Debt Profile Research Articles

Fiscal multipliers and prospects for consolidation

This article looks at various aspects of fiscal consolidation in 18 OECD economies. The prospects for fiscal consolidation depend upon the problems a country may face with its debt stock, the political will to deal with these problems and on the costs of consolidation. These costs are a function of the impacts of fiscal policy on the economy, which is the focus of this study. The analysis is based on a series of simulations using the National Institute Global Econometric Model, NiGEM. Fiscal multipliers differ across countries because the structure and behaviour of economies differ. They also differ within countries, depending on factors such as the fiscal instrument implemented, the policy response to fiscal innovations, and expectation formation by economic agents. The purpose of this study is to allow an assessment of the likely impact on the economy and on the fiscal position of consolidation programmes.We decompose the key factors that determine the size of the multiplier by changing them one at a time. Even under a specified set of assumptions, the outturn for the budget balance retains a high degree of uncertainty. We illustrate this uncertainty by calibrating probability bounds around projected debt profiles. This can allow an assessment of the probability of achieving specified fiscal targets, such as those set out in the European Union’s new Fiscal Compact.

Effects of Elitism and External Debt Crises on Nigerian Citizenry

This paper examines the nexus between the elites and external debt imbroglio on Nigerians. It argues that the flakes of the debt crises are the killings and bombings in different parts of the North with the psychological fear in the south that this billowy suicide flame will soon waft in. The method adopted in this work is the content analysis of external debt profiles since 1961 up to June, 2012. Data extracted are consequently used to test a hypothesis using the t-test at both 0.05 and 0.01 levels of significance. However, the two types of elites show that they are agents of political decay, a description Samuel Huntington gave to the military in the sixties. The results indicate that there is no significant difference between the military and their democratic elites. Problems emanating from these high external debts are high unemployment rates, decaying infrastructure, delayed or outright stoppage of promotion, among others. Consequently, frustration propels the followership, sponsored by some disgruntled elites, to express their disgust in different ways such as suicide bombing and forming of religious, cult and ethnic militia. All this has led to the insecurity of lives in the polity. The antidote is for the political elites to find lasting solution to the debt crises and to desist henceforth from taking foreign loans .This is the veritable desideratum to propel the country towards meaningful and sustainable development.

Análise da relevância de indicadores financeiros e não financeiros na avaliação de desempenho organizacional: Um estudo exploratório no setor brasileiro de distribuição de energia elétrica

This article aims to analyze the relevance of financial and nonfinancial ratios in the evaluation of organizational performance of companies in the Brazilian electricity distribution sector. In this regard, an exploratory study was conducted, using Delphi and Analytic Hierarchy Process (AHP) techniques. The results show that, in relation to the financial perspective, the most important indicator is the Interest Coverage, followed by Return on Equity and Debt Profile. Those three major ratios represent approximately 60% of the total importance of the financial perspective. In the operational perspective, a balance between the ratios is observed, with a slight advantage for the EBITDA margin, FEC e DEC ratios. Finally, the analysis of socioenvironmental perspective shows that the Environmental Commitment Rate and the Aggregate Profitability of Investments are, respectively, the two most important ratios, which, together represent approximately 62% of all social and environmental perspective importance.

World Overview

Global economic prospects have deteriorated markedly in recent months. Risks around our central forecast have shifted distinctly to the downside. Much of this is due to the heightened uncertainty surrounding Europe's sovereign debt crisis. There is widespread agreement among policymakers - ranging from the IMF, European Commission and European Central Bank to individual heads of state both within and outside the Euro Area - that resolution to the crisis requires urgent, comprehensive and coordinated action. Yet 17 months after the first bail-out programme was introduced in Greece, policymakers have failed to deliver a strategy that promises a credible prospect of growth and an end to rising debt profiles. Solvency concerns in three relatively small peripheral countries (Greece, Ireland and Portugal), combined with weakening growth across the continent, raise the dangerous spectre of illiquidity beginning to affect solvency in the larger core economies with high debt ratios - notably Italy. Left unchecked, the consequences would be severe for the world economy.

