External Debt Management Research Articles

DEBT MANAGEMENT AGENCY IN UKRAINE: A COMPREHENSIVE APPROACH TO THE CREATION AND OPERATION

The article considers a comprehensive approach to the formation and operation of a debt agency in Ukraine based on international experience. Ensuring the full functioning of the Public Debt Management Agency of Ukraine in accordance with international best practices in order to increase the effectiveness of debt policy aimed at reducing the debt burden and reducing the cost of public debt service is one of the most important tasks of Ukraine's strategic development. Analysis of international experience shows that the creation of a debt agency, as a new structure, does not automatically guarantee increased efficiency of external public debt management. It depends on the qualifications of the staff, the structure of the country's public debt and the degree of influence of the agency's staff on the change in the debt burden. Quite a wide resonance in society on the creation of a debt agency in Ukraine, incomplete regulatory support of this process necessitates the definition of approaches to the creation of a debt agency of Ukraine and justification of its functional capacity, which is associated with: creating favorable conditions for the newly created debt agencies of Ukraine; introduction of mechanisms for monitoring and control over its activities and strengthening the interaction of various government agencies within the general government sector; increasing the efficiency and productivity of the debt agency.

Effect of Public External Debt on Economic Growth in Ethiopia

This study is an effort to determine the effect of public external debt on economic growth in Ethiopia. In doing this, the study used an Autoregressive Distributive Lag model (ARDL modeling) to analyze Ethiopian data from 1981 to 2014 with GDP per capita as a function of stock of public external debt, public external debt servicing, human capital, physical capital, labor force, trade openness and policy change dummy. The empirical result reveals that in the long-run high level of stock of public external debt has a significant negative effect on economic growth. Therefore, there is an evidence for the “Debt overhang” and “Conventional view” of public debt in Ethiopia. On the other hand, public external debt servicing has a negative coefficient but insignificant in affecting economic growth. That is, there is no evidence for the “Crowding out” effect of public external debt in the country. Besides, human capital is found to have negative impact on GDP per capita. Moreover, Labor force has a significant positive impact but private capital formation and trade openness are insignificant in explaining the Ethiopian economy. Hence, the study’s implication is that the government and policy makers should improve the existing policies on public external debt management through investing in productive activities and sectors. Moreover, the government should implement structural change, public sector and tax reform, and diversifying the economy so as to generate more revenue in domestic. Keywords: ARDL Approach, Economic Growth, Public external debt, Public external debt Servicing JEL Code : G29 DOI: 10.7176/JESD/10-13-04 Publication date: July 31 st 2020

Veinte años de relaciones estratégicas de la Unión Europea con América Latina y el Caribe (1999-2019): análisis de la evolución de sus “tres pilares” fundamentales

El artículo se centra en las relaciones birregionales entre la Unión Europea (ue) y América Latina y el Caribe (alc) en el marco de la política exterior europea. Su objetivo central es examinar la evolución de los “tres pilares” fundamentales en torno a los cuales se han articulado tales relaciones: el diálogo político, la cooperación y el comercio –en un sentido más o menos amplio–, desde 1999, año en que se creó la “Asociación Estratégica” que encauza las relaciones birregionales. La hipótesis central interpretativa del trabajo es que alc no ha representado una prioridad en el marco de la política exterior de la ue. Las relaciones se han mantenido con cierta asimetría y, a pesar de que se han logrado avances en algunos temas relevantes, en ninguno de los “tres pilares” los resultados han sido notables. Esto no ha sido así desde el punto de vista del desarrollo y la mejora de las condiciones económicas, sociales y políticas en Latinoamérica, ni desde el de la propia influencia europea en esta región. Las relaciones ue-al han pasado por alto algunos temas considerados clave, como las migraciones, la cooperación en materia educativa, la gestión de la deuda externa, entre otros. Finalmente, se defiende la idea de que pueden y deben profundizarse estas relaciones, y de que la región de alc puede constituir un aliado estratégico imprescindible de la ue

EXTERNAL DEBT IMPLICATIONS ON THE DEVELOPMENT OF NATIONAL ECONOMY

The external debt of the Republic of Moldova is increasing constantly. Excessive external debt has been a big problem for both developing and developed countries during the years. Developing countries face this problem more often as they need to borrow to finance their objectives and strengthen the economic growth. It is very important for our country to determine the optimal level of indebtedness that the economy can bear. That is why the external debt should be contracted in strict accordance with the needs of the economy, and borrowed loans should consider the country’s reimbursement capacities to avoid the liquidity or solvency crisis. The scope of this paper is to give a prompt and correct overview of the importance of external debt management and its impact on the economic growth of the country. In the research process, the deduction, based on general theoretical information on the structure, management, external debt and indebtedness assessment, the economic influence policies were used and then passed on to practical analysis using specific indicators.

