Public Sector Debt Research Articles

Report on Government Finance & Public Sector Debt Statistics Technical Assistance

Report on Government Finance & Public Sector Debt Statistics Technical Assistance

PUBLIC DEBT AS A DETERMINANT OF THE CONVERGENCE OF BOSNIA AND HERZEGOVINA IN THE EU ACCESSION PROCESS

The debt crisis, as one of the significant causes of disruptions in economies, is no longer reserved only for underdeveloped and developing countries, but it is a global economic problem that we are currently witnessing. The concept of debt crisis stems from excessive borrowing, which, by its increase, causes negative economic consequences. The realized deficit of transition countries over the past decade has had a significant impact on the increase in public sector debt, and these countries are faced with the great challenge of consolidating public finances and trying to reduce public debt while preserving economic growth. This paper provides an analysis of the state of the public debt of Bosnia and Herzegovina and its implications for the economy, which, with its movement and inadequate structure, causes negative economic consequences, making the process of convergence in the EU more difficult.

ОЦІНКА ФАКТОРІВ ВПЛИВУ ЗОВНІШНЬОГО БОРГУ НА МАКРОЕКОНОМІЧНИЙ РОЗВИТОК КРАЇНИ

The article evaluates the factors influencing the external debt on the macroeconomic development of the country. Management of the external debt of the state involves a certain process of creation and implementation of a number of specific mechanisms of influence on such debt. It was established that the size of the external state debt depends on many factors, including the main economic indicators. It was determined that the external debt is not a static indicator of changes and can change its size under the influence of many factors: changes in taxation, changes in regulatory policy, changes in the foreign economic situation (for example, changes in the volume of external demand for export goods), changes in the economic situation, etc. When identifying cause-and-effect relationships between macroeconomic indicators, we will consider the ratio of the debt of the general public administration sector to GDP as a key indicator characterizing external public debt. The following indicators were used to find relationships: debt service to the total amount of state budget expenditures; consumer price index; index of the real effective exchange rate of the hryvnia to the US dollar; volume of direct foreign investment; volume of imports; index of political stability. Based on the results of modeling, we obtained the values of the investigated indicators, including their forecasts for the next 5 periods, as well as the range of deviations of the forecasted values. A cause-and-effect relationship between the ratio of the debt of the general public administration sector to the GDP of Ukraine and the selected group of macroeconomic indicators was revealed. Practical verification of the built model in the conditions of hostilities is impossible, which is caused by the catastrophic drop in GDP and the rapid increase in foreign aid of Ukraine's allies.

Asymmetric Impacts of Public Debt on Economic Growth: Empirical Evidence From Vietnam

Purpose: The objective studies the influence of government debt on the expansion of the Vietnamese economy was the subject of the research presented in this article. Theoretical framework: Most governments in developing nations have budget deficits due to excessive spending and inadequate revenue. When the government chooses to pay the budget deficit through borrowing, it incurs a liability known as public debt and public debt on economic growth. Design/methodology/approach: In regression analysis involving time series data, if the regression model contains the variables' present values and the lagged values (past values), this model is known as the lagged distribution model. If the model's explanatory variables include one or more lagged values of the dependent variable, the model is called the autoregressive model. Nonlinear Auto Regressive Distributed Lag regression was applied. Findings: The findings reveal that government debt has a considerable and disproportionate effect on sustained economic growth in the short and long run using a Nonlinear Autoregressive Distributed Lag (NARDL) model with quarterly data over twenty years beginning in 2000. Research, Practical & Social implications: The results indicate a disproportional association between public sector debt levels and short- and long-term economic growth. The results are consistent with recent empirical studies showing a nonlinear relationship between some nations' public debt and economic development. Originality/value: Government debt should support short- and long-term economic growth through funding production. Consequently, government debt should not burden the economy when the high amount of debt exceeds the capacity to repay.

Does Public Debt and Investments Create Crowding-out Effect in Turkey? Evidence from ARDL Approach

The impact of public sector debt composition on the private sector is a matter of curiosity. This article explores the crowding-out effect of public debt and public investment on private investment in Turkey from 1975 to 2020, utilising the ARDL method. The findings reveal that public investment, public domestic debt stock, and external debt service create a crowding-out effect; on the other hand, the public external debt stock has a crowding-in effect on private sector investments. In this study, the crowding-out effect of public debt, which has not been directly related to private sector investments in the literature, is tried to be examined.

