Syndicate content

Financial Sector

Are South Asian countries sinking into a debt trap?

Bidisha Das's picture

This blog is part of a series based on International Debt Statistics 2018.

The 2018 edition of International Debt Statistics (IDS 2018) which presents statistics and analysis on financial flows (debt and equity) for 123 low-and middle-income countries has just been released. One of the key observations of IDS 2018 is that net financial flows in 2016 to all developing countries witnessed a more than threefold increase over their 2015 level. This was driven entirely by net debt flows, which increased by $542 billion in 2016. Consequently, total external debt outstanding of all developing countries went up to $6.9 trillion, an increase of 4.1 percent over 2015. Interestingly, South Asia seems to deviate from this norm of IDS 2018.

External debt outstanding of South Asia contracted in 2016

South Asia is the only region that has shown a contraction in the total external debt outstanding in 2016. The total external debt stock of South Asia contracted by almost 2 percent as net debt flows into the region turned negative ($-7.7) for the first time in a decade. More specifically, this is the result of net long-term external debt flows turning negative (-$12.5 billion) implying that principal repayments by South Asia, on long-term external debt far exceeded disbursements.

International Debt Statistics 2018 shows BRICs doubled bilateral lending commitments to low-income countries in 2016 to $84 billion

World Bank Data Team's picture
Also available in: العربية | Français | Español
The 2018 edition of International Debt Statistics (IDS) has just been published.

IDS 2018 presents statistics and analysis on the external debt and financial flows (debt and equity) of the world’s economies for 2016. It provides more than 200 time series indicators from 1970 to 2016 for most reporting countries. To access the report and related products you can:

This year’s edition is released less than 10 months after the 2016 reference period, making comprehensive debt statistics available faster than ever before. In addition to the data published in multiple formats online, IDS includes a concise analysis of the global debt landscape, which will be expanded on in a series of bulletins over the coming year.

Why monitor and analyze debt?

The core purpose of IDS is to measure the stocks and flows of debts in low- and middle-income countries that were borrowed from creditors outside the country. Broadly speaking, stocks of debt are the current liabilities that require payment of principal and/or interest to creditors outside the country. Flows of debt are new payments from, or repayments to, lenders.

These data are produced as part of the World Bank’s own work to monitor the creditworthiness of its clients and are widely used by others for analytical and operational purposes. Recurrent debt crises, including the global financial crisis of 2008, highlight the importance of measuring and monitoring external debt stocks and flows, and managing them sustainably. Here are three highlights from the analysis presented in IDS 2018:

Net financial inflows to low-and middle income countries grew, but IDA countries were left behind

In 2016, net financial flows into low- and middle-income countries grew to $773 billion - a more than three-fold increase over 2015 levels, but still lower than levels seen between 2012 and 2014.

However, this trend didn’t extend to the world’s poorest countries. Among the group of IDA-only countries, these flows fell 34% to $17.6 billion - their lowest level since 2011. This fall was driven by drops in inflows from bilateral and private creditors.

Where does Chinese development finance go?

Tariq Khokhar's picture

This post looks at the recently updated “Global Chinese Official Finance Dataset” from research group AidData. The post is also available here as an R Notebook which means you see the code behind the charts and analysis.

Credit: A city park in Tianjin, China. Photo: Yang Aijun / World Bank
Credit: A city park in Tianjin, China. Photo: Yang Aijun / World Bank

China has provided foreign assistance to countries around the world since the 1950s. Since it’s not part of the DAC group of donors who report their activities in a standard manner, there isn’t an official dataset which breaks down where Chinese foreign assistance goes, and what it’s used for.

A team of researchers at AidData, in the College of William and Mary have just updated their “Chinese Global Official Finance” dataset. This is an unofficial compilation of over 4,000 Chinese-financed projects in 138 countries, from 2000 to 2014, based on a triangulation of public data from government systems, public records and media reports. The team have coded these projects with over 50 variables which help to group and characterize them.

Activity-level data on an increasingly important donor

This dataset is interesting for two reasons. First, China and other emerging donors are making an impact on the development finance landscape. As the Bank has reported in the past (see International Debt Statistics 2016), bilateral creditors are a more important source of finance than they were just five years ago. And the majority of these increases are coming from emerging donors with China playing a prominent role.

Second, this dataset’s activity-level data gives us a look at trends and allocations in Chinese bilateral finance which can inform further analysis and research. Organizations like the World Bank collect data on financial flows directly from government sources for our operational purposes, but we’re unable to make these detailed data publicly available. We compile these data into aggregate financial flow statistics presented from the “debtor perspective”, but they’re not disaggregated by individual counterparties or at an activity-level. So there can be value added from sources such as AidData’s China dataset.

A detailed view, but only part of the picture of all financial flows

However, this dataset has limitations. It only presents estimates of “official bilateral credits”. These are flows between two governments, and are just one part of the total financial flows coming from China. By contrast, the World Bank is able to integrate the granular data it collects from countries into the full set of financial flows to and from its borrowing countries. This situates official bilateral credit among the broader spectrum of providers of long-term financing (such as bondholders, financial intermediaries, and other private sector entities), sources of short-term debt (including movements in bank deposits), and equity investments (foreign direct and portfolio investments). This data integration leads to better quality statistics.

In short, AidData’s China dataset provides more detail on one type of financial flow, but is likely to be less reliable for a number of low-income countries. With these caveats in mind, I’ve done a quick exploration of the dataset to produce some summary statistics and give you an idea of what’s inside. 

Looking at foreign assistance by type of flow

First, let’s see what the trends in different types of foreign assistance look like. AidData researchers code the projects they’ve identified into three types of “flow”:

  1. Official Development Assistance (ODA), which contains a grant element of 25% or more and is primarily intended for development.
  2. Other Official Flows (OOF), where the grant element is under 25% and the the financing more commercial in nature.
  3. Vague Official Finance, where there isn’t enough information to assign it to either category.

Here are the total financial values of the projects in AidData’s dataset, grouped by flow type and year:

It looks like more Chinese finance is classed as OOF ($216bn in the period above) than ODA ($81bn), and that 2009 is a bit of an outlier. With this dataset, we next can figure out which countries are the top recipients of ODA and OOF, and also which sectors are most financed.

Chart: An Over 30-Fold Increase in Turkey's Power Generation Capacity

Tariq Khokhar's picture
Also available in: العربية | Français | 中文

Since 1970, the electricity generation capacity of Turkey has increased more than 30-fold to reach 70,000 MW in March 2015. In a country of nearly 80 million people, demand for electricity has risen about 7 percent annually in recent years, requiring steady efforts to expand the sources of reliable and clean power. Starting in the early 2000s, through a series of interlinked measures supported by the World Bank Group, the country has worked to meet this growing demand, while spurring private-sector investment and innovation. Read more.
 

Chart: Global Growth Forecast to Reach 2.7 Percent in 2017

Tariq Khokhar's picture
Also available in: Français | العربية | 中文 | Español

The World Bank forecasts that global economic growth will strengthen to 2.7 percent in 2017 as a pickup in manufacturing and trade, rising market confidence, and stabilizing commodity prices allow growth to resume in commodity-exporting emerging market and developing economies. Growth in advanced economies is expected to accelerate to 1.9 percent in 2017, and growth in emerging market and developing economies as will rise to 4.1 percent this year from 3.5 percent in 2016. Read more and download Global Economic Prospects.

In the Middle East and North Africa region, financial flows in 2015 went against the global trend

Sun Hwa Song's picture

Now that the 2017 edition of International Debt Statistics (IDS) has been released, as a member of the team who put these statistics together, I thought I would look back at what the data tells us about financial flows into the Middle East and North Africa (MENA) region.

According to IDS 2015 data, net financial flows (debt and equity) to all low and middle income countries were only one third of their 2014 levels ($1,159 billion). In particular net debt flows turned negative (-$185 billion) for the first time since the 2008 financial crisis, while foreign direct investment (FDI) showed a marginal increase of $7 billion from $536 billion in 2014. These phenomena were observed in all regions but MENA.

The net debt inflows into the MENA region diverged from global trends. The inflows increased 84 percent from 2014. On the other hand, FDI recorded its lowest level since 2010.

The 2017 Atlas of Sustainable Development Goals: a new visual guide to data and development

World Bank Data Team's picture
Also available in: 中文 | العربية | Español | Français

The World Bank is pleased to release the 2017 Atlas of Sustainable Development Goals. With over 150 maps and data visualizations, the new publication charts the progress societies are making towards the 17 SDGs.

The Atlas is part of the World Development Indicators (WDI) family of products that offer high-quality, cross-country comparable statistics about development and people’s lives around the globe. You can:

The 17 Sustainable Development Goals and their associated 169 targets are ambitious. They will be challenging to implement, and challenging to measure. The Atlas offers the perspective of experts in the World Bank on each of the SDGs.