Кредитно-дефолтні свопи у системі управління зовнішнім державним боргом

The article aims at systematizing the theoretical and methodological foundations of using credit default swaps in the external public debt management. Theoretical principles of using credit default swaps in the external public debt management are studied. The advantages and disadvantages of credit default swaps as derivative financial instruments are generalized. It is shown that the main disadvantages of credit default swaps are their speculative character and dependence on international rating agencies, as well as lack of proper regulation in the synthetic securitization of debt-based assets. The mechanism of credit default swap functioning in the risk management system in external state borrowings is conceptualized. The factors influencing the value of the credit default swap in the risk management system in external government borrowing are identified. It is shown that the main factors are the sovereign credit rating, the maturity of debt securities, liquidity and yield of external government bonds, market demand and supply of debt securities and default swaps. The dynamics of the value of credit default swaps on Ukraine’s debt securities is analyzed. The relationship between the swap value and geopolitical factors in the formation of the international investment position of the state is shown. In order to increase the efficiency of credit default swaps in external public debt management and minimize the interest rate risks of external government borrowings, it is suggested to amend norms and regulations, providing for the essence of default swap, the composition of the parties, accounting and value formation peculiarities.

Conceprual approaches to the public debt management and its impact on financial stability

Management and regulation of public debt for many years is an urgent problem of the functioning of the financial system of the state, as it is a component of the financial systems of the vast majority of countries. In this regard, the priorities and areas of the debt policy, in the framework of which the formation and servicing of public debt are gaining particular importance. Public debt plays a significant and multifaceted role in the macroeconomic system of any state, since relations regarding the formation, servicing and repayment of public debt have a significant impact on the state of public finances, monetary circulation, the investment climate, the structure of consumption and the development of international cooperation between states. For the Republic of Kazakhstan, the problem of improving the public debt management system and its impact on financial stability is relevant because its solution requires research and the search for radically new mechanisms in the context of the transformation of the economic system into a market one, which is associated with increased economic risk.The purpose of the study is to identify the main trends in the system of managing state external borrowings of the Republic of Kazakhstan, to analyze theoretical studies of foreign and domestic authors, as well as solutions to formulate recommendations for improving the efficiency of external debt management and its impact on the financial stability of Kazakhstan. The theoretical and methodological basis of the study was the development of domestic and foreign economists, laws and regulations governing economic and social processes in this area. The information base of the study was the work of domestic and foreign scientists and specialists in the field of public debt, official statistical and informational materials of the Ministry of Finance of the Republic of Kazakhstan, data of the National Bank of the Republic of Kazakhstan, data of the Ministry of National Economy of the Republic of Kazakhstan, statistical collections and Internet resources.

Effects of Public Expenditure on Gross Domestic Product in Zambia from 1980-2017: An ARDL Methodology Approach

The paper explored the fundamental changes in public expenditure and the resulting effect on the gross domestic product using an ARDL approach for time series data over the period 1980-2017. The control variables included foreign direct investment and current account balance. The objective was to determine changes which had occurred with regard to the performance of GDP since 1980. A quantitative method approach was used to ascertain the relationship between the variables and analysed using the E-views 9 software. Cointegration results showed a long run relationship between GDP and government expenditure. In this regard, changes in government expenditure have a strong converse effect on GDP. Government expenditure, which has increased significantly in the past decade, is seen to have had negative effects both in the short run and long run. Contrary to theory, increased government expenditure may not be ideal for growing the Zambian economy. This could be due to the allocation of this public expenditure, i.e. the 2018 Budget had 24% of the expenditure directed to economic activities. Thus it is recommended that government practice increased fiscal discipline or reallocated resources as their expansionary fiscal policies are not yielding the intended results. Additionally, policies to promote private investment may be more beneficial for the Zambian economy. On the other hand, increased investment is also recommended with government encouraging more investment promoting policies as FDI is observed to have a positive impact in the short run though insignificant in the long run. These should ensure more investors are encouraged to stay longer and the impacts/externalities of their investments be accrued to the nationals to ensure long run benefits. The Zambian government should also ensure that the country diversifies its export base and enhances its external debt management to ensure positive and consistent impact of Current Account Balance in the long run.