Corporate Debt and Outsourcing in India

The structure of firms' activities, as to whether they should be undertaken internally or performed wholly or partially with the help of external firms, has been important. The issue of outsourcing has generated interest among academics and practitioners. Simultaneously, how firms' capital structures influence behaviour is important, because the divergent goals and preferences of different providers of capital can manifest themselves in the form of differences in strategies pursued by firms. This article uniquely evaluates whether variations in Indian firms' capital structures, and more specifically, the quantity and type of debt chosen by firms, have influenced firms' outsourcing decisions. Governance mechanisms in Indian organizations have been unique when compared to that elsewhere, with government playing a big role in the financing of firms since banks and financial institutions are, in the main, government-owned. Also, the legal environment is unique and different from those in advanced economies. The link between capital structure and strategy, thus, can become quite unusual in India. The evaluation is based on a large sample of firms for which debt data were available. The main finding noted is that as the proportion of funds borrowed by Indian firms from commercial banks and financial institutions rise, these firms engage in greater levels of outsourcing and are less inclined to vertically integrate. In the presence of financing by government-owned banks and financial institutions, industry has been able to engage in strategies that may not be compatible with asset and property rights protection and performance enhancement. This is due to the collective action problem banks and financial institutions may face in monitoring lenders. As far as corporate debentures are concerned, where debentures rise as a proportion of borrowings, firms continue to engage in outsourcing. Possibly they can ignore the pressures from bondholders, who in India have not yet had a significant presence as the corporate debt market in India is still relatively under-developed and inadequate as a source of funds. By that same logic, firms can ignore pressures from fixed deposit holders to adopt performance-enhancing or property rights protecting strategies. Yet, fixed deposit holders show an ability to influence firms to lower outsourcing as their presence in the debt structure of firms enhances. This may be not due to fixed deposit holders' influencing abilities but because the relative costs of fixed deposits are high, with interest rates on fixed deposits five to ten percentage points more than that for other debt. The enhancement of fixed deposits in firm' debt profiles will cause margin pressures. To obviate these, firms may resort to potentially cost-saving integration strategies.

Estrutura de maturidade das dívidas das empresas brasileiras: um estudo empírico

O objetivo principal deste trabalho consiste em analisar os principais determinantes da estrutura de maturidade das dívidas, à luz das teorias baseadas nas imperfeições do mercado, bem como compreender o perfil do endividamento das empresas brasileiras de grande porte, detentoras de dívidas bancárias e emissoras de debêntures. A amostra consiste em 38 empresas brasileiras de grande porte emissoras de dívidas, analisadas no período entre 2002 e 2007, sendo utilizadas as técnicas econométricas de regressão cross-section e dados em painel, a fim de testar as hipóteses sobre a estrutura de maturidade das dívidas das empresas brasileiras. As variáveis Oportunidades de crescimento (OPOCR), Receita operacional líquida (LNROL), Alavancagem (ALAV), Maturidade dos ativos (MATA) e Rating Alto (RATA) apresentaram resultados estatisticamente significantes. Todavia, o sinal apresentado foi o contrário, divergindo do proposto pela teoria. Foi observado que, analisando à luz do referencial teórico levantado, apenas a variável Alíquota efetiva de tributos (TAXE) influencia o comportamento da maturidade das dívidas.

