The Management of the External Debt Burden

1990 ◽  
pp. 100-116
Author(s):  
Robert Z. Aliber
Keyword(s):  
External Debt ◽  
Debt Burden

scholarly journals The Debt Overhang Hypothesis: Evidence from Pakistan

2016 ◽  
Vol 11 (1) ◽  
pp. 140-151 ◽  
Author(s):  
Muhammad Imran Shah ◽  
Irfan Ullah ◽  
Zia Ur Rahman ◽  
Nadeem Jan
Keyword(s):  
Economic Growth ◽  
Dynamic Behaviour ◽  
Negative Impact ◽  
Labour Force ◽  
External Debt ◽  
Unit Roots ◽  
Debt Overhang ◽  
Debt Burden ◽  
Long Run ◽  
Domestic Labour

AbstractThis study investigates the debt overhang hypothesis for Pakistan in the period 1960-2007. The study examines empirically the dynamic behaviour of GDP, debt services, the employed labour force and investment using the time series concepts of unit roots, cointegration, error correlation and causality. Our findings suggest that debt-servicing has a negative impact on the productivity of both labour and capital, and that in turn has adversely affected economic growth. By severely constraining the ability of the country to service debt, this lends support to the debt-overhang hypothesis in Pakistan. The long run relation between debt services and economic growth implies that future increases in output will drain away in form of high debt service payments to lender country as external debt acts like a tax on output. More specifically, foreign creditors will benefit more from the rise in productivity than will domestic producers and labour. This suggests that domestic labour and capital are the ultimate losers from this heavy debt burden.

ՀՀ տնտեսության պարտքային անվտանգության խնդիրները Արցախյան պատերազմի համատեքստում

2021 ◽  
pp. 181-188
Author(s):  
Ani Grigoryan
Keyword(s):  
Public Debt ◽  
Budget Deficit ◽  
External Debt ◽  
Military Operations ◽  
Economic Problems ◽  
Political Situation ◽  
Debt Burden ◽  
Military Expenditures ◽  
The Republic ◽  
The Government

The 2020 began with the Coronavirus crisis and ended with the Artsakh war, causing both financial and human losses. An extremely difficult economic and political situation was created for the Republic of Armenia. The volume of military expenditures, which is expenditure priority due to military operations, has increased by about 40 billion drams in the current year. The epidemic restrictions reduced tax revenues by about 113 billion drams. The purpose of this article is to reveal the challenges that Armenia has been facing, due to the epidemic and the Artsakh war, substantiating the approach, that the above-mentioned instabilities will inevitably lead to a violation of the logic of the planned economic growth. During the research, the indicators of the government debt-to-GDP ratio of different years were calculated by the method of quantitative analysis, which show the amount of the debt burden. As a result of the research we came to the conclusion that the economic problems will lead to an increase in the budget deficit. And the lack of the resources to finance the latter will make it inevitable for the Republic of Armenia to attract new external public debt, which will increase the already heavy external public debt burden of the RA. Considering the above-mentioned issues as a priority, this article aims to study the dynamics of the external debt obligations of the RA economy during the difficult economic and political period for the Republic of Armenia.

scholarly journals External Debt and Capital Accumulation Nexus: Evidence from Pakistan

2020 ◽  
Vol 59 (1) ◽  
pp. 29-44
Author(s):  
Abida Yousaf ◽  
Tahir Mukhtar
Keyword(s):  
Capital Accumulation ◽  
External Debt ◽  
Negative Relationship ◽  
Jel Classification ◽  
Debt Service ◽  
Testing Technique ◽  
Debt Overhang ◽  
Debt Burden ◽  
Export Ratio ◽  
Debt Capital

The rising public debt burden is a common feature of developing countries like Pakistan. This study is an attempt to empirically analyse the external debt and capital accumulation nexus for Pakistan from 1972 to 2016. The ARDL bound testing technique was employed to estimate two models which incorporate different indicators of external debt. Results indicate the existence of a negative relationship between external debt to revenue ratio and stock of capital that supports the debt overhang hypothesis for Pakistan. The debt overhang hypothesis states that large accumulated debt leads to a decrease in overall capital accumulation in an economy. Similarly, other indicators of external debt, namely, external debt service to revenue ratio, external debt to export ratio, and external debt service to export ratio tend to bring a fall in stock of capital in Pakistan. Based on its findings, the study suggests the need for better and productive use of external debt in public sector development projects to foster the capital accumulation process in Pakistan. JEL Classification: H63; H71; E24; H63 Keywords: External Debt; Capital Accumulation; Human Capital; ARDL.

