Vietnam's debt woes will concern investors

2015 ◽  
Keyword(s):  
Public Debt ◽  
Development Projects ◽  
Foreign Investors ◽  
Content Type ◽  
Borrowing Costs ◽  
Fund Development ◽  
Debt Levels

Subject Vietnam's debt difficulties. Significance Vietnam's Finance Ministry announced on May 15 that it would continue to use offshore borrowings to fund development projects, although many economists caution that public debt levels are unsustainable, potentially harming Vietnam's image with investors. There are concerns that government liabilities may be higher than reported, and that recent monetary initiatives, including currency devaluations, may aggravate the situation. Impacts Borrowing costs will rise, and Vietnam could face a credit downgrade if debt limits are reached. Foreign investors will respond cautiously to reforms of infrastructure partnership regulations. Vietnam's ability to capitalise on ASEAN infrastructure integration may be hindered.

Orthodox debt strategy may not pay off for Mexico

2020 ◽  
Keyword(s):  
Capital Markets ◽  
Public Debt ◽  
Fiscal Deficit ◽  
International Capital ◽  
Foreign Investors ◽  
Content Type ◽  
International Capital Markets ◽  
Borrowing Costs ◽  
Bond Issues

Significance Public debt increased from the second quarter of 2020, mainly due to the sharp economic contraction and peso depreciation. Impacts A debt downgrade would not cut off Mexico’s access to international capital markets, but it would increase borrowing costs significantly. Efforts to avoid a higher fiscal deficit, and debt, will weigh on growth expectations for 2021. As Mexico becomes less attractive for foreign investors, long-term bond issues in dollars will become more popular than those in pesos.

Slovakia will not change export-led model overnight

2015 ◽  
Keyword(s):  
Public Debt ◽  
Purchasing Power ◽  
External Financing ◽  
Bond Yields ◽  
Content Type ◽  
Breathing Space ◽  
Debt Levels

Significance Impacts The IPO should help cut public debt levels and will create fiscal breathing-space for more spending ahead of the 2016 elections. Falling bond yields will ease debt servicing; Slovakia will comfortably meet its external financing requirement. The deflationary trend will peter out later in 2015 but persistently low inflation will help boost household purchasing power.

Oman and Bahrain are the most vulnerable Gulf states

2020 ◽  
Keyword(s):  
Public Sector ◽  
Public Debt ◽  
Medium Term ◽  
Fiscal Deficits ◽  
Content Type ◽  
Gulf States ◽  
Remittance Flows ◽  
Debt Levels

Significance Oman and Bahrain, already struggling with rising public debt levels and high fiscal deficits, are in the most exposed medium-term position. Impacts Governments will seek to avoid cutting expenditure on public-sector salaries. Private businesses will lay off many of their expatriate workers. Gulf economic contractions will significantly reduce global remittance flows.

What debt threshold hampers economic growth in Africa?

2019 ◽  
Vol 19 (1) ◽  
pp. 25-42 ◽  
Author(s):  
Lord Mensah ◽  
Divine Allotey ◽  
Emmanuel Sarpong-Kumankoma ◽  
William Coffie
Keyword(s):  
Economic Growth ◽  
Public Debt ◽  
Developed Countries ◽  
Annual Data ◽  
African Region ◽  
African Countries ◽  
Content Type ◽  
Distributed Models ◽  
The Impact ◽  
Debt Levels

Purpose This paper aims to test whether a debt threshold of public debt has any effect on economic growth in Africa. Design/methodology/approach The authors applied the panel autoregressive distributed models on 38 African countries with annual data from 1970 to 2015. It was established that the threshold and the trajectory of debt has an impact on economic growth. Findings Specifically, the authors found that public debt hampers economic growth when the depth is in the region of 20 to 80 per cent of GDP. Based on debt trajectory, this study established that increasing public debt beyond 50 to 80 per cent of GDP adversely affects economic growth in Africa. The study also finds that the persistent rise in debt also has adverse effect on economic growth in the African countries in the sample. It must be known to policymakers that the threshold of debt in developing countries, and for that matter African countries, are less than that of developed countries. Practical implications This study suggests threshold effects between 20 and 50 per cent; this should be a guide for policymakers in the accumulation of debt stock. Interestingly, the findings suggest some debt trajectory effect, which policymakers might consider by increasing efforts to reduce debt levels when they fall between 50 to 80 per cent of GDP. This implies that reducing such debt levels can help African countries increase their economic growth. Originality/value The study is unique because it seeks to add new evidence on the relationship between public debt and growth in the African region, by considering the impact of the persistent growth of public debt on economic growth.