Globalisation and the problems of entrepreneurial development in Nigeria

This paper argues that globalisation is a force of inequality and marginalisation. The reason is it exploits the world's developing economies. This threatens entrepreneurial development and human security. The paper seek to, through dependency paradigm, concretise the view that despite the excitement generated by globalisation as invitation to a world that is increasingly interconnected and borderless Nigeria (like other African countries) comes out at a disadvantage. Rather than gain from globalisation considering her enormous contributions to the global economy via her rich human and material endowments, Nigeria still faces its retrenching side effects such as mounting debt profile, capital flight, local industry collapse, over-dependence on imported goods and services, mono-product economy, etc. Hence, the Western allies encourage Nigeria to open her economy for rape with little or no access to other economies for her lack of the competitive advantage derivable from local capacity utilisation and functional entrepreneurial development.

External Debts, Growth and Peace in the Sudan: Some Serious Challenges Facing the Country in the Post-Conflict Era

This paper attempts to examine the impacts of the extent of the external debt problem and its sustainability on the government’s efforts to reduce poverty and sustain growth and peace in the Sudan. It starts with defining the concepts of external debt and types of loans and then examines the details of the external debt profile, magnitude, composition and sources by creditors. It also lists the causes (both external and internal) of the debt problem in the Sudan. A major section of this paper is devoted to investigate the relationship between growth, debt and peace in the Sudan in order to generate some policy based recommendations to deal with the issues of poverty and growth in the country. The remaining sections discuss various issues pertaining to debt burden indicators, debt sustainability, the Sudan debt relief strategy for solving the problem of external debt in the 1980s, and the new borrowing and investment policies. The final section gives some conclusions and policy recommendations.

Dollarization and Maturity Structure of Public Securities: The Experience of Bolivia

The public debt profile has improved in Bolivia in recent years, with regard to both the maturity structure and the currency composition. This paper analyzes changes in the public debt profile in Bolivia since 2000, and the role played by macroeconomic factors and the debt management strategy adopted by the authorities. We find that both played an important role, in particular the strengthening of the fiscal and international reserves positions and the appreciation of the Boliviano; and regulations promoting the use of the domestic currency. Our findings are consistent with Claessens, Klingebiel and Schmukler (2007)—who found that macro and institutional factors had an impact on debt profiles for a group of emerging and developed economies—and are in contrast with the original sin literature, which stresses that profiles are mainly determined by market incompleteness. We also compare the debt profile of Bolivia with those of other countries in Latin America, and find that there is still room for improvement against the regional benchmark, both in terms of maturity structure and currency composition.

Three countries’ debt profiles: Average maturities in Mexico, Brazil, and Russia

This paper draws on public debt in Brazil, Mexico, and Russia, and develops a bond-by-bond database from 1990 to 2005 that accounts for all available information on buybacks and swaps. We estimate a de facto indicator of average maturity of debt. We analyze the behavior of these three emerging sovereigns as they manage their debt profile and service their debt. We find that average maturity has improved in our three countries from 2000 to 2005. However, this evolution is subject to uncertainty on the possibility of future buybacks, swaps, and other restructurings. Compared to the Brazilian and Russian cases, improvement appears more progressive in Mexico. Moreover, we observe more examples of swaps in Eurobonds in this country. If we consider the original sin criteria, we observe that primary issuance of long-term international debt in domestic currency appears as an exception.

Re-Accessing International Capital Markets After Financial Crises: Some Empirical Evidence

The paper analyzes the factors that contribute to the re-access of countries that emerge from a severe financial crisis to the international capital markets. It conjectures that these factors depend on a sovereign's commitment and ability to repay its foreign debt, signaled by sound macroeconomic policies, and the global liquidity environment. Using panel data for 49 countries over a 24-year period, the analysis uses a simple probit approach to show that, indeed, a sustainable debt profile and a sound external position, accompanied by a favorable global liquidity environment, are key factors in affecting the likelihood a sovereign reaccesses international capital markets.

Re-Accessing International Capital Markets After Financial Crises: Some Empirical Evidence

The paper analyzes the factors that contribute to the re-access of countries that emerge from a severe financial crisis to the international capital markets. It conjectures that these factors depend on a sovereign's commitment and ability to repay its foreign debt, signaled by sound macroeconomic policies, and the global liquidity environment. Using panel data for 49 countries over a 24-year period, the analysis uses a simple probit approach to show that, indeed, a sustainable debt profile and a sound external position, accompanied by a favorable global liquidity environment, are key factors in affecting the likelihood a sovereign reaccesses international capital markets.