Debt component of financial stability

Subject. The article considers the debt burden of countries and institutional units within them as part of financial stability. Objectives. The purpose is to analyze the conditions and to trace long-term historical trends in the debt of non-financial sector as a factor of financial stability in relation to some developed and developing nations. Methods. The study rests on the review of counter-positions of various authors on the subject, the cross-country comparative analysis, cluster analysis, trend analysis, and the graphical method. Results. The paper offers a systematization of types of debt of institutional sectors, discloses theoretical foundations of debt analysis as a factor of financial stability, reveals long-term trends in non-financial sector’ debt, based on the Bank for International Settlements data covering information on 31 advanced economies and 13 emerging markets. Conclusions. The findings can be used by the Ministry of Finance and the Bank of Russia, when developing fiscal and monetary policy strategies and tools aimed at ensuring conditions for financial stability. The paper identifies countries with leverage (including public debt and private sector debt) exceeding critical thresholds in terms of constraints on economic growth and financial stability.

THE IMPACT OF ECONOMIC GROWTH AND TOTAL INVESTMENTS ON PUBLIC DEBT: THE VAR ANALYSIS APPROACH

The level of public sector debt varies according to the government’s size, scope, and activities. Borrowing positively affects the level of production and employment in the country when it occurs in the right conditions. The benefits and damages of borrowing vary from country to country and may have different consequences. The emergence of opposing views for or against borrowing may be caused by the evidence. In this study, the effects of total investment and economic growth on borrowing were examined with the data of the period 1995-2021. Granger causality and VAR analysis methods were used in the analysis. According to Granger’s evidence, there is a bidirectional relationship between economic growth and public debt. The results show that there is a causal relationship between economic growth and total investment. Affirming variance decomposition and impact-response analysis, most of the shock to government debt is because of economic growth. The impact of the total investment on government debt is also small. This result shows that policymakers should pay attention to the potential risks of public debt when implementing policies to promote economic growth. To keep sound debt management, future policies should emphasize budgetary discipline and they should make no compromises. Using borrowed funds for total investment and the promotion of high-value-added investments are also crucial for maintaining a healthy growth policy.<p> </p><p><strong> Article visualizations:</strong></p><p><img src="/-counters-/edu_01/0873/a.php" alt="Hit counter" /></p>

Impact of Treasury Bill on Private Sector Credit in Nigeria

In this study, the effect of treasury bills on private sector credit in Nigeria using annual data from 1981 to 2018 was examined. The specific objectives of the study were to examine the impact of treasury bills and treasury bill rate on private credit. Treasury bills was disaggregated into its various components and used as explanatory variables along with other essential macroeconomic variables. The study was conducted in the light of the crowding out effect hypothesis. The behavior of variables was captured in an autoregressive distributed lag (ARDL) model. The result of the estimated model shows that treasury bills held by commercial banks, treasury bills held by the public and treasury bill rate has significant negative effect on credit to private sector, showing that treasury bills have a crowding out effect on private sector credit. It is recommended that treasury bill rate should be set to align with other rate of return on short term financial asset in the financial system to allow for fair competition between public sector and private sector debt instrument and thus limit the crowding out effect and that the issuing of treasury bills should be justified with the existence of excess liquidity in the financial system.

Cambodia: Technical Assistance Report-Government Finance Statistics Mission (April 26-July 15, 2021)

A follow-up technical assistance (TA) mission to the Ministry of Economy and Finance (MEF) was conducted remotely during 12 days over the period of April 26–July 15, 20211. This activity was part of Cambodia’s participation in the Japan-funded Government Finance Statistics (GFS) and Public Sector Debt Statistics (PSDS) Project for selected Asian countries (JSA3)2. The mission liaised with Mr. Alexandros Mourmouras, Director of the Capacity Development Office in Thailand (CDOT), Mr. Rifaat Basanti, the IMF Regional JSA3 GFS/PSDS Project Manager, Ms. Delphine Anne Moretti, the IMF Regional Public Financial Management (PFM) Advisor for Southeast Asia, and Mr. Sean Craig, Macroeconomic Advisor – all in the CDOT, and Mr. Yasuhisa Ojima, the IMF’s Resident Representative for Cambodia. The mission would like to thank the authorities for their excellent collaboration and support.

Leading indicators of debt pressure: a South African application

As South Africa’s national debt has been on a steady upward trend since the late 2000s, this paper aims to construct an Early Warning System (EWS) using logit regressions to predict the likelihood of future public sector and private sector debt pressure. Results show that real GDP growth and the exchange rate matter for the prediction of private sector debt pressure. Government expenditure and real GDP growth are the most important predictors of public sector debt pressure. The implication of the net substantive magnitude of leading indicator impacts is that private debt pressure is principally structural, and public debt pressure is a reflection of discretionary policy choices. Early warnings from all four model predictions satisfy statistical reliability criteria. The best performing model is the public sector model for excessive debt accelerations, capturing 61.54% of the actual high-pressure events with a precision of 72.73%.

The Belt & Road Initiative and the public and private debts of participating countries: The role of China's economic policy uncertainty

This paper investigates the effects of China’s economic policy uncertainty on external debts in countries involved in the Belt & Road Initiative. We first investigate an investment decision model to show heterogeneous effects on public and private debts. We then estimate such effects with recent data using a Propensity Score Matching (PSM)-Difference in Difference (DID) approach. We find that China’s economic policy uncertainty has intermediary effects on the scale of the external debt For the Belt & Road participating countries. We also show that there exists a significant difference in the effects on external public and private debts. The effects of economic policy uncertainty on total external debts in the participating countries are mainly attributable to the effect on the private sector debt rather than the public sector debt.

Cabo Verde: Technical Assistance Report-Government Finance Statistics and Public Sector Debt Statistics

A technical assistance (TA) mission on Government Finance Statistics (GFS) and Public Sector Debt Statistics (PSDS) visited the city of Praia, Republic of Cabo Verde, from July 22 to August 2, 2019, with the aim of putting more and better-quality fiscal data —particularly on PSDS — in the hands of public decision makers. The mission was funded by the Data for Decisions (D4D) fund under module 1 on fiscal data including debt.

Cabo Verde: Technical Assistance Report-Government Finance Statistics and Public Sector Debt Statistics

"Volume 2021 (2021): Issue 238 (Nov 2021): Cabo Verde: Technical Assistance Report-Government Finance Statistics and Public Sector Debt Statistics" published on 01 Nov 2021 by International Monetary Fund.

Lao People’s Democratic Republic: Technical Assistance Report-Government Finance Statistics and Public Sector Debt Statistics

This technical assistance (TA) report on government finance statistics (GFS) covers the remote TA to the Ministry of Finance (MOF) during September 21–October 2 and December 14–18, 2020 and March 9–13 and April 19–23, 2021 (which was extended to May 2021). These peripatetic activities were conducted remotely due to the travel restrictions resulting from the COVID-19 situation. This report documents the main achievements from these activities. These activities were part of the GFS and Public Sector Debt Statistics (PSDS) project funded by the Government of Japan (JSA3) and implemented by the IMF Statistics Department (STA) and the IMF Capacity Development Office in Thailand (CDOT).

Audit Efficiency and Influence of Environmental Factors to State Bodies: Evidence of Kazakhstan

Research and assessment of the public sector debt management system and the development of audit methods based on them will improve the process of monitoring the effectiveness of the formation, management and assessment of public debt.
 In accordance with the provided data of the audit of the audit of the effectiveness of the formation and management of debt of the Government of the Republic of Kazakhstan, an assessment of the state of the state and state-guaranteed debt was carried out. A negative trend in the growth of public debt and the lack of control and management of public and guaranteed public debt, which is reflected in the growth of both nominal and percentage ratio of debt to GDP, are noted, as well as trends in environmental and social issues of both global and regional scale, which are possible to solve only on condition of creating a new type of ecological culture, greening education in accordance with the actual needs of the individual and civil society.

