5.09.88.35.623.918.216.16.18.88.2
Niger6.20.11.9–4.90.24.1–9.8–8.3–19.6–0.5–0.31.314.310.87.27.07.37.5
Tanzania3.03.63.85.81.411.0–2.0–1.83.832.921.621.0
Uganda0.84.74.21.27.9–10.4–26.6179.339.863.02.712.013.0–1.41.6
Mean63.32.61.91.62.06.1–2.7–2.6–8.935.914.918.314.915.613.26.16.45.8
Median63.03.52.52.51.34.1–2.7–1.0–9.29.89.88.914.314.015.74.06.35.3
Source: IMF staff estimates.

Merchandise only. These data differ from those in Table 6, which show the growth of exports of goods and nonfactor services.

Average during three years preceding first SAF- or ESAF-supported program.

Average during most recent three-year period ending in 1991 or 1991/92.

Investmentand saving computed as a ratio to GNP.

Gross national savings, domestically generated for The Gambia, Lesotho, and Guinea.

Excluding Guinea, for which data are not available for the three years before SAF/ESAF arrangements.

Source: IMF staff estimates.

Merchandise only. These data differ from those in Table 6, which show the growth of exports of goods and nonfactor services.

Average during three years preceding first SAF- or ESAF-supported program.

Average during most recent three-year period ending in 1991 or 1991/92.

Investmentand saving computed as a ratio to GNP.

Gross national savings, domestically generated for The Gambia, Lesotho, and Guinea.

Excluding Guinea, for which data are not available for the three years before SAF/ESAF arrangements.

A similar pattern is seen in the growth of trade volumes. The growth rates of both export and import volumes rose sharply in most of the countries where debt burdens were reduced. The contribution of strong export volume growth to the progress toward viability in most of these countries has already been emphasized. Stronger export growth, together with the greater availability of financing, also provided the scope for more rapid import growth—or in Guyana, a significantly less onerous contraction. In several countries, the growth in import volumes in recent years followed a period of considerable import compression. By contrast, in the countries that made little or no progress toward external viability, export volume growth strengthened less; this, together with the generally weaker terms of trade in these countries, contributed to a considerable compression of imports in recent years.

Developments in consumer price inflation also differed between the two groups of countries: in the countries that made more progress toward viability, the median inflation rate fell by 7 percentage points between the three years preceding SAF/ESAF arrangements and the most recent year; in the other group it also fell but only slightly. However, even in the most recent year for which data are available, the median inflation rate in the countries that made the greatest progress toward viability was higher than in the other group.

Savings and investment data for the ESAF countries are weak at best, and wide differences in quality and coverage make cross-country comparisons hazardous. With this caveat, the picture that emerges is of increases in average and median investment ratios in the countries where the strongest progress toward external viability occurred; however, considerable variation across countries persisted. The average for the group was heavily influenced by Mozambique, where there was large investment to rebuild war-torn infrastructure, and Lesotho, where a large water project was undertaken. In five of the countries, the investment ratio actually fell. Developments in the group of countries that did not improve their debt positions were even less favorable. Except in Uganda, where there was an increase, each of the other countries saw little change or a decline in the investment ratio. In view of the fact that most of these countries experienced significant deteriorations in their terms of trade (which would raise investment ratios if volumes were constant), this picture is rather bleak. There was also a considerable difference in savings behavior. Whereas savings ratios rose slightly on average in the countries that made visible progress toward viability, they fell slightly in the countries that did not reduce their debt. These developments in investment and saving were reflected in a small increase in average current account deficits relative to GDP (Appendix Table A14).

