## wpiea2026153-source-pdf

## Source details

**Canonical URL:** [wpiea2026153-source-pdf](https://www.imf.org/-/media/files/publications/wp/2026/english/wpiea2026153-source-pdf.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/wp/2026/english/wpiea2026153-source-pdf.pdf.md)
- [Structured JSON version](/-/media/files/publications/wp/2026/english/wpiea2026153-source-pdf.pdf.json)

---

### Context and motivation
- Access to international capital markets differentiates Emerging Markets and Developing Economies (EMDEs) and is crucial for financing development and navigating external shocks.
- Frontier Economies: tapped international bond markets relatively recently; access remains precarious during global financial tightening.
- Eurobond issuance pattern: peaked in 2021 and declined sharply in 2022–23, with only one Eurobond issuance in 2022–23. (Data exclude issuances below US$250 million.)
- Recent stress events: COVID-19 and post-pandemic global monetary tightening from 2022 coincided with sizable external debt repayments in Frontier Economies, widening sovereign spreads; several sovereigns defaulted, restructured, or turned to the IMF.

### Analytical approach (three steps)
- Step 1: Differentiate countries into non-market access and market access; bifurcate market access into Recurrent Market Access Countries (RMACs) and Frontier Economies using durability of access and compositional shifts in external debt; validate with unsupervised K-means clustering.
- Step 2: Estimate a discrete-time event LOGIT model to identify macroeconomic fundamentals and global conditions associated with market entry.
- Step 3: Compare pre- and post-entry debt dynamics to assess whether market entry disciplines borrowing or facilitates debt build-up, checking differences between MAC-Frontiers and LIC-Frontiers.

### Defining sustained market access (algorithm and thresholds)
- Market entry: first Eurobond issuance.
- Base metric: share of private external public debt in market-entry year = private_share_base.
- Inclusion rule: require private_share_t+1 ≥ 1/2 private_share_base to continue the window; robustness checks also considered 25 percent.
- Update rule: private_share_new_base = max{private_share_current_base, private_share_t}.
- Sustained window defined if condition holds for a minimum of five consecutive years.
- Iterative application across countries for 1980–2024.
- Discard windows if no new private credit disbursement within the window or if private debt share declines consistently relative to the preceding year in the window.
- Classification rule: if a country’s most recent sustained market access window is ending in 2021 or later the country is considered as market access.
- Comparison benchmark: similar in spirit to PRGT requirement of borrowing at least 50 percent of a country’s IMF quota in three of the last five years.

### Classification, clustering, and thresholds
- Sample: 92 EMDEs; classification: 36 non-market access (NMACs) and 56 market access countries.
- Market-access subgroups using K-means clustering and PCA (retain components capturing >80% variance):
  - RMACs: Sustained access ≥ 20 years — 23 countries
  - MAC-Frontier: Sustained access ≤ 20 years — 18 countries
  - LIC-Frontier: Sustained access ≤ 20 years — 15 countries
  - NMACs: No sustained market access — 36 countries
- Adopted cutoff: 20 years of sustained market access to separate RMACs from Frontier Economies (matching rate plateau around 19–23 years).
- Clustering robustness: expanded to >20 macro variables; assignments consistent with baseline.

### Stylized facts (governance, sequencing, and external financing)
- Governance:
  - RMACs maintain highest weighted WGI averages throughout the period.
  - MAC-Frontiers and LIC-Frontiers show gradual sustained WGI improvements that precede market entry by several years.
  - NMACs have low and stagnant WGI averages.
- Timing of market entry:
  - RMACs: largely established access prior to 2000.
  - MAC-Frontiers: entered shortly before the GFC.
  - LIC-Frontiers: largely entered in the early 2010s.
  - All Frontier Economies in the sample issued at least one Eurobond by 2019.
- External financing mix:
  - Hierarchy in private external financing share: RMACs > MAC-Frontiers > LIC-Frontiers > NMACs.
  - Market entry for Frontier Economies is accompanied by reallocation toward private creditors and a flip from non-bonded private lending to bond issuance.
  - Multilateral lending shares remain broadly flat and higher for LIC groups; bilateral lending declines across all groups.
- Correlations with per capita Real GDP (exact figures)
  - Private Share of Ext. Public Debt correlation with Per capita Real GDP: NMAC: 0.52; LIC-Frontier: 0.50; MAC-Frontier: 0.26; RMAC: 0.56; Total: 0.63
  - Bond Share of Ext. Public Debt correlation with Per capita Real GDP: NMAC: -0.35; LIC-Frontier: 0.41; MAC-Frontier: 0.62; Total: 0.64