Specific aspects of Russia's external debt management in modern conditions

Specific aspects of Russia's external debt management in modern conditions

External Debt and Economic Growth in Nigeria: Long Run Analysis

The role of external debt in economic growth of developing countries has been questioned since there has been a high incidence of default, low economic growth and high levels of poverty, all of which are associated with high stocks of external debt. Also, the uncertainties about country external debt sustainability position as well as whether countries are already trapped in the debt-overhang situation have underlined point of debate among scholars. This study investigates the dynamic relationship between external debt and economic growth of Nigeria for period of 1985 to 2017 using Johansen approach to cointegration, vector error correction model (VECM) and granger causality test. Data for the study was collected from the CBN statistical bulletin. The findings revealed that debt service payment has negative and insignificant impact on Nigeria’s economic growth while external debt stock has negative and significant effect on economic growth. The causality test indicates no-directional causality between external debt and GDP. From the findings, the study recommends that policy-makers should reformulate the external debt management strategy to minimize sovereign risk through diversification of the external borrowing. This could potentially be achieved by reducing the dependency on one specific debt instrument or currency. Hence, the strategy will be effective if it is carried out in parallel with a comprehensive surveillance and debt-monitoring system.

The relationship between external debt and economic growth: empirical evidence from Ukraine and other emerging economies

The article examines the relationship between external debt and economic growth in emerging economies for the period 2006-2016. The authors used different econometric tools, e.g., ADL model and correlation analysis. The regression results showed that the original values had no significant impact on the estimation of the parameters. Thus, there was made an assumption that emerging economies have a non-linear impact on macroeconomic parameters, including external debt that has a non-linear type of influence on economic growth. The authors established that high level of external debt, in conjunction with macroeconomic instability, impedes economic growth in such countries. The regression model also showed that there is a critical level of debt burden for emerging economies, where the marginal impact of external debt on economic growth becomes negative.The results of the study highlighted the significance of the problem of effective public debt management strategy implementation in Ukraine. This issue is predetermined by the appropriate organizational support. The study recommends improving a public external debt management model. In this paper, the authors proposed a new structure with the participation of new element – independent agencies. The unified external debt management system should integrate all state institutions and executive power structures in this area.

Assessing Fiscal Risks in Bangladesh

This paper identifies, quantifies, and assesses fiscal risks in Bangladesh. By performing sensitivity analysis and using stochastic simulations, it measures risks arising from shocks to gross domestic product growth, the exchange rate, commodity prices, and interest rates. It also analyzes specific fiscal and institutional risks, including those related to the pension system, issuance of guarantees, state-owned commercial banks, and external borrowing and debt management strategies. The paper finds that fiscal aggregates are particularly sensitive to shocks to commodity prices and the exchange rate. Other factors that could affect fiscal aggregates are the unfunded pension system and limited institutional capacity.

The U.S. external debt: risks and prospects for developing the strategy of the U.S. external debt management

According to the modern widespread approaches to the nature of external debt and its effects on economic processes, debt financing is among the distinctive features of the liberalization-oriented world of nowadays. Accordingly, unrestricted capital flows signify orientation at macroeconomic balance, since under the conditions when administrative barriers are absent capital distribution is even and symmetric, enabling leveling of factor prices. Associated with these arguments is a claim that prices of goods and services do not indicate non-negligible fluctuations and a financial system gains economic agents' confidence. This research addresses the issues of the phenomenon of external debt and provides an insight into the U.S. external debt and its effects on both the U.S. and world economy. The findings show that the U.S. external debt is of no considerable threat to the world economy in the short-term, since the peace of the world's economic leader's growth exceeds that of debt servicing expenditures. However, an economic decline may turn the status-quo upside down, since the country may face inability to raise enough funds in time to discharge its financial liabilities, especially to non-residents.

External debt among HIPCs in Africa: accounting and panel VAR analysis of some determinants

PurposeThe management of external debt among highly indebted poor countries (HIPCs) in Africa still remains a challenge despite numerous packages and attempts to ameliorate the consequences of such odious debt. The purpose of this paper is to establish the factors that contribute to the growth rate of external debt and how these factors respond to shocks to external debt growth rate in Africa.Design/methodology/approachData were obtained from 24 African countries and analyzed using a panel vector autoregression estimation methodology.FindingsThe study found that external debt growth rates respond positively to unit shock or changes in government investment spending, consumption spending, and domestic borrowings over a long period of time. In the medium term, external debt growth rates respond negatively to shocks in tax revenue, inflation, and output growth rates. The paper also provides empirical support that external debt may be consumed rather than invested among HIPCs in Africa.Research limitations/implicationsThe findings of this paper are limited to only HIPCs in Africa.Practical implicationsThis study has some few debilitating implications for external debt management among HIPCs in Africa. First, the paper suggests that debt repayment may be a problem. This is largely because external debt is consumed rather than invested. External debt sustainability needs a holistic approach in less developed countries. The findings place much emphasis on improvements in gross domestic product and tax revenues as the principal routes out of the debt doldrums. However, this option must be exploited with great caution as there is ample evidence that these poor countries increase their external borrowing capacities with improvements in economic outlook.Originality/valueThis paper fills a research gap that identifies specific components of government deficit budgets that may be contributing to the growth rate of external debts among HIPCs.

Governance infrastructure and indebtedness of African countries: Do regional blocs matter?

Motivated by the intermediating role of good institutions in enabling growth via external debt financed investment and the touted promise of regional integration for Africa's growth prospect, we use data on 37 countries, over the period 2002–2010, to explore the governance institutions—external indebtedness nexus in Africa, at the regional bloc level. We find a robust negative relation between governance institutions and external indebtedness in East & Horn of Africa, Central Africa and Southern Africa; and unclear relationships in North and West Africa regions. Importantly, these baseline results are robust to the consideration of debt write-offs, natural resource rents, and endogeneity. Further, we find that geographic, economic and cultural factors of proximity, intra-regional activity, shared official language, legal origin and dominant religion, largely explain the commonality of Africa's regional blocs of countries. These and other results of the study can support potential external debt management strategy that leverages effective governance institutions and enhanced regional economic integration.

Determining the Macroeconomic Factors of External Debt Accumulation in Nigeria: An ARDL Bound Test Approach

Nigeria is witnessing a continuous increase in external debt stocks despite a bitter three decades experience in this regard, resultant effects of high interest rates, low savings, weak exchange rates and persistent budget deficits. This study using time series data looked into this phenomenon adopting the ARDL bound test. These factors were found to have had a statistically significant relationship in the long run and adjustment mechanism for the short run was found to be very weak. It is thus instructive government concentrates on external debt signing and management so as to avoid the ugly experience of the past.

Assessing Fiscal Risks in Bangladesh

This paper identifies, quantifies, and assesses fiscal risks in Bangladesh. By performing sensitivity analysis and using stochastic simulations, it measures risks arising from shocks to GDP growth, the exchange rate, commodity prices, and interest rates. It also analyzes specific fiscal and institutional risks, such as those related to the pension system, the issuance of guarantees, the state-owned commercial banks, and the external borrowing and debt management strategy. The paper finds that fiscal aggregates are particularly sensitive to shocks to commodity prices and exchange rates. Other factors that could affect fiscal aggregates are the unfunded pension system and the limited institutional capacity.

Assessing Fiscal Risks in Bangladesh

This paper identifies, quantifies, and assesses fiscal risks in Bangladesh. By performing sensitivity analysis and using stochastic simulations, it measures risks arising from shocks to GDP growth, the exchange rate, commodity prices, and interest rates. It also analyzes specific fiscal and institutional risks, such as those related to the pension system, the issuance of guarantees, the state-owned commercial banks, and the external borrowing and debt management strategy. The paper finds that fiscal aggregates are particularly sensitive to shocks to commodity prices and exchange rates. Other factors that could affect fiscal aggregates are the unfunded pension system and the limited institutional capacity.

External Debt Management in Romania

This paper approaches the evolution of Romania’s foreign debt in three periods of time: during Nicolae Ceausescu regime, in the transition period and the one which followed the adhesion to European Union. For all three periods the external debt management had to deal with different circumstances: the sharp increase of real interest rates from the 1980s, the lack of credibility on international financial markets from the 1990s or the recent global crisis. We conclude that political regime, the efficiency of the allocation of the borrowed funds or the international context played major roles in the external debt management.

