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Will more debt hinder the development of the Dominican Republic?

Co-Authors: Aleksandra Iwulska, Javier Eduardo Báez and Alan Fuchs

In April this year the Dominican Republic borrowed 1.25 billion US dollars on international markets in 30-year bonds. The DR is the only country in the B investment rating group that  successfully issued 30-year bonds in the last 6 years. The country has a total of 2.75 billion US dollars for three issuances in the past 15 months.

At the same time, debt levels have been growing in the country: non-financial sector public (NFPS) debt doubled from 18.3 percent of GDP in 2007 to 36.6 in the first quarter of 2014.When considering the DR Central Bank debt stock, levels would be already close to 47 percent of GDP. It is worth noticing that Jiménez and Ovalle (2011) estimated in 56.7% the debt to GDP the maximum debt to GDP threshold that investors would consider sustainable for the DR in 2013.  Meanwhile, interest payments reached a peak of 2.4 percent of GDP in 2012-13 and external debt stood at 25 percent of GDP in 2013, levels not seen since the economic crisis of 2003. But the economic realities in the DR now are much different than they were in 2003. GDP grew by 4.1 percent last year and 5.5 percent in the first quarter of 2014. The Central Bank forecasts the annual economic growth at 4.5 percent this year. Meanwhile, central government fiscal deficit dwindled from 6.6 percent of GDP in 2012 to 2.9 percent in 2013.

Collecting Country Debt Data: 63 Years and Counting

Jung Weil's picture
IDS 2014
What word has four letters, one syllable, no weight but can still be crushing? If you guessed debt, you are correct. The World Bank has had a Debt Reporting System (DRS) since 1951, and it's still going strong.

Although the World Bank collaborates with international agencies that work with external debt and debt-related statistics (the Bank for International Settlements (BIS), the International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OECD) and others), the World Bank has the international mandate to collect external debt data, and we maintain comprehensive external debt information.

International Debt Statistics: three changes for 2014

Neil Fantom's picture

The World Bank has been collecting statistics on the debt of its borrowing countries since 1951, through the Debtor Reporting System. Published for many years as World Debt Tables (see, for example, the 1982 edition here) and then as Global Development Finance (initially as Volume 2), the 2013 dataset - which contains data for 2011 - was published in a renamed publication as International Debt Statistics, with expanded coverage of Quarterly External Debt Statistics and Public Sector Debt.

Last year we reviewed our dissemination strategy for World Development Indicators (WDI), and made some improvements to improve the quality and accessibility of the statistical indicators, tables and analyses. This year we’ve looked at debt statistics, and are planning some changes here as well; while the 2014 dataset - which contains data for 2012 - has been released in mid-December as usual, we’ll be releasing the redesigned data products in mid-February.

Relative risk ratings and shadow sovereign ratings for 120+ countries

Dilip Ratha's picture

Sovereign credit ratings assigned by the major rating agencies (such as Fitch, Moody’s and Standard and Poor’s) play a major role in determining the government’s access to international capital markets. Although sovereign ratings relate to debt and creditworthiness of the central government, in effect they serve as a barometer of confidence and a ceiling for creditworthiness for the private sector as well. They influence the borrowing costs of private entities and in a wider sense overall investment flows. The sovereign rating is often a benchmark and sub-sovereign entities, such as companies and banks, rarely get a rating higher than the sovereign’s.

Relative risk ratings and shadow sovereign ratings for 120+ countries

Dilip Ratha's picture

Sovereign credit ratings assigned by the major rating agencies (such as Fitch, Moody’s and Standard and Poor’s) play a major role in determining the government’s access to international capital markets. Although sovereign ratings relate to debt and creditworthiness of the central government, in effect they serve as a barometer of confidence and a ceiling for creditworthiness for the private sector as well. They influence the borrowing costs of private entities and in a wider sense overall investment flows. The sovereign rating is often a benchmark and sub-sovereign entities, such as companies and banks, rarely get a rating higher than the sovereign’s.

Development Banks and Post-Crisis Blues in Investment Finance

Otaviano Canuto's picture

International long-term private finance to developing countries has changed dramatically in the wake of the global financial crisis. Caught in “post-crisis blues”, as my World Bank colleagues Jeff Chelsky, Claire Morel and Mabruk Kabir called it in a recent Economic Premise, some traditional sources of long-term finance are strained, and alternatives have not been able to adequately compensate. Private financing of infrastructure has been particularly hurt.

Microcredit Borrowers in Bangladesh Are Not Necessarily Trapped in Poverty and Debt as many contended in recent years

Shahid Khandker's picture

With spectacular growth of microfinance institutions (MFIs) in Bangladesh, there is a growing concern that borrowers might be borrowing from multiple sources and more than they are able to repay, and hence, they are trapped in poverty and debt.  Microfinance programs, operating in Bangladesh for more than two decades, have reached more than 10 million households in 2008, nearly half the rural population, with an annual disbursement close to US$1.8 billion and an outstanding balance of US$1.5 billion.  Multiple program membership has increased over the years: it was nonexistent in 1991/92, 11.9 percent in 1998/99 and 36 percent in 2010/11. 

However, a recent study shows that increased borrowing, even from multiple sources, has not lowered loan recovery rates. 

Also, another recent study observes that microcredit borrowers are not necessarily trapped in poverty and debt. This study analyzes data from a long panel survey over a 20-year period, and finds that although many participants have been with microcredit programs for many years they are not necessarily trapped in debt as the accrued assets due to borrowing outweigh accumulated debt for many borrowers.

Until Subnational Debt Do Us Part

Otaviano Canuto's picture

Decentralization in many countries has given subnational governments certain spending responsibilities, revenue-raising authority, and the capacity to incur debt. Furthermore, rapid urbanization in developing countries is requiring large-scale infrastructure financing to help absorb influxes of rural populations. Not surprisingly, the subnational debt market in some developing countries has been going through a notable transformation.

Bears, boots and long-run growth

Justin Yifu Lin's picture

Photo: istockphoto.comJackson Hole was abuzz last week as top economists rubbed shoulders with central bankers, but the stuffed bears in the lobby of the venue seemed symbolic of the angst permeating world markets.

In spite of this, the participants got down to business and I was not alone in thinking that today’s financial market turmoil and the anxiety over high unemployment in the United States and over European debt should be treated by the economics profession as an opportunity to think differently about solutions for kick-starting growth. 

Today’s uncertainty should spur policymakers to take new economic ideas and build a social consensus for action. An ambitious, innovative approach is needed otherwise the crisis will likely be with us for some years. Indeed, the US and EU could face a Japan-style scenario, with prolonged recession and a high level of public debt.

How Advanced Economies Can Tackle Their Debt Woes

Vamsee Kanchi's picture

Given the urgent need for policymakers in Europe and other advanced economies to tackle current debt challenges, there is a frantic scramble for suitable policy tools that will help resolve the Greek conundrum. 

One policy tool – a form of debt restructuring known as ‘financial repression’ that focuses on establishing a tighter relationship between government and the financial industry by setting caps on interest rates and regulating cross-border money flows – has largely been overlooked.  The Petersen Insitute’s Carmen Reinhart recently delivered a


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