Pressures on embattled Zambian government will grow

2019 ◽  
Keyword(s):  
World Bank ◽  
Public Debt ◽  
External Debt ◽  
The United States ◽  
Bank Loans ◽  
Content Type ◽  
The Public ◽  
Currency Depreciation ◽  
Debt Burden ◽  
The Government

Subject Zambian debt crises. Significance Both the IMF and World Bank have cut their growth projections for Zambia, compounding concerns about currency depreciation, inflation and escalating external debt. Amid public anger at worsening corruption, the government and President Edgar Lungu are struggling to contain mounting dissent. Impacts Lusaka’s ties to China, and criticism from the United States, could undermine future access to concessional IMF and World Bank loans. An opposition alliance will struggle to stay united and withstand authoritarian pressures from the government in advance of the 2021 polls. Growth will be slower than expected this year and next, and currency depreciation will continue to exacerbate the public debt burden.

Review of the Debt Sustainability Framework for Low Income Countries

Policy Papers ◽  
2017 ◽  
Vol 17 ◽  
Author(s):  
Keyword(s):  
Low Income ◽  
Stress Test ◽  
External Debt ◽  
Low Income Countries ◽  
Debt Sustainability ◽  
Debt Burden ◽  
The Core ◽  
Sustainability Framework ◽  
Test Scenarios ◽  
Capacity Estimates

The Debt Sustainability Framework for Low-income Countries (LIC DSF) has been the cornerstone of assessments of risks to debt sustainability in LICs. The framework classifies countries based on their assessed debt-carrying capacity, estimates threshold levels for selected debt burden indicators, evaluates baseline projections and stress test scenarios relative to these thresholds, and then combines indicative rules and staff judgment to assign risk ratings of external debt distress. The framework has demonstrated its operational value since the last review was conducted in 2012, but there are areas where new features can be introduced to enhance its performance in assessing risks. Against the backdrop of the evolving nature of risks facing LICs, both staff analysis and stakeholder feedback suggest gaps in the framework to be addressed. Complexity and lack of transparency have also been highlighted as causes for concern. This paper proposes a set of reforms to enhance the value of the LIC DSF for all users. In developing these reforms, staff has been guided by two over-arching principles: a) the core architecture of the DSF—model-based results complemented by judgment—remains appropriate; and b) reforms should ensure that the DSF maintains an appropriate balance by providing countries with early warnings of potential debt distress without unnecessarily constraining their borrowing for development.

scholarly journals External Debt Burdens and Economic Growth: A Vector Error Correction Approach from Nigeria

2021 ◽  
Vol 04 (08) ◽  
Author(s):  
ZAAGHA, Alexander Sulaiman ◽  
Keyword(s):  
Economic Growth ◽  
Error Correction ◽  
External Debt ◽  
Debt Sustainability ◽  
Debt Overhang ◽  
Vector Error Correction ◽  
Debt Burden ◽  
Vector Error ◽  
Crowd Out ◽  
Domestic Products

This study examined the effect of external debt burden on the growth of Nigeria economy. Time series data was sourced from Central Bank of Nigeria Statistical Bulletin from 1986-2019. Nigeria real gross domestic was proxied for dependent variable while debt servicing; external debt stock, debt overhang, debt sustainability and crowd-out effect of external debt were proxies for independent variables. The study employed multiple regression models to estimate the relationship that exists between external debt burden indicators and Nigeria economic growth. Ordinary Least Square (OLS), Augmented Dickey Fuller Test, Johansen Co-integration test, normalized co-integrating equations, parsimonious vector error correction model and pairwise causality tests were used to conduct the investigations and analysis. The study findings revealed that 72 percent of the variations in Nigeria gross domestic products can be explained by the changes in external debt burden indicators. The results indicated a negative coefficient with external debt stock and debt overhang while a positive coefficient with debt sustainability, debt servicing and crowd out effect of external debt on Nigeria gross domestic products. From the findings, the study concludes that external debt burdens significantly affect growth of Nigeria economy. We recommend that the fund borrowed should be effectively managed, the federal government should laydown guidelines in terms of defining the purpose, duration, moratorium requirements and commitments, negotiation among others including conditions for external debt loans. Government should initiate and develop policies that will address the fundamental causes of external debt.

