Appendix III. Glossary of External Debt Terms

International Monetary Fund
Published Date:
June 2003
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Accrual of Interest Costs

Continuous recording of interest costs, so matching the cost of capital with the provision of capital.

Affiliated Enterprises

Enterprises related through direct investment ownership structures, such as branches, subsidiaries, associates, and joint ventures. Affiliated enterprises include those in a direct ownership relationship but also those that are related through a third enterprise and/or a chain of direct investment relationships. For a fuller exposition of direct investment relationships, see the OECD Benchmark Definition of Foreign Direct Investment (OECD, 1996, pp. 9–12).

Agreed Minute

Paris Club document detailing the terms for a debt rescheduling between creditors and the debtor. It specifies the coverage of debt-service payments (types of debt treated), the cutoff date, the consolidation period, the proportion of payments to be rescheduled, the provisions regarding the down payment (if any), and the repayment schedules for rescheduled and deferred debt. Creditor governments commit to incorporate these terms in the bilateral agreements negotiated with the debtor government that implements the Agreed Minute. Paris Club creditors will agree to reschedule only with countries that have an IMF upper credit tranche arrangement (Stand-By Arrangement or Extended Fund Facility (EFF)), a Poverty Reduction and Growth Facility (PRGF) arrangement, or a Rights Accumulation Program.

Amortization Schedule

The schedule for the repayment of principal and payment of interest on an ongoing basis. For loans, the amortization schedule is normally included in an annex to the contract or can be estimated from the contract.


Buying (or borrowing) in one market and selling (or lending) in the same or another market to profit from market inefficiencies or price differences.

Arrangement on Guidelines for Officially Supported Export Credits (OECD Consensus)

The Arrangement (sometimes known as the Consensus) is a gentleman’s agreement governing the provision of officially supported export credits with a credit period of two years or more. It is negotiated by an international body called the Participants to the Arrangement on Guidelines for Officially Supported Export Credits, which meets in Paris under the auspices, and with the administrative support, of the Secretariat of the OECD. The Participants are Australia, Canada, the European Union (including all the Member States), Japan, Korea, New Zealand, Norway, Switzerland, and the United States. Additionally, there are three Observers: the Czech Republic, Hungary, and Poland.


Balance of Payments

The balance of payments is a statistical statement that systematically summarizes, for a specific period of time, the economic transactions of an economy with the rest of the world. Transactions, for the most part between residents and nonresidents, consist of those involving goods, services, and income; those involving financial claims and liabilities to the rest of the world; and those (such as gifts) classified as transfers.

Bank for International Settlements (BIS)

Established in 1930 by intergovernmental convention, the Bank for International Settlements promotes cooperation among central banks. In this capacity it carries out four main functions: it holds and manages deposits from a large number of central banks throughout the world; it serves as a forum for international monetary cooperation; it assists as agent or trustee in the execution of various international financial agreements; and it carries out research and issues publications on monetary and economic subjects.

Berne Union

The International Union of Credit and Investment Insurers. This Union is an informal association of export credit insurance agencies, founded in 1934. The two main objectives of the Berne Union are the promotion of the international acceptance of sound principles in export credit insurance and investment insurance, and the exchange of information relating thereto. The almost 50 members meet twice a year to exchange information and seek to establish common standards, for instance on the appropriate down payment and repayment periods for various kinds of exports. Informal credit ratings of the borrowing countries are maintained. They also consult with each other on a continuing basis, and cooperate closely. All members participate as insurers and not as representatives of their governments.

Bilateral Deadline

In the context of Paris Club reschedulings, the date by which all bilateral agreements must be concluded. It is set in the Agreed Minute and is typically about six months later, but can be extended upon request.

Bilateral Debt

Loans extended by a bilateral creditor.

Bilateral Rescheduling Agreements

Rescheduling agreements reached bilaterally between the debtor and credito r countries. These are legally the equivalent of new loan agreements. After a Paris Club rescheduling, such agreements are required to put into effect the debt restructuring set forth in the multinational Agreed Minute.

Bullet Repayment

The repayment of principal in a single payment at the maturity of the debt.

Buyer’s Credit

A financial arrangement in which a bank or financial institution, or an export credit agency in the exporting country, extends a loan directly to a foreign buyer or to a bank in the importing country to pay for the purchase of goods and services from the exporting country. Also known as financial credit. This term does not refer to credit extended directly from the buyer to the seller (for example, through advance payment for goods and services).


Capital Account

In the balance of payments, the capital account covers capital transfers and the acquisition or disposal of nonproduced nonfinancial items (for example, patents).

Capital Transfers

Capital transfers consists of the transfer—without a quid pro quo—of ownership of a fixed asset or the forgiveness, by mutual agreement between creditor and debtor, of the debtor’s financial liability when no counterpart is received in return by the creditor.

Capitalized Interest

Capitalized interest is the conversion of accrued interest costs or future interest payments, by a contractual arrangement with the creditor, into a new debt instrument or the principal amount. The most common form of capitalization is the reinvestment of interest costs into the principal amount, either because of an explicit agreement regarding the specific debt instrument or as part of a rescheduling agreement. Frequently as part of a rescheduling agreement, some percentage of interest due during the consolidation period (see below) is converted, through an agreement made with the creditor, into principal.

Claim Payments

Payments made to exporters or banks, after the claims-waiting period, by an export credit agency on insured or guaranteed loans when the original borrower or borrowing-country guarantor fails to pay. These are recorded by the agencies as unrecovered claims until they are recovered from the debtor or the debtor’s guarantor.

Claims-Waiting Period

The period that exