Ninth UNCTAD Debt Management Conference
Geneva, 11 - 13 November 2013
External Shocks, Financial Stability and Debt
by
Mrs. Yuefen Li
Head
Debt and Development Finance Branch
UNCTAD
The views expressed are those of the author and do not necessarily reflect the views of UNCTAD
The global financial crisis as a huge and
long lasting external shock
Before the crisis: general
improvements of debt indicators by
developing countries
Since the crisis: below prior-crisis
trend. Some countries in debt
distress owing to external shocks.
2
Developing countries’ total
debt/exports
Developing Countries,
Total External Debt
6000
140
120
100
80
5000
4000
3000
60
40
20
0
2000
1000
0
2000
2002
2004
2006
Total debt stocks
2008
2010
2012
Total Debt/Exports
percentage
(billions US$)
Developing countries’ total
reserves/short-term debt
Developing Countries,
International Reserves
7000
6000
5000
4000
3000
2000
1000
0
700
600
500
400
300
200
100
0
2000
2002
2004
2006
2008
2010
2012
Internati onal Reserves
Reserves/Short-term debt (ri ght
axi s)
percentage
(billions US$)
Public Debt in High Income countries
Public Debt in High Income Countries
45'000
120
Total Debt
Debt-to-GDP (%, right axis )
40'000
100
35'000
80
25'000
60
20'000
15'000
40
10'000
20
5'000
0
0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
(%)
billions USD
30'000
Public Debt in Developing countries
Public Debt in Developing Countries
8,000
70
Total Debt
Debt-to-GDP (%, right axis)
7,000
60
6,000
50
5,000
(%)
billion USD
40
4,000
30
3,000
20
2,000
10
1,000
0
0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
400
$ billion
350
Bonds
Bank Lending
% GDP (right axis)
% of GDP
300
2.0
1.5
250
200
1.0
150
100
0.5
50
0
0.0
2000
2002
2004
Source: Dealogic and the World Bank
2006
2008
2010
2012
Current status of economic
recovery
• Advanced countries: slow and timid
• Emerging economies: lower GDP
growth and high capital flow volatility
• Low income countries: low external
demand and slower growth.
8
Debt situation
Advanced economies: sharp increase of debt
Developing countries: also increasing
LDCs: Both debt ratios were higher than the
respective ratios of developing countries.
two LDCs in debt distress and ten LDCs in
high risk of debt distress.
Caribbean economies : very vulnerable except
commodity exporting countries
9
Crisis revealed misconceptions
on debt
• OECD country debt is not risk
free
• Private debt should not be
overlooked
• Domestic debt is not as
harmless as people thought
10
Two challenges ahead
• Increasing short term
debt
• Higher cost of debt
servicing: Interest rate
normalization
11
Avoid over borrowing
when international
liquidity is abundant
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Debt crisis prevention and
resolution
Two UNCTAD initiatives in working
together with all stakeholders:
- UNCTAD Principles on Responsible
Sovereign Lending and Borrowing were
formulated in 2012
- Working Group on Debt Workout
Mechanism in Feb. 2013
13
Thank you
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