### Market access criterion empirical validation and private disbursements (exact figures)
- Comparison of five-year averages excluding issuance year (t):
  - Pre-5 Avg Share (%) — LIC-Frontier: 12.8; MAC-Frontier: 13.85; RMAC: 23.0
  - Post-5 Avg Share (%) — LIC-Frontier: 30.8; MAC-Frontier: 34.15; RMAC: 40.7
  - 25th pct. Growth (%) — LIC-Frontier: 54.8; MAC-Frontier: 110.35; RMAC: 31.7
  - Median Growth (%) — LIC-Frontier: 207.7; MAC-Frontier: 225.31; RMAC: 109.
  - 75th pct. Growth (%) — LIC-Frontier: 585.9; MAC-Frontier: 6342.32; RMAC: 194.8
- Key finding: post-access averages exceed pre-access levels by 18-20 percentage points, indicating a structural transition from official to private external borrowing.

### Determinants of first market entry — event-history LOGIT (sample and fit)
- Observation window for Frontier Economies starts in 1996; sample excludes FCS-labeled countries in robustness checks.
- Country-specific macro variables entered as 3-year rolling averages: inflation, real GDP per capita, real GDP growth, WGI average, public debt/GDP, reserves/imports.
- Global variables (contemporaneous): WB Commodity Index, risk-free rate (10-year US Treasury in real terms), CBOE VIX.
- FX regime dummy (0 pegged, 1 floating) lagged by 1 year.
- Continuous variables winsorized and standardized.
- Model fit: Observations: 840; Countries: 57; pseudo R2: 0.21.

### LOGIT key coefficient estimates (exact reported coefficients)
- Real GDP per capita: 0.920***
- Risk-free rate (10-year real): -0.611***
- WGI average: 0.478***
- CBOE VIX: -0.-480* (reported in text as -0.480)
- Real GDP growth: 0.413***
- WB commodity index: 0.481*
- Reserve import coverage: 0.289***
- FX regime (0=pegged, 1=float): -0.289 (not significant)
- Inflation: -0.801 (not statistically significant)
- Public debt-to-GDP ratio: 0.099 (not statistically significant)
- Substantive interpretation:
  - Global push factors open issuance windows (low real US 10-year rates and low market volatility).
  - Domestic pull factors determine which countries tap markets: income (0.920) and institutional quality (0.478) are most significant, followed by real growth (0.413) and reserve coverage (0.289).
  - Commodity prices (0.481) matter for commodity-reliant countries.
  - Historical pattern: predicted probabilities rise after GFC, peak around 2012, drop in 2015–16, rebound around 2016, and peak in 2018–19.

### Post-entry debt accumulation and decomposition (stylized quantitative patterns)
- Debt decomposition framework: Δd_t = ε_t d_{t-1}^{fρ_t} + (r_t − g_t)/(1+g_t) d_{t-1} − pb_t + sfa_t (terms defined in text).
- Data handling: extreme stock-flow adjustments discarded.
- MAC-Frontiers (five years before vs five years after market entry):
  - Pre-entry: public debt-to-GDP ratio declines cumulatively by 10 percent of GDP on average.
  - Post-entry: debt-to-GDP increases by about 12 percentage points cumulatively in five years.
  - Post-entry driver: primary deficits contribute a cumulative 9 percent of GDP to debt accumulation; interest–growth differential worsens; growth slows relative to pre-market period.
- LIC-Frontiers:
  - Pre-entry: chronic primary deficits but stable debt due to sizeable negative interest–growth differential and concessional external financing.
  - Post-entry: debt-to-GDP increases by about cumulative 11 percentage points in five years; continued deficits at slower pace; large stock-flow adjustments observed; growth accelerates somewhat but interest–growth differential narrows.
- Aggregate stylized conclusions:
  - Both MAC-Frontiers and LIC-Frontiers show post-entry debt accumulation driven by looser fiscal stances, higher interest burdens, and rapid compositional shift from concessional to commercial and domestic financing.
  - The share of private disbursements increases by about threefold after market entry.
  - Rapid debt accumulation is not accompanied by a material short-term boost in growth relative to the world average; five-year growth relative to world average declines slightly after first Eurobond issuance.
  - Evidence is descriptive and associative; causal interpretation limited by selection and timing concentrated in favorable global conditions.

### Policy implications and recommendations (specific priorities)
- Carefully manage transition to market financing by:
  - Reinforcing market access with credible medium-term fiscal frameworks.
  - Strengthening debt management capacity to lengthen maturities, limit rollover and foreign exchange risks, and avoid bunching repayments.
  - Rebuilding buffers to mitigate stress when global conditions tighten.
- Specific cautions:
  - Do not interpret the first Eurobond issuance as durable access to permanent financing; market access can close abruptly when global financial conditions tighten.
  - Entrench market borrowing within a well-planned and credible medium-term fiscal framework anchored in debt sustainability, supported by realistic revenue and expenditure projections and informed by debt sustainability assessments.
- Policy rationale: without these safeguards market access may relax short-run financing constraints while increasing debt vulnerabilities when global financial conditions tighten.

### Data, sample, and notable data points used
- Country–year panel: 92 countries.
- Bond-market analysis: 1980–2024; cluster analysis uses 1996–2024 country-level averages.
- Sample restriction: population above 2 million.
- Regional composition (N Countries): Sub-Saharan Africa: 37; Latin America & Caribbean: 15; Europe & Central Asia (developing): 14; East Asia & Pacific: 10; Middle East & North Africa: 10; South Asia: 6; Total: 92.
- Manually added sovereign bond issuances (country, year, issuance amount (USD)):
  - Republic of Congo, 2007, 478 million
  - Iran, Islamic Rep., 2002, 1.0 billion
  - Tanzania, 2013, 600 million
  - Serbia, 2005, 1.02 billion
  - Moldova, 1996, 30 million
- Key datasets referenced: IMF WEO, World Bank WGI, World Bank WDI, World Bank IDS (DT.DIS.PBND.CD), IMF PFMH, CBOE VIX (VIXCLS), 10-year U.S. Treasury (DGS10 / GS10), World Bank Commodity Markets ("Pink Sheet"), de facto exchange-rate regime classification (Ilzetzki, Reinhart, and Rogoff).

*IMF Working Paper: Beyond the First Bond: Market Access and Debt Dynamics in Frontier Economies — Working Paper No. WP/2026/153*

### Introduction ...........................................................................................................

### Introduction

### Context and motivation
- The ability to reliably access international capital markets differentiates Emerging Markets and Developing Economies (EMDEs) and is particularly crucial for financing development needs and navigating external shocks.
- Frontier Economies are those that have tapped international bond markets relatively recently but whose access remains precarious, especially when global financial conditions tighten.
- Through the decade after the Global Financial Crisis (GFC), several Frontier Economies issued Eurobonds; Eurobond issuances in Frontier Economies peaked in 2021 and declined sharply in 2022–23, with only one Eurobond issuance in 2022–23. (Note: the data underpinning the charts excludes issuances below US$250 million.)

### Recent stress events
- The COVID-19 pandemic and subsequent sharp global monetary tightening exposed structural weaknesses and waning market confidence in many Frontier Economies.
- Starting in 2022, post-pandemic monetary tightening in advanced economies overlapped with sizeable external debt repayment obligations in Frontier Economies, resulting in widening sovereign spreads; in some cases, spreads increased to distressed levels, effectively shutting some countries out of international bond markets.
- Several sovereigns defaulted and resorted to debt restructuring, and some turned to the IMF for emergency funding.