Armenia and Georgia need external funds for crisis

2020 ◽  
Keyword(s):  
Public Debt ◽  
Health Spending ◽  
Labour Migration ◽  
Content Type ◽  
Tourism Sector ◽  
Business Support ◽  
External Funds ◽  
Oil Revenues ◽  
Debt Levels

Significance Commodity exports have been hit in both countries, the Georgian tourism sector has become a source of weakness, and Armenia is exposed to Russia because of trade and labour migration. Impacts The COVID-19 crisis will create demand for higher health spending in future budgets. The fiscal response will lead to higher public debt levels in Georgia and Armenia. Azerbaijan faces the additional shock of low oil revenues but is planning similar welfare and business support packages.

Debt overhang threatens Kenya’s infrastructure plans

2019 ◽  
Keyword(s):  
Exchange Rate ◽  
Public Debt ◽  
External Debt ◽  
Development Projects ◽  
Foreign Reserves ◽  
Fiscal Deficits ◽  
Content Type ◽  
Debt Overhang ◽  
Alternative Approaches ◽  
Central Bank Governor

Subject Kenya's debt difficulties. Significance Central Bank Governor Patrick Njoroge recently called for reorganising Kenya’s public debt and exploring alternative approaches to fund fiscal deficits. Increased infrastructure spending over recent years has contributed to a steep rise in debt, causing recurrent spending to increase faster than the development budget this debt is supposed to finance. Impacts Rising commercial external debt will put increasing pressure on the country’s exchange rate and foreign reserves. Institutional weaknesses may threaten the current appeal to restrict overdependence on debt. Corruption scandals may slow or even stall some development projects.

Does a Clarke-Groves type tax prevent free riding when implementing Eurobonds?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Carlos Contreras ◽  
Julio Angulo
Keyword(s):  
Public Debt ◽  
Sovereign Debt ◽  
Free Riding ◽  
Social Utility ◽  
Liquidity Premium ◽  
Transfer Scheme ◽  
Content Type ◽  
Depth Analysis ◽  
Fiscal Rule ◽  
Debt Levels

Purpose The purpose of this paper is to propose a Clarke-Groves Tax (CGT) type as a remedy to the criticism that the implementation of Eurobonds has raised regarding the risk of undermining fiscal discipline. In this model, a government minimizes its sovereign debt-to-GDP ratio in a given period and decides whether to join a common sovereign debt club. In doing so, it exposes itself to a positive or negative tax burden while benefiting from the liquidity premium involved in creating a secure asset. The authors found that the introduction of this tax may prevent free riding behaviours if Eurobonds were to be implemented. To illustrate this, the authors provide some numerical simulations for the Eurozone. Design/methodology/approach In the model presented, a government which optimizes a social utility function decides whether to join the common debt club. Findings The adoption of the proposed tax could prevent free-riding behaviours and, therefore, encourages participation by those countries with lower debt levels that would have not otherwise taken part in this common debt mechanism. Under certain circumstances, we can expect the utility of all members of this club to improve. The bias in the distribution of gains might be mitigated by regulating the tax rule determining the magnitude of payment/reward. The proportion of the liquidity premium, arising from the implementation of a sovereign safe asset, has a decisive impact on the degree of the governments’ utility enhancement. Research limitations/implications The adoption of a CGT would require Eurobonds club members to reach an agreement on “the” theoretical model for determining the sovereign debt yield. One of the limitations of this model is considering the debt-to-GDP ratio as the sole determinant of public debt yields. Moreover, the authors assumed the relationship between the debt-to-GDP ratio and funding costs to be identical for all countries. Any progress in the implementation of the proposed transfer scheme would require a more realistic and in-depth analysis. Practical implications A new fiscal rule based on compensating countries with lower public debt levels could be a way to mitigate free-riding problems if a Eurobond mechanism is to be established. Originality/value This fiscal rule has not been proposed or analysed before in a context such as that considered by this paper.