Cross-Country Experience with Restructuring of Sovereign Debt and Restoring Debt Sustainability

The paper is organized as follows: Section II provides a cross-country overview of the economic conditions, including the composition of sovereign debt and its dynamics prevailing prior to the debt operations, and a discussion of the scope and outcomes—in terms of the debt relief provided by creditors—of the debt restructurings. Section III analyzes the debt profile, liquidity position, DSAs and accompanying stress tests, and an EWS to assess whether debt sustainability has been restored in each country case. Conclusions are set out in Section IV.

Uncertainty and Debt-Maturity in Emerging Markets

Although a lot has been written on the link between debt maturity and financial crises, it remains puzzling why the private sector in emerging market economies holds such a large share of short-term debt in the presence of substantial macroeconomic risk. To understand this phenomenon, we propose a simple model in which debt maturity depends on economic uncertainty about investment returns. We show in particular that if lenders are risk averse, higher uncertainty can (i) lower the total debt level a country is able to borrow and (ii) tilt the debt profile towards short-term debt. We take these model implications to the data using a panel of 28 emerging market economies and various indicators for macroeconomic uncertainty. We find substantial empirical support for the model's predictions.

Currency Mismatch, Uncertainty and Debt Maturity Structure

The academic literature has so far little to say about the underlying causes of the large structural asset and liability imbalances of emerging markets that frequently contributed to financial crises. The aim of the paper is to contribute to filling this gap by proposing a theoretical model that links currency and maturity mismatches with real volatility in the economy. We show that if (i) a significant share of the debt is denominated in foreign currency - creating a currency mismatch - and (ii) borrowing is constrained by solvency, then currency mismatch can create and exacerbate a maturity mismatch. An important feature of the model is that higher economic or political uncertainty tightens solvency constraints and tilts the debt profile towards short term debt, thereby increasing the volatility of output. Taking the model implications to the data, we find empirical support for the model's predictions using data for 28 emerging market economies.

Official external debt: Perspectives from the experiences of Arab countries

This study focuses on Arab debt profiles from 1975 to 1990, which show the predominance of official bilateral debt. Such debt is poorly addressed by existing economic theories, which have been biased towards portraying commercial lending. It is best seen as government to government debt. This necessarily highlights the fiscal roots of external debt, and the role of political and strategic factors. Such factors may distort official credit provision, and underpin military debts. The alternative approach is a synthesis of interactions between public finance, foreign policy, particularly military aspects, and the management of external debts in Arab countries. Inherited debt structures are changing slowly, with a small but significant shift towards private finance.

Risk Management Disclosure Practices of UK Non-Financial Firms After FRS 13

In the United Kingdom Financial Reporting Standard (FRS) 13, which came into force for March 1999 yearends, requires narrative and numerical disclosure of all financial instruments held or issued, in order to provide information about their impact on the firm’s risk profile. We use this information to examine the interest rate and currency profile of financial liabilities and assets. We find that UK firms on average have a greater proportion of assets and liabilities tied to floating rates of interest and that they tend to match the interest rate profile of assets and liabilities. Although sterling liabilities on average represent over half of total liabilities, for firms holding sterling and non-sterling debt the US dollar was the dominant currency. We also find a relationship between the level of foreign operations and foreign debt. Since the foreign debt profile is disclosed after the effect of derivatives, this result suggests that cross-currency swaps are used for hedging.