External Debt Management Techniques: An Evaluation Of The Debt Conversion Programme On Nigeria Economy

The study evaluated the various debt conversion programme used by the Federal Government of Nigeria to manage the nation’s external debt. It examines the problems and prospects of management techniques with a view to improving on them or possibly suggests new techniques which might be helpful in solving the external debt problem. Therefore, the research is focused on the external debt management techniques in Nigeria, with emphasis on the efforts of the central Bank of Nigeria (CBN) and the federal ministry of finance (FMF). Generally, the indebtedness of the country becomes a problem when the burden of servicing the debt becomes so heavy and unbearable that it imposes intolerable constraints on the economy and on the development efforts of the authorities.Managing the debt stock without stultifying growth has always has always been the headache of economic planners in Nigeria and other developing countries The pupation of this study constitutes the Central Bank of Nigeria (CBN) and the Federal Ministry of Finance (FMF) records and personnel, the sample used is the representative sample. This is because the sample reflects the conditions existing in the population. A total of 20 top management personnel of both the CBN and FMF including 5 top management personnel of the Debt Conversion Committee (DCC) were sampled. In this study, two types of data were collected that is, the secondary data and the primary data. In designing the instrument, care has been taken to ensure its effectiveness, the validity of the research questions were established found reliable at r = 0.82. The result showed that the management of Nigeria’s external debt via debt conversion programme is effective( χ2cal 6.545 > χ2tab value of 1.635 ;df=4; =0.05).Also, the Nigeria’s debt conversion programme is realistic. (χ2cal 4.655 > χ2tab 1.635 ;df=4; =0.05). However, the study revealed that the debt conversion programme is not the final solution to Nigeria’s external debt problems. (χ2cal 4.655 > χ2tab 1.635 ; df=4; =0.05). On the basis of the findings, it is therefore recommended that the debt management should be part of the macroeconomic policies of the month. The nation need not wait until there is a debt crisis before embarking on debt management. Also, accurate information on external debts should be sourced as this aids its efficient management on a day-to-day basis and external borrowing strategies in the planning framework. DOI: 10.5901/mjss.2013.v4n10p216

The Nexus Between External Debt And Economic Growth In Nigeria (1981 – 2009).

The study seeks to determine the impact of external debt on Nigeria using annual data from 1981- 2009. In our empirical analysis, we run ordinary least square test to verify the statistical significance of the variables used and Johansen cointegration to determine the order of integration among the variables. Empirical investigations revealed that the coefficient of external debt is statistically significant at 5% while other variables such as prime lending rate. Growth rate of GDP are not statistically significant. Our cointegration result s revealed the existence of two cointegrating equations at 5% level of significance among Gross domestic product, external debt, PLR, GRGDP and GREXDS. The results show the existence of long-run relationship among the variables. I. Introduction External debt management refers to the establishment of the condition of issue and redemption of foreign loans. It involves the proceeds of administering the external public debt that is, providing for the payment of interest and arranging the refinancing of maturity bonds/debt. It involves a conscious and carefully planned schedule of the acquisition and retirement of loans contracted either for development purpose or to support the balance of payments. It makes use of estimates of foreign earnings, sources of exchange finance, sources of exchange finance, the project returns from the investment and the repayment schedule. It also includes an assessment of the country's capacity to service existing debts and a judgment on the desirability of contracting loans (CBN; 1996). Nigeria's economic histories in the pre and post independence era are important in order to understand the magnitude of her economic problems and the measures in the recent past to combat the external debt crisis and achieve sustainable economy recovery and growth. The nation's inability to meet all its debt service payments constitutes one of the serious obstacles to the inflow of external resources into the economy. The accumulation of debt service arrears, which is being compounded with penalty interest, has not permitted reduction in the debt stock, despite the fact that government has been servicing it external debt with US $2.0 billion annually between 1991 and 1997. The reasons for this are varied. In some cases, debt problems have mainly stemmed from the efficient use and control of borrowed funds by debtor countries. In most countries, returns on investment had not even debt servicing cost. While in others an adequate policy framework for debt management has led to accumulation of external debts that have proved excessive for the countries debt servicing capacity. Many debtors have faced much higher than anticipated growth in debt payment relative to their growth in their exports of gods and services.