Influences on Domestic Performance

These developments suggest that for most countries, progress in reducing the external debt burden and normalizing relations with creditors was generally reinforced by stronger growth of GDP and exports and lower inflation. The roles of policy adjustments, external factors, and other influences in these developments is not easy to sort out. There were numerous influences on the performance of these economies, and many are not quantifiable. Structural reforms stand out in this respect: all of the countries under review implemented structural reforms in at least one key area, but comparing, let alone quantifying, these influences is not possible. Still, there is evidence that bold and comprehensive structural reforms have brought high returns: the four countries where reforms were most forceful-Bolivia, The Gambia, Ghana, and Guyana—were among the strongest performers of the countries under review (Box 4). Moreover, countries where there was less progress toward external viability tended to be those that had difficulties sustaining their structural reform programs. For some countries, reforms during SAF arrangements were considerably less forceful than during subsequent ESAF arrangements, and the latter are recent enough that their effects are not yet evident. In other countries, such as Madagascar and Niger, the process of transition to a more democratic system was accompanied by persistent difficulties with policy implementation.

The role of financial policies and external developments is easier to compare among countries (Table 12). Generally, the countries with the best external and domestic performance undertook stronger financial adjustment measures than those where progress toward external viability and domestic performance was weaker. However, except in the area of fiscal policy, differences were not great. Countries with stronger performance reduced deficits of the central government relative to GDP by some 4 percentage points, while the countries with weaker performances held fiscal deficits steady relative to GDP. In contrast, money growth rates tended to be higher and to fall by less during the SAF/ESAF period in the countries that achieved the greatest improvements in domestic and external performance; interest rates rose by about the same amount in both groups of countries. Countries that progressed less toward external viability experienced larger real depreciations than the others; this difference reflected efforts to address the relatively large terms of trade shocks in these countries. It is notable that in most respects, financial policies prior to the SAF/ESAF period were weaker in the first group of countries than in the second group; the stronger adjustment of fiscal deficits in the first group left average fiscal deficits, money growth, and real interest rates broadly the same in the two groups of countries.

Table 12.Domestic Policy and External Developments(Annual averages)
Central Government Budget: Deficit (In percent of GDP)Real Effective Exchange Rate (Average annual percent change)Growth of Broad Money (Average annual percent change)Real Interest Rate1 (In percent)Terms of Trade (Average annual percent change)Net Resource Transfer2 (In percent of GDP)
Three years before SAF/ESAFYear before SAF/ESAFMost recent yearThree years before SAF/ESAFSAFESAF(Average Three years before SAF/ESAFSAFESAFYear before SAF/ESAFMost recent yearThree years before SAF/ESAFSAFESAFMost recent yearThree years before SAF/ESAFSAFESAFMost recent year
1. Countries that made relatively more progress toward external viability
Bangladesh–9.1–7.5–5.32.8–3.2–3.828.315.913.147.91.70.11.96.96.56.05.9
Bolivia–20.5–1.3–1.8–0.1–3.6–5.448.244.9–164–9.5–10.9–5.5–7.92.22.03.84.2
Gambia, The–9.3–1.50.99.4–11.3–1.819.832.211.7–2225.3–1.0–0.7–0.2–21.120.116.216.4
Ghana–1.80.11.6–35.1–22.9–1.861.753.025.7–10912.3–8.2–9.7–4.2–4.05.07.710.1
Guyana–49.8–48.4–33.2–14.6–21.647.864.8–45–29–1.9–2.7–1.1–6.137.614.0
Lesotho–6.2–10.3–0.6–2.6–1.12.016.820.01.1–4–119.923.926.519.3
Malawi–7.8–7.0–3.0–5.74.519.514.511–7.13.57.05.612.58.1
Mozambique–18.1–15.3–6.030.7–31.9–8.615.450.733.9–56–1–4.9–0.84.820.041.344.847.2
Senegal–4.6–2.30.29.31.7–4.53.09.32.7176.2–0.93.93.718.728.023.123.2
Sri Lanka–9.7–8.7–9.4–9.3–1.95.311.516.021.75–6.9–2.72.72.72.74.07.77.7
Togo–1.6–6.9–5.96.83.08.97.7–7.84.456–3.5–1.6–1.01.321.227.132.124.0
Median–9.1–7.0–3.0–0.1–3.2–1.819.620.514.5–44–1.9–2.2–0.81.66.920.116.214.0
Mean–12.6–9.9–5.7–0.8–7.9–2.423.126.419.4–1310.3–3.6–1.00.810.617.519.816.4
II. Countries that made relatively little progress toward external viability
Burundi–15.2–6.8–4.02.1–9.8–6.415.97.23.43113.0–5.1–11.15.814.818.420.920.9
Guinea–5.5–4.629.744.1–307–12.1–3.4–2.6–2.65.56.45.85.8
Kenya–6.0–2.9–3.3–7.2–5.0–3.916.78.319.04–6.22.1–5.25.7–0.67.03.60.5
Madagascar–4.0–3.5–5.6–5.5–22.4–3.918.318.918.5122.3–15.6–9.6–3.412.220.417.313.9
Mauritania–10.7–2.4–4.1–7.8–6.5–1.214.09.612.4139.1–6.30.58.121.420.320.010.5
Niger–4.8–3.6–3.3–5.5–7.4–7.04.98.76.4116–2.2–4.9–8.9–7.322.222.624.712.6
Tanzania–7.2–2.61.5–24.4–33.2–1.136.140.5–151–2.1–5.1–5.6–5.629.319.519.819.8
Uganda–9.2–4.0–7.5–45.9–56.1–36.4176.7165.055.6–616–25.0–17.4–14.2–0.311.111.69.3
Median–7.2–3.6–4.1–7.2–9.8–3.916.339.239.413.5–2.1–5.1–7.3–3.013.519.018.711.6
Mean–8.24–3.9–3.9–13.5–20.1–8.641.1336.3319.2–114.00.3–7.9–7.5–1.713.115.715.511.7
Source: IMF staff estimates.