Military Debt: Perspectives from the Experience of Arab Countries

This paper highlights the importance of military debts in Arab external debt profiles. By 1990, these debts ranged between $45-90 billion--equivalent to 40% of their debts of that time--and were important in six of the nine severely indebted economies. The paper also sketches the broad features of the military credits market, which clearly affects civilian and total indebtedness. Hence, military spending and military debts are more intrinsic to debt formation than debt economics has admitted. Particularly in this region, explicit treatment of the military dimension is crucial for a more complete or accurate analysis of external indebtedness.

Politics of Constitutional Reforms and Democratization in Africa

JULIUS O. IHONVBERE [*] ABSTRACT Any constitution that does not emerge from widespread consultations with all nationality and interest groups cannot be regarded as legitimate. The basis of constitutional legitimacy must now be measured by the extent to which the masses have been part of the process of compacting the constitution. [1] The mere existence of a constitution, however comprehensive, will do little to create a stable environment for democracy and development unless people know and understand its provisions, have faith that their governments will not overrule it, and believe that their rights as promulgated within it, will indeed be upheld (Ould-Abdallah 1998). Introduction: Global Issues and Objectives CONSTITUTIONAL REFORMS have become the main political activity in most African states. In Angola, Algeria, Egypt, Kenya, Swaziland, Zimbabwe, and Nigeria to mention a few, constitutions are either being reformed or there are very intensive contestations on the need for reforms. Without doubt, these agitations for reforms and on going reviews of existing constitutions are precipitates of the changing character of national, regional, and global politics. The end of the Cold War has had far-reaching impacts on socioeconomic and political relations in Africa. As distances are shrinking and economic and financial relations are becoming streamlined, African states have had to adjust accordingly. The imposition of International Monetary Fund (IMF) and World Bank designed and supervised structural adjustment programs (SAPs) on African states was accompanied with the imposition of political conditionalities. Economic conditionalities required African states to execute policies of desubsidization, deregulation, devalu ation, and the adoption of other stringent fiscal and economic policies. As well, economic conditionality required the crisis and debt-ridden African states to shrink their roles in the economy, and open their economies to the new forces of globalization that were rapidly integrating national markets. Of course, for foreign dominated, distorted, disarticulated, and largely technologically challenged African states, globalization meant further incorporation into the margins of the world economy. This marginal location meant increasing vulnerability to the vagaries of a metropole-dominated capitalist global order. Unfortunately, for most African states, the failure of adjustment programs culminated in a rising debt profile, unemployment, inflation, a rising crime wave, rural-urban migration, infrastructural decay, and social dislocation. One consequence of this development was the massive emigration of qualified professionals (brain drain phenomenon) to foreign lands, thus, further complicating the already desp erate economic conditions in the continent. As African states were struggling to meet the stringent conditionalities required to obtain credit, aid, and resuscitate their declining markets, Western nations, lenders, and donors, capitalizing on the advantages of the post-Cold War order, imposed new political conditionalities. Among other factors, the conditionalities required African states to respect human rights, allow for multiparty politics, and conduct democratic elections as preconditions for doing business or securing aid. This new approach reflected a determination by the global community to alter existing economic and political patterns for restructuring the emerging global order, albeit in the interest of the developed nations. Yet, the new emphasis on democracy, human rights, elections, transparency, and accountability was designed to streamline conditions within the developing formations to make them conducive for business. In this way, economic and political conditionalities became aspects of the overall globalization process by incorporat ing political necessities within economic determinants that fuel the global relations of power, production, and exchange. …

Africa Research Bulletin: Economic, Financial and Technical Series, February 16th‐March 15th 1998. Published April 7 1998

In This Issue Burundi Sanctions Stay 13349 Ethiopia Foreign Investment 13355 Sao Tome e Principe Crisis and Conflict 13357 South Africa Poor Showing 13359Rating Down 13365 Zimbabwe “Zambianisation”? 13360 Nigeria Debt Profile 13364Contents1 Continental Developments 133492 Policy and Practice 133533 Communications and Transport 133674 Commodities 133715 Industries 133776 Economic Aid 13381Rates 13380Index 13382