Geneva, 23th – 25th November 2015
Exogenous Shocks and Debt
by
Mr. John Panzer
Director
Global Practice for Macroeconomics & Fiscal Management
The World Bank Group
The views expressed are those of the author and do not necessarily reflect the views of UNCTAD
Exogenous Shocks and Debt
In Developing Countries
John Panzer
Director
Global Practice for Macroeconomics
& Fiscal Management
Outline
•
•
•
•
Development and Poverty Reduction
Debt in Developing Countries (LICs)
Outlook and Vulnerabilities
Policy Options
3
Era of unprecedented growth
Real GDP Growth by Country Group
7
Average Real GDP Growth (%)
6
5
4
3
2
1
0
World
Emerging Markets and
Developing Countries
2001-2008
Sub-Saharan Africa
2009-2012
Low Income Developing
Countries
2013
Source: World Bank Global Monitoring Report
4
Strong
(butbut
uneven)
progress
against twin
goals
Positive
Uneven
Outcomes
in Twin
Economic developments leading to IDA17
Goals
Growth inclusive in IDA countries
Convergence in poverty reduction
14
70%
12
IDA FCS
10
60%
In percent*
8
50%
Poverty Rate
IDA [SERIES
NAME]
IDA
40%
Average
6
4
2
0
-2
30%
-4
Bolivia
Tanzania
Cambodia
Congo, Rep.
Nepal
Bhutan
Vietnam
Tajikistan
Kyrgyz Republic
Moldova
Nicaragua
Rwanda
Honduras
Mozambique
Uganda
Pakistan
Sri Lanka
Mali
Bangladesh
Lao PDR
Senegal
Nigeria
Ethiopia
Malawi
Togo
Madagascar
-6
20%
World
10%
Income growth of bottom 40%
Source: PovCal Net, The World Bank.
2012
2011
2010
2008
2005
2002
1999
1996
1993
1990
1987
1984
1981
0%
Income growth of total population
Source: World Development Indicators.
* Average annual growth in mean income/consumption per
capita during a 5-year period between 2002-2012.
Benign external environment
350
150
300
140
250
130
200
120
150
110
100
100
50
90
0
80
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Commodity Price index
Source: World Development Indicators, DSAs
FDI
Exports
Exports
Index (100=2001)
Commodity Prices and FDI
Index (100=2001)
LIC commodity exporters
LICs able to diversify financing
Debt disbursements to Low Income Countries by type
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2005
2006
Multilateral
2007
Bilaterals
2008
2009
2010
Other Private
2011
2012
Commercial Banks
2013
2014
Bonds
7
Broader access to global bond markets
Global Bond Issuances – Sub-Saharan Africa (Excl. SA)
7
Billions (USD)
6
5
4
3
2
1
0
2009
2010
2011
2012
2013
2014
Angola
Cote d'Iviore
Ethiopia
Gabon
Ghana
Kenya
Mozambique Namibia
Nigeria
Rwanda
Senegal
Seychelles
Zambia
Tanzania
2015
8
HIPC gains sustained
Change in External Debt After HIPC
Average External Debt to GDP
180
160
140
120
100
80
60
40
20
0
Average
25 Percentile
75 Percentile
DP = HIPC Decision Point
Source: World Development Indicators
9
Until very recently, reduced risks of debt distress
Number of Countries by Risk Rating and Year
26
26
24
26
22
22
23
22
22
20
16
24
29
19
19
30
34
18
18
19
16
17
19
22
23
24
15
23
22
20
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Low
Moderate
High/In Debt Distress
10
A Changing
more challenging
global outlook
Context
Outlook in April 2014
Outlook in October 2015
Lower Projected Commodity Prices
6.0
5.5
Index (2005=100)*
Annual percentage change
Lower Projected Growth
5.0
4.5
4.0
3.5
3.0
2.5
2.0
2016
2017
2018
180
160
140
120
100
80
60
40
20
0
2019
2016
2018
2019
Higher Current Account Deficits
Larger and Increasing Projected Debt
60.0
0.6
CAB in percent of GDP
Gross public debt in percent of
GDP
2017
50.0
40.0
30.0
20.0
10.0
0.0
0.4
0.2
0.0
-0.2
-0.4
-0.6
-0.8
2016
2017
2018
2019
2016
2017
2018
2019
Source: World Economic Outlook, April 2014 and October 2015, IMF.
*Commodity Price Index includes both Fuel and Non-Fuel Price Indices
Transitioning into headwinds
• Country specific
• Oil and commodity exporters vs. diversified economies
• Buffers and vulnerabilities
12
Transitioning into headwinds - vulnerabilities
Oil
Exporters
1) Fiscal
2) External
Commodity
Exporters
1) External
2) Fiscal
Diversified
1) Fiscal
13
Transitioning into headwinds – external sector and
erosion of buffers
Change in Reserves
0%
0%
-10%
-5%
-20%
-10%
-30%
-15%
-40%
-50%
-20%
-60%
-25%
-70%
-30%
-80%
Change in FX Reserves (%)
Change in LCU value against USD
Change in FX Reserves and Depreciation Since 2014
Change in FX vs. USD
Source: World Bank Survey of Commodity Exporters
14
Policy options in an era of headwinds
• Speed of adjustment a function of policy space
•
•
•
Market debt
Reserves
IFIs
• If possible, support domestic demand
• In the longer run:
•
•
Debt risk management
Diversification (RER, structural reforms)
15
Policy
options
of “Headwinds”
Policy options
in in
an an
era Era
of “headwinds”
How we are helping countries transition and increase gains
• Efficiency in Public Finance
o Domestic Resource Mobilization and its cross-cutting effects
o Public Investment and debt management to sustain
infrastructure development
o Human capital
But external financing is critical
• Relentless focus on productivity/transformation
o Ambition in policy reforms in agriculture, resource
management and infrastructure
• Importance of Equity and Measurement
o Constantly checking and measuring progress