One-year deposit rate deflated by increase in consumer prices.

Defined as grants, loans, arrears, rescheduling, and IMF purchases less scheduled interest and amortization.

Excluding Guinea and Tanzania.

Excluding Guinea.

Source: IMF staff estimates.

One-year deposit rate deflated by increase in consumer prices.

Defined as grants, loans, arrears, rescheduling, and IMF purchases less scheduled interest and amortization.

Excluding Guinea and Tanzania.

Excluding Guinea.

The striking difference between the two groups is in external developments. The deterioration in the terms of trade in the countries with weaker performance was a large multiple of that in the countries with stronger performances. Uganda is noteworthy in this respect: notwithstanding considerable structural change, external indicators weakened sharply, principally on account of the exceptionally large deterioration in the terms of trade. Net resource transfers, while lower relative to GDP in the weaker performers, differed considerably less. These comparisons point to the large role that the terms of trade played both in supporting (or not undercutting) the good policies of the strong performers, and in offsetting the effects of broadly stable financial policies in the countries with relatively weak domestic and external performance. Moreover, the fact that several of the countries with relatively weak financial policies also experienced large deteriorations in their terms of trade may well reflect the difficulty of reining in fiscal deficits and money growth in the face of adverse terms of trade developments.

Box 4.Successful Adjustment—Bolivia, The Gambia, Ghana, and Guyana

The benefits of financial adjustment and structural reform are perhaps most striking in four countries-Bolivia. The Gambia, Ghana, and Guyana—where strong measures across a broad spectrum of issues were implemented in the course of previous stand-by arrangements (for Bolivia and Ghana) and the SAF and ESAF arrangements. Starting from among the most distorted positions and weakest performances in the group of countries under consideration, these four countries sharply reduced central government budget deficits and fundamentally revised the role of the public sector in public enterprises, marketing boards, price policies, the allocation of foreign exchange, and the setting of the exchange rate. The results were dramatic: a declining trend in per capita GDP was reversed, exports surged, and (except in Ghana) inflation was sharply reduced. In Bolivia and Ghana, strong domestic economic performance was sustained through the SAF/ESAF period despite a sharp deterioration in the terms of trade that precluded progress in reducing the debt ratio in Ghana. In the other three countries, the ratio of debt to exports fell, while in The Gambia timely payments of contractual debt-service obligations were restored.

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