EU can become a trendsetter and bolster world GDP

2019 ◽  
Keyword(s):  
Public Debt ◽  
Economic Conditions ◽  
Budget Deficits ◽  
Content Type ◽  
The Face ◽  
Economic Slowdown ◽  
Global And Local ◽  
Global Influence ◽  
The Eu ◽  
Debt Levels

Subject The global reach of Germany's fiscal scope. Significance The focus on euro-area debt fragility perhaps obscures the fact that the bloc and broader EU have strengthened their fiscal position. They can afford to take action in the face of the global and local economic slowdown. Public debt levels and budget deficits have shrunk since 2014, especially in Germany and the Netherlands, which enjoy substantial budget surpluses and moderate debt levels. Impacts Action would prevent the EU from looking feeble and unable to respond to, let alone influence, shifts in global economic conditions. A change in perceptions of the EU and its capabilities might boost local and global sentiment, multiplying the influence of any stimulus. Illustrating Germany's global influence, it bought 89.4 billion of dollars of goods from China in 2018 and 57.7 billion dollars of US goods.

Bulk and block holders herding behaviour

2018 ◽  
Vol 7 (2) ◽  
pp. 150-171
Author(s):  
Ganesh R. ◽  
Naresh Gopal ◽  
Thiyagarajan S.
Keyword(s):  
Economic Performance ◽  
Institutional Investors ◽  
Design Methodology ◽  
Indian Market ◽  
Foreign Investors ◽  
Content Type ◽  
Industrial Sectors ◽  
Block Data ◽  
Block Holders

Purpose The purpose of this paper is to examine industry herding among the institutional investors and to find whether their herding behaviour is intentional or unintentional. Design/methodology/approach The study uses Lakonishok et al. (1992) model to examine the presence of industry herding behaviour among institutional investors. To determine whether the herding observed is intentional or unintentional, herding measure is regressed with volatility, volume, beta and return. The period of the study is from 1 April 2005-31 March 2015. Findings The findings of the study showed that though institutional investors have herding tendency towards most of the industries, in the overall period industry herding was not significant. The herding found in some industrial sectors was linked to economic performance of those sectors in India during the period of study and hence the herding was unintentional in nature. Research limitations/implications This is the first attempt to study industry herding among institutional investors and their intent in Indian market ever since the country opened its market to foreign investors in a big way. Present study is limited to the use of only bulk/block data instead of the entire trading data for the period. Originality/value This study is the first attempt to investigate industry herding behaviour of institutional investors in the market using their bulk and block trading data. The herding observed in well performing industries has been shown to be unintentional and hence rational. The results indicate that the entry of big institutional investors, including foreign institutions into the Indian market has not destabilised the market by irrational herding.

Investor-State dispute settlement (ISDS) cases and India: affronting regulatory autonomy or indicting capricious state behaviour?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Prabhash Ranjan
Keyword(s):  
Public Interest ◽  
Dispute Settlement ◽  
Due Process ◽  
International Investment ◽  
Public Power ◽  
Foreign Investors ◽  
Content Type ◽  
International Investment Law ◽  
Global Context ◽  
State Behaviour

Purpose The dominant narrative in the investor-State dispute settlement (ISDS) system is that it enables powerful corporations to encroach upon the regulatory power of developing countries aimed at pursuing compelling public interest objectives. The example of Phillip Morris, the tobacco giant, suing Uruguay’s public health measures is cited as the most significant example to prove this thesis. The other side of the story that States abuse their public power to undermine the protected rights of foreign investors does not get much attention. Design/methodology/approach This paper reviews all the ISDS cases that India has lost to ascertain the reason why these claims were brought against India in the first place. The approach of the paper is to study these ISDS cases to find out whether these cases arose due to abuse of the State’s public power or affronted India’s regulatory autonomy. Findings Against this global context, this paper studies the ISDS claims brought against India, one of the highest respondent-State in ISDS, to show that they arose due to India’s capricious behaviour. Analysis of these cases reveals that India acted in bad faith and abused its public power by either amending laws retroactively or by scrapping licences without following due process or going back on specific and written assurances that induced investors to invest. In none of these cases, the foreign investors challenged India’s regulatory measures aimed at advancing the genuine public interest. The absence of a “Phillip Morris moment” in India’s ISDS story is a stark reminder that one should give due weight to the equally compelling narrative that ISDS claims are also a result of abuse of public power by States. Originality/value The originality value of this paper arises from the fact that this is the first comprehensive study of ISDS cases brought against India and provides full documentation within the larger global context of rising ISDS cases. The paper contributes to the debate on international investment law by showing that in the case of India most of the ISDS cases brought were due to India abusing its public power and was not an affront on India’s regulatory autonomy.

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