### Analytical approach (three steps)
- Step 1: Differentiate countries into non-market access and market access; bifurcate market access into Recurrent Market Access Countries (RMACs) and Frontier Economies using an iterative criterion based on durability of access and compositional shifts in external debt portfolios, validated with unsupervised K-means clustering.
- Step 2: Estimate a discrete-time event LOGIT model to identify macroeconomic fundamentals and global conditions associated with market entry.
- Step 3: Analyze whether market entry disciplines borrowing or facilitates debt build-up by comparing pre- and post-entry debt dynamics and checking differences between MAC-Frontiers and LIC-Frontiers.

### Key high-level findings (exact phrasing retained where possible)
- "Conducive global liquidity conditions catalyze market entry, domestic economic fundamentals and institutional quality ultimately determine whether a non-market access country can successfully utilize the window of opportunity."
- "Countries tend to restrain borrowing in the run up to market entry, while a looser fiscal stance tends to set in afterwards as new financing source softens spending constraints."
- "Debt drivers in the aftermath of market entry exhibit a similar pattern for MAC-Frontiers and LIC-Frontiers, as the negative interest–growth differential narrows and weakens debt dynamics."
- "Access to international bond markets does not necessarily translate into meaningful improvements in growth dynamics relative to the rest of the world."

---

### Defining Criteria for Market Access
- Conceptual framing:
  - RMACs = "heaven": deep, institutionalized integration with international bond markets and recurrent borrowing with relative ease.
  - Frontier Economies = "purgatory": left near-complete reliance on official financing but have newly entered international bond markets; presence is relatively recent and nascent.
- The paper operationalizes Frontier status through the lens of durability of market access, emphasizing recurrent and resilient presence in markets including during global downturns.

### Methodology: two-step sequenced framework
- First, define sustained market access windows to group countries into market access and non-market access categories.
- Second, within market access group, distinguish RMACs and Frontier Economies by longevity of access using unsupervised K-means clustering to ensure empirically meaningful separation aligned with structural, macroeconomic, and financial indicators.

---

### Step 1: Defining Sustained Market Access Windows (algorithm and thresholds)
- Framework emphasizes continued reliance on private external financing and compositional shifts in external debt portfolios.
- Market entry is taken as the first Eurobond issuance; sustained access requires maintaining the share of private external financing in total external public borrowing.
- Algorithmic process (exact steps and thresholds preserved):
  1. Identify the first year of Eurobond issuance to establish market entry.
  2. Use the share of private external public debt in that year as the base value (private_share_base).
  3. Search forward through subsequent years (t+1, t+2, ...) to evaluate whether the following condition holds — where the private share in one year after base year is greater than half of the private share in base year: private_share_t+1 ≥ 1/2 private_share_base.
     - Robustness checks have been conducted, and results do not change significantly when we choose 25 percent. The rule intends to identify a structural shift in the composition of external debt, particularly whether continued dependency on private external financing holds.
  4. If the condition holds, update the base year by taking the maximum of the current base and the new value for the private share, and repeat with the next value:
     - private_share_new_base = max{private_share_current_base, private_share_t}
  5. If the condition holds for a minimum of five consecutive years, define this as a sustained market access window for this country.
  6. Repeat steps 1 to 5 iteratively for all countries in the sample from 1980 to 2024 to capture all potential access windows.
  7. Discard the windows if there is no new private credit disbursement within the window or if the share of private debt is in a consistent decline relative to the preceding year in the window.
  8. Finally, classify countries based on their latest sustained market access window: if a country’s most recent window is ending in 2021 or later the country is considered as market access.

- Comparison to PRGT criterion:
  - The approach is similar in spirit to the IMF PRGT market access graduation requirement, which is "the ability to borrow in international financial markets at least 50 percent of a country’s IMF quota in three of the last five years."