Trends, comparisons + country-level analysis for 17 SDGs

For example, the interactive treemap below illustrates how the number and distribution of people living in extreme poverty has changed between 1990 and 2013. The reduction in the number of poor in East Asia and Pacific is dramatic, and despite the decline in the Sub-Saharan Africa’s extreme poverty rate to 41 percent in 2013, the region’s population growth means that 389 million people lived on less than $1.90/day in 2013 - 113 million more than in 1990

Note: the light shaded areas in the treemap above represent the largest number of people living in extreme poverty in that country, in a single year, over the period 1990-2013.

Newly published data, methods and approaches for measuring development

Kenyan firms benefit from increased use of financial services and lower crime-related losses

Silvia Muzi's picture

The private sector continues to be a critical driver of job creation and economic growth. However, several factors can undermine the private sector and, if left unaddressed, may impede development.  Through rigorous face-to-face interviews with managers and owners of firms, the World Bank Group’s Enterprise Surveys benchmark the business environment based on actual experiences of firms.

This blog focuses on surveys conducted of 781 Kenyan firms across five regions (including Nairobi and Mombasa) and six business sectors—i) food, ii) textiles and garments, iii) chemicals, plastics and rubber, iv) other manufacturing, v) retail, and vi) other services.

Under Kenya’s new constitution, the country recently embarked on several major business reforms that promoted a more market-friendly environment. Some examples of positive benefits include boosts in public investment in infrastructure, increased interest from foreign investors, and lowered transaction costs from information technology improvements. The Kenya Enterprise Surveys sheds light on how the country’s private sector fared amidst these reforms.

More firms use financial services than before

According to the Kenya Enterprise Surveys (ES) data, the use of financial services has improved since 2007.  On average, 44% and 41% of Kenyan firms use banks to finance investment and working capital, respectively. The corresponding figures in 2007 were much lower at 23% and 26%. Moreover, the percentage of Kenyan firms with a bank loan is 36%, which is on par with the global average yet higher than the average of countries in the same income group (do note that when this survey was conducted, Kenya was classified as a low income country, having since graduated to a lower middle income country).

Bribery and limited access to banking are challenges for Afghan private firms

Arvind Jain's picture

The World Bank Group’s Enterprise Surveys benchmark the business environment based on actual experiences of firms. In a new blog series we kicked off last week, we’re sharing these findings from recently analyzed surveys conducted through extensive face-to-face interviews with managers and owners of firms in several countries.
 
In this post we focus on Afghanistan. We’ve conducted a survey with 410 firms across five regions and four business sectors—manufacturing, construction, retail, and services.

The International Monetary Fund (IMF) has noted that considerable political and security uncertainties have posed challenges for Afghanistan. Furthermore, the financial sector has been vulnerable with eight out of 15 banks classified as weak in late 2014. Within this context, the Afghanistan Enterprise Surveys (ES) shed light on several interesting findings:

Corruption is a challenge

According to the Afghanistan Enterprise Survey, firms face almost a 50 percent chance of having to pay a bribe if they applied for an electricity connection, tried to obtain permits, or met with government officials for tax purposes (“Bribery incidence”).  This is more than double of what private firms in landlocked developing countries experience on average.
 

Access to finance is biggest challenge for firms in Namibia

Joshua Wimpey's picture

The private sector continues to be a critical driver of job creation and economic growth. However, several factors can undermine the private sector and, if left unaddressed, may impede development.  Through extensive face-to-face interviews with managers and owners of firms, the World Bank Group's Enterprise Surveys benchmark the business environment based on actual experiences of firms. A series of blogs, starting today, share the findings from recently analyzed surveys conducted in several countries.

The Namibia Enterprise Surveys consisted of 580 interviews with firms across three regions and three business sectors – manufacturing, retail, and other services. So what are some key highlights from the surveys?

Exports take on average 8 days to clear through customs but varies according to firm size
In 2013, it took a firm in Namibia about eight days to clear exports through customs, which is considerably more than the two days it took in 2006. Despite this increase, the average time to clear direct exports through customs is still about the same as in the upper middle income countries (8 days) and lower than the Sub-Saharan Africa regional average (10 days). Moreover, there is a wide variation across firm size. For a small firm, it takes about 17 days on average to clear exports through customs, compared to around six days for medium-sized firms and about two days for large firms.

Clearing imports, in contrast, through customs is considerably faster in Namibia (five days) than the average for upper middle income countries (11 days) and Sub-Saharan Africa average (17 days).


 

Pages