scholarly journals Can Pakistan Raise More External Debt? A Fiscal Reaction Approach

2020 ◽  
Vol 12 (4) ◽  
pp. 21-42
Author(s):  
Sadia Mansoor ◽  
Mirza Aqeel baig ◽  
Irfan Lal
Keyword(s):  
External Debt ◽  
Negative Relationship ◽  
Macroeconomic Policies ◽  
Debt Sustainability ◽  
Debt Burden ◽  
Long Run ◽  
Significant Negative Relationship ◽  
Fiscal Reaction Function ◽  
Debt Policy

This study has assessed the role of existing policies in determining the state of debt sustainability for the Pakistan economy (1980- June 2019) through fiscal reaction function. This study adds to the literature in two aspects. First, a policy index has been constructed to formulate a debt-policy interactive term that implies whether or not existing macroeconomic policies contribute in making external debt sustainable in Pakistan. Second, this study has gauged the potential sustainable external debt through in-sample forecast method. The estimated results obtained by the ARDL method show that Pakistan has just entered into a phase of unsustainable debt burden in the long run as fiscal reaction analysis exhibits the weak significant negative relationship between primary balance and external debt to GDP ratio. Moreover, existing macroeconomic policies also show a negative association with the primary balance that implies the ineffectiveness of policies in making external debt sustainable for Pakistan. This study suggests that an increase in foreign inflows through remittances or export earnings may improve the debt sustainability state in Pakistan.

scholarly journals Macroeconomic determinants of external debt in Nepal: The ARDL Approach

2020 ◽  
Vol 2 (2) ◽  
pp. 275-289
Author(s):  
Tilak Singh Mahara ◽  
Sabina Dhakal
Keyword(s):  
Foreign Aid ◽  
Budget Deficit ◽  
Trade Openness ◽  
External Debt ◽  
Debt Burden ◽  
Debt Accumulation ◽  
Long Run ◽  
Short Run ◽  
Macroeconomic Determinants

Background: External debt is the loan amount borrowed from the international level, payable with interest and principal. It is the major source of financing budget deficit in a developing country. Debt accumulation for productive investment is a viable strategy for long-term development. To escape the external debt burden or for the external debt burden strategy, it is crucial to study the major macroeconomic determinants of external debt. Objective: The principal objective of this study is to examine the major macroeconomic determinants of external debt in Nepal. Methods: In this study, the external loan is taken as a dependent variable whereas, budget deficit, per capita gross domestic product, terms of trade, trade openness, foreign aid, and real effective exchange rates are taken as explanatory variables that may cause external borrowing in Nepal. The study applies the ARDL cointegration approach to trace out the relationship between the stated variables. The bound test (F-Version) has been applied for the determination of the existence of long-term cointegration among variables.Short-run dynamics is measured by the Error Correction Mechanism. Results: The empirical result indicates that fiscal deficit, trade openness, and foreign aid are major macroeconomic determinants of external debt in Nepal. From the obtained results, it is seen that an increase in foreign aid helps to significantly reduce external debt but trade openness and the budget deficit significantly leads to an increase in external debt both in the short-run as well as in the long-run. The error correction term is found to be significant and negative, showing proof of a strong association between the selected variable and ensures the correction of short-term disequilibrium to a stable equilibrium at the rate of 37 percent per annum. Conclusions: The study concludes that foreign aid, budget deficit, and trade openness are the main determinants of external debt in Nepal in both the long-run and short-run.  Appropriate export-import or foreign trade policy, effective demand management policy, progressive tax system as well as monitoring tax evasion, effectual and productive utilization of available resources helps to reduce debt accumulation and saves the nation from the possible debt trap.

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