Debt Build-up in Frontier Low-Income Developing Countries (LIDCs) since 2012: Global or Country-specific Factors and Way Forward?

By Constance de Soyres, Anna Rogantini Picco, Randa Sab

February 22, 2019

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Format: Chicago

Constance de Soyres, Anna Rogantini Picco, and Randa Sab. Debt Build-up in Frontier Low-Income Developing Countries (LIDCs) since 2012: Global or Country-specific Factors and Way Forward?, (USA: International Monetary Fund, 2019) accessed September 18, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper focuses on the debt build-up that frontier low-income developing countries (LIDCs) have faced since 2012. First, it documents a 20-percentage point increase in the external and government debt-to-GDP ratios, a composition shift toward higher non-concessional debt, and a rise in interest rate payments. Second, using panel regressions, it shows that while both global and country-specific factors are correlated with debt-to-GDP ratios over 1998–2016, global factors dominate for the period 2012–16. Third, through a small open-economy model, it shows that the projected tightening in global financial conditions would reduce debt-to-GDP ratios by less than the increase associated with the expected rise in investment.

Subject: Asset and liability management, Commodity price indexes, Debt relief, External debt, Fiscal policy, Fiscal stance, Prices, Public debt

Keywords: Adjustment cost, Commodity price indexes, Debt build-up, Debt relief, Debt-to-GDP ratio, Fiscal stance, Frontier LIDCs, Global, Global and country-specific factors, Gov. debt-to-GDP, Open economy, Percent GDP, Price index, WP

Publication Details

Pages:

40
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/037
Stock No:

WPIEA2019037
ISBN:

9781484396247
ISSN:

1018-5941

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