---

### Stylized facts and what the classification captures
- The methodology captures structural change in financing sources and patterns by conditioning on both bond issuance and sustained private share in external public borrowing.
- The market entry year is asserted to be "structurally meaningful" and validated through unsupervised clustering and robustness checks.
- The paper provides stylized facts on economic features and debt portfolios across country groups and compares pre- and post-entry behavior.

---

### Figures and tables referenced (content highlights)
- Figure 1: Eurobond Issuances by EMDEs, 2005–23 — shows peak in 2021 and sharp decline in 2022–23; excludes issuances below US$250 million.
- Table 1 and Table 2: Illustrative examples ("Tale of Two Countries" and "Private External Disbursements Before and After Market Entry") are used to demonstrate the methodology.
- Subsequent sections present classification tables, correlations (e.g., Table 4: Correlation: Per capita Real GDP and Share of Private External Debt), governance analysis, decomposition of public debt, determinants of first market entry (Table 5), evolution of predicted probability for market entry (Figure 5), and post-entry debt accumulation and debt dynamics (Figures 6 and 7).

---

*IMF Working Paper: Beyond the First Bond: Market Access and Debt Dynamics in Frontier Economies — Introduction section.*

### 2023. As the share of external private debt has not halved at any point from its peak or declined consistently

### wpiea2026153-source-pdf - 2023. As the share of external private debt has not halved at any point from its peak or declined consistently

### Market access criterion and empirical validation
- Market access classification hinges on sustained patterns in the share of external private debt after market entry; countries that do not see the share of external private debt more than halve from its peak or decline consistently are considered to meet the market access criterion, while those that do are classified as non-market access (example contrast: Country A meets criterion; Country B does not).
- To validate that market entry marks a structural shift toward private external borrowing, the paper compares five-year averages of private external disbursements before (t-5 to t-1) and after (t+1 to t+5) the entry year, excluding the year of Eurobond issuance to avoid base effects.
- Key finding: post-access averages exceed pre-access levels by 18-20 percentage points, indicating a structural transition from official to private external borrowing rather than a transitory fluctuation.

- Table 2: Private External Disbursements Before and After Market Entry (exact figures)
  - Pre-5 Avg Share (%) — LIC-Frontier: 12.8; MAC-Frontier: 13.85; RMAC: 23.0
  - Post-5 Avg Share (%) — LIC-Frontier: 30.8; MAC-Frontier: 34.15; RMAC: 40.7
  - 25th pct. Growth (%) — LIC-Frontier: 54.8; MAC-Frontier: 110.35; RMAC: 31.7
  - Median Growth (%) — LIC-Frontier: 207.7; MAC-Frontier: 225.31; RMAC: 109.
  - 75th pct. Growth (%) — LIC-Frontier: 585.9; MAC-Frontier: 6342.32; RMAC: 194.8

### Country classification, clustering, and thresholds
- Sample: 92 EMDEs; methodology classifies 36 non-market access (NMACs) and 56 market access countries.
- Market access group split into RMACs (recurrent market access) and Frontier Economies to separate sustained access from nascent/transitional access.
- K-means clustering and fundamentals-based validation:
  - Country-level averages of six core variables computed over 1996–2024, standardized, projected via PCA (retain components capturing >80% variance), and clustered into three groups.
  - Robustness: expanded clustering to >20 macro variables; assignments consistent with baseline.
  - Threshold selection: matching rate between market-access classification and fundamentals-based clusters peaks and plateaus around 19–23 years.
  - Adopted cutoff: 20 years of sustained market access to separate RMACs from Frontier Economies.
- Resulting classification counts and key characteristics (Table 3)
  - RMACs: Sustained access ≥ 20 years — 23 countries — Deep domestic markets; bondholder dominance
  - MAC-Frontier: Sustained access ≤ 20 years — 18 countries — Compositional flip towards bonds; transitioning
  - LIC-Frontier: Sustained access ≤ 20 years — 15 countries
  - NMACs: No sustained market access — 36 countries — Fragile access; higher official debt; Official creditor reliance

### Stylized facts: governance, market entry sequencing, and external financing mix
- Governance and sequencing
  - RMACs maintain the highest weighted WGI averages throughout the period.
  - MAC-Frontiers and LIC-Frontiers experience gradual sustained improvements in WGI that precede market entry by several years.
  - NMACs maintain low and stagnant WGI averages with no systematic improvement.
  - Market entry timing: RMACs largely established access prior to 2000; MAC-Frontiers started entering markets shortly before the GFC; LIC-Frontiers largely entered in the early 2010s. All Frontier Economies in the sample issued at least one Eurobond by 2019.
- External financing mix and creditor composition
  - Hierarchy in private external financing share: RMACs > MAC-Frontiers > LIC-Frontiers > NMACs.
  - Market entry for Frontier Economies is accompanied by marked reallocation of external debt toward private creditors and a compositional flip from non-bonded private lending to bond issuance.
  - Multilateral lending shares remain broadly flat and higher for LIC groups; bilateral lending declines across all groups.
- Correlations with per capita real GDP (Table 4 exact figures)
  - Private Share of Ext. Public Debt correlation with Per capita Real GDP: NMAC: 0.52; LIC-Frontier: 0.50; MAC-Frontier: 0.26; RMAC: 0.56; Total: 0.63
  - Bond Share of Ext. Public Debt correlation with Per capita Real GDP: NMAC: -0.35; LIC-Frontier: 0.41; MAC-Frontier: 0.62; Total: 0.64

### Determinants of first market entry (event-history LOGIT model and results)
- Model design and variables
  - Observation window for Frontier Economies starts in 1996; sample excludes NMACs labeled as conflict-affected in World Bank’s 2020 FCS list to avoid bias.
  - Country-specific macro variables enter as 3-year rolling averages (t-1, t-2, t-3): inflation, real GDP per capita, real GDP growth, WGI average, public debt/GDP, reserves/imports.
  - Global variables enter contemporaneously at time t: WB Commodity Index, risk-free rate (10-year US Treasury in real terms), CBOE VIX.
  - FX regime dummy (0 pegged, 1 floating) enters with 1-year lag (t-1).
  - Continuous variables winsorized and standardized.
- Model specification produces strong predictive power: Observations: 840; Countries: 57; pseudo R2: 0.21.
- Key coefficient estimates and interpretation (Table 5 exact coefficients; standard errors omitted here but preserve coefficient values)
  - Real GDP per capita: 0.920*** (positive, significant)
  - Risk-free rate (10-year real): -0.611*** (negative, significant)
  - WGI average: 0.478*** (positive, significant)
  - CBOE VIX: -0.-480* (reported as -0.480 in text; negative, significant)
  - Real GDP growth: 0.413*** (positive, significant)
  - WB commodity index: 0.481* (positive, significant)
  - Reserve import coverage: 0.289*** (positive, significant)
  - FX regime (0=pegged, 1=float): -0.289 (not significant)
  - Inflation: -0.801 (not statistically significant)
  - Public debt-to-GDP ratio: 0.099 (not statistically significant)
- Substantive interpretation:
  - Global push factors open issuance windows: low real US 10-year rates (-0.611) and low market volatility (-0.480) facilitate entry; a one-standard deviation increase in the risk-free rate reduces odds of first market entry by about 39 percent.
  - Domestic pull factors primarily determine which countries tap markets: income (0.920) and institutional quality (0.478) are the most significant predictors, followed by real growth (0.413) and reserve coverage (0.289).
  - Commodity prices (0.481) increase probability of entry, especially for commodity-reliant countries.
- Temporal and historical patterns:
  - Predicted probabilities rise after the GFC, peak around 2012 (near-zero US 10-year real rates and oil ≈ US$100/barrel in 2012–13), drop in 2015–16 with commodity price collapse, rebound around 2016 and peak 2018–19 with Fed pivot and moderate oil recovery.

### Post-entry debt accumulation, drivers, and growth implications
- Debt decomposition framework used: Δd_t = ε_t d_{t-1}^{fρ_t} + (r_t − g_t)/(1+g_t) d_{t-1} − pb_t + sfa_t (text defines terms and contributions)
- Data handling: cases with unusually high stock-flow adjustments discarded to avoid one-offs or data inconsistencies.
- Empirical patterns (five years before vs five years after market entry)
  - MAC-Frontiers
    - Pre-entry (five years): public debt-to-GDP ratio declines cumulatively by 10 percent of GDP on average; near-primary balance; favorable interest–growth differential; exchange rate/price dynamics supportive.
    - Post-entry (five years): debt-to-GDP increases by about 12 percentage points; primary deficits contribute a cumulative 9 percent of GDP to debt accumulation; interest–growth differential worsens and growth slows relative to pre-market period.
  - LIC-Frontiers
    - Pre-entry: chronic primary deficits but stable debt due to sizeable negative interest–growth differential and concessional external financing; real interest contribution negligible; exchange rate/price effects net negative; overall public debt flat prior to entry.
    - Post-entry: debt-to-GDP increases by about cumulative 11 percentage points in five years; loose fiscal stance continues at slower pace; large stock-flow adjustments suggest possible masking of true fiscal outlays; growth accelerates somewhat but interest–growth differential narrows due to higher interest burden; financing shifts from concessional to commercial and domestic sources.
- Aggregate implications and stylized conclusion
  - Both MAC-Frontiers and LIC-Frontiers show debt accumulation after market entry driven by looser fiscal stances, higher interest burdens, and a rapid compositional shift from concessional to commercial and domestic financing.
  - The share of private disbursements in the financing mix increases by about threefold after market entry.
  - Rapid debt accumulation is not accompanied by a material short-term boost in growth relative to the world average; five-year growth relative to world average declines slightly after first Eurobond issuance.
  - The evidence is descriptive and associative; causal interpretation limited by selection, timing concentrated in favorable global conditions, and practical constraints on constructing a credible counterfactual.

*Source: IMF Working Paper excerpt (Beyond the First Bond: Market Access and Debt Dynamics in Frontier Economies).*

### Conclusion

### Conclusion

### Framework and country classification
- The paper classifies country groupings based on the durability of sovereign access to international financial markets using a two-step framework that combines:
  - the timing of first Eurobond issuance, and
  - persistent reliance on private external creditors for public external financing.
- Robustness of classifications is reinforced by an unsupervised K-means clustering exercise that indicates a plateau in fundamentals-based separation at around two decades of sustained access.
- A discrete-time event LOGIT regression model is used to analyze market-entry transitions.

### Determinants of market entry (findings from the LOGIT analysis)
- Global factors act as window openers:
  - Global liquidity conditions and risk appetite facilitate market entry.
- Domestic pull factors increase likelihood of successful entry:
  - Higher income levels,
  - Improved institutional quality,
  - Robust growth prospects,
  - Strong reserve buffers.
- Countries with strong domestic pull factors are more likely to leverage favorable global financial and commodity cycles to successfully enter the market.

### Post-entry dynamics and heterogeneity across Frontier Economies
- Initial market access triggers shifts in borrowing patterns among Frontier Economies:
  - Frontier Economies generally show fiscal restraint and restrain public debt in the run-up to debut Eurobond issuance as a signaling effort.
  - After market entry, debt tends to accumulate faster as a new financing source is unlocked, potentially frontloading development and social spending.
  - For both groups of Frontier Economies, the financing mix rapidly shifts toward bonds, increasing exposure to rollover and global financial cycle risks.
- Debt-dynamics decomposition findings:
  - There is a deterioration in the interest–growth differential as borrowing costs rise, contributing to upward debt trajectories.
  - In MAC-Frontiers, debt accumulation is driven primarily by notable deterioration in the primary fiscal balance following market entry.
  - In LIC-Frontiers, persistent deficits combine with a higher interest burden as countries substitute away from concessional financing.
- Growth effects:
  - Accessing markets does not translate into relative growth gains, at least in the short run.