Individual Debt Ratio as a Way of Assesing the Financial Conditions of Local Government Units

Purpose: The aim of the study is to analyze existing methodological approaches and developments used to assess the financial condition. Design/Methodology/Approach: The methodology was based on the methods of analysis and logical construction, the basics of descriptive statistics (to determine the phenomenon of debt), as well as the basic approach typical of the heuristic method. Findings: Despite the development of methods of assessing the financial condition, practice very often confirms that the primary direction of assessing the financial condition is the ability to absorb debt. This approach forces a search for an answer to the question, can the individual debt ratio (IWZ) be a measure that answers the question about the financial condition of local government units? Practical Implications: The IDR applied in Poland seems to be an effective instrument for controlling the debt of local government units. The structure of this indicator allows, on the one hand, systemic control of the debt of the entire public finance sector, and, on the other hand, it is flexibly adapted to the specificity and level of affluence of a given entity. Therefore, it is worth promoting such solutions in individual European Union countries as an effective tool for limiting LGU's uncontrolled debt. Originality/Value: Results of the study reflect that IDR concerns the possibility of debt service, but it cannot be a measure of financial condition, because in local government units there are liabilities not only classified as debt obligations. The omission of these obligations and their impact on the financial condition makes the information value of IDR imperfect and incomplete. It is difficult to indicate the optimal solution that would fully reflect the current financial condition. It is possible as well as from the point of view of additional workloads, difficult to implement in practice.

On Russia’s public sector debt

The article examines the problem of comprehensive official reporting on public sector debt. It considers the IMF toolkit for public debt statistics, the peculiarities of its practical use and inherent methodological issues influencing the quantitative assessments. Estimates of the total liabilities and liquid assets for the components of the Russian public sector are given, which show, inter alia, the increase of the total liabilities of the largest state-owned enterprises (as a share of GDP) since 2016, first of all, due to the growing share of stateowned banks in the banking sector. The importance of regular monitoring and review of the public sector liabilities and assets is substantiated.

The non-financial sector debt: Global trends

Subject. This article examines the non-financial sector debt ratio relative to the GDP of emerging and developed market economies. Objectives. The article aims to find out what institutional units show debt growth or reduction, what causes and conditions prevent debt decline or lead to its growth in different countries and sectors, and highlight the foundations of public policy in this area. Methods. For the study, I used a cross-country comparative analysis, grouping method, and graphical and trend analyses. The study covers 43 market economies, including 26 developed and 17 emerging ones. The time period is from Q4 2001 to Q4 2019. Results. The article identifies and describes the structural debt changes that have taken place since 2008, which include a reduction in private sector leverage and rising public sector debt in developed market economies, and accelerated growth in the non-financial corporations and households' debt in emerging market economies. Conclusions and Relevance. Given the different conditions of access to the capital market and the institutional differences between developed and emerging market economies, different approaches to debt management are needed. The identified trends are important to develop non-financial sector debt management policies, including both fiscal and monetary policies.

Kingdom of Lesotho

In response to a request from the authorities and as part of the United Kingdom’s Department for International Development (DFID) Enhanced Data Dissemination Initiative (EDDI) 2 project, a government finance statistics (GFS) mission visited Maseru, Lesotho, during January 20–31, 2020. The mission was the last, in a series of five consecutive technical assistance (TA) missions to Lesotho, as part of the EDDI 2 project. The objective of the five-year project, that started in 2015 was to foster compilation and dissemination of GFS and public sector debt statistics (PSDS) consistent with international methodological standards. The work program under the project identified the enhancement of classification of transactions in fiscal accounts and the expansion of the institutional coverage of data to include all significant general government units as key milestones to achieve by the end of the project.

Are Central Government Rules Okay? Assessing the Hidden Costs of Centralised Discipline for Municipal Borrowing

In the EU, the specialty municipal banks have been the traditional funding source besides tax sharing and governmental transfers for Local Governments (LGs). With the decentralization process, LGs experienced different market-based options so that banks were no longer the only source of funding. However, with the onset of the Eurozone crisis, public sector debt is no more risk-free, and the cost of borrowing became unstable over time. To minimise such risks, Central Governments forced LGs to adopt general principles of control of local borrowing. Previous studies evidenced that centralised controls affect unitary countries more than federations. This paper investigates the Centralised Discipline and Control Model to understand whether it generates hidden costs. For such a purpose, the paper compares municipal bonds against borrowing from banks in Italy, a European unitary country. This paper highlights the existence of hidden costs for Italian LGs because the Central Government set up an expensive system for controlling the entire public sector debt. Policy makers should pay particular attention to which model of control to adopt by considering their country’s specific characteristics and the potential impacts of the different models on them, according to the present economic circumstances.