### Policy implications and recommendations
- Carefully manage the transition to market financing by:
  - Reinforcing market access with credible medium-term fiscal frameworks,
  - Strengthening debt management capacity,
  - Rebuilding buffers to mitigate stress when global conditions tighten.
- Specific policy priorities for Frontier Economies:
  - Do not interpret the first Eurobond issuance as durable access to a permanent source of financing; market access can close abruptly when global financial conditions tighten (consistent with an earlier IMF Departmental Paper, IMF, 2014).
  - Entrench market borrowing within a well-planned and credible medium-term fiscal framework anchored in debt sustainability, supported by realistic revenue and expenditure projections and informed by debt sustainability assessments (IMF, 2022; IMF, 2024).
  - Strengthen debt management capacity to lengthen maturities, limit rollover and foreign exchange risks, and avoid bunching repayments (IMF, 2014).
- Warning: Without these safeguards, market access may relax financing constraints in the short run while increasing debt vulnerabilities when global financial conditions tighten.

### Data, sample, and notable data points used in analysis
- Country–year panel: 92 countries.
- Bond-market analysis covers 1980–2024; cluster analysis uses country-level averages over 1996–2024.
- Sample restriction: countries with a population above 2 million.
- Regional sample composition (by N Countries):
  - Sub-Saharan Africa: 37
  - Latin America & Caribbean: 15
  - Europe & Central Asia (developing): 14
  - East Asia & Pacific: 10
  - Middle East & North Africa: 10
  - South Asia: 6
  - Total: 92
- Manually added sovereign bond issuances (country, year, issuance amount (USD)):
  - Republic of Congo, 2007, 478 million
  - Iran, Islamic Rep., 2002, 1.0 billion
  - Tanzania, 2013, 600 million
  - Serbia, 2005, 1.02 billion
  - Moldova, 1996, 30 million
- Key datasets and series referenced in the empirical work include:
  - IMF World Economic Outlook (WEO) for Real GDP, GDP growth, inflation (CPI), gross general government debt;
  - World Bank Worldwide Governance Indicators (WGI) for institutional quality (six-indicator average, normalized);
  - World Bank World Development Indicators (WDI) for expanded macroeconomic variables;
  - World Bank International Debt Statistics (IDS) for external debt stocks, private creditors' share, and sovereign bond issuance (series PPG, bonds (DIS, current US$), identifier DT.DIS.PBND.CD);
  - IMF Public Finances in Modern History (PFMH) for interest payments, primary balance, and real GDP growth used in debt-dynamics decomposition;
  - CBOE VIX (via FRED, series VIXCLS), 10-year U.S. Treasury constant maturity yield (DGS10 / GS10, via FRED), and World Bank Commodity Markets ("Pink Sheet") aggregate commodity price index as global push factors;
  - De facto exchange-rate regime classification from Ilzetzki, Reinhart, and Rogoff (2019, 2021), extended by carrying forward the last observed regime through the end of the sample.

*Source: Conclusion and Annex I (Data) of the IMF Working Paper "Beyond the First Bond: Market Access and Debt Dynamics in Frontier Economies".*

### Annex II. Regression Results

### Annex II. Regression Results

### Tables (reported)
- Table A.5 Regression results excluding FCS
- Table A.6 Regression results including all sample countries

### Notes on tables and pagination
- Appears on pages 38–39 of the working paper.

### Annex III. Expanded Stylized Facts

### Figures (reported)
- Figure A.2: Decomposition of Public Debt in EMDEs – Simple Averages
  - Source: WEO and IDS databases and authors’ calculations
- Figure A.1: Governance, Market Access, Evolution of External Financing in EMDEs – Simple Averages
  - Source: WEO and IDS databases and authors’ calculations
- Figure A.3: Spreads and Maturities before and after Market Entry
  - Source: WEO and IDS databases and authors’ calculations

### Notes on figures and pagination
- Appears on page 40 of the working paper.

*Beyond the First Bond: Market Access and Debt Dynamics in Frontier Economies — Working Paper No. WP/2026/153*

---


_Source: https://www.imf.org/-/media/files/publications/wp/2026/english/wpiea2026153-source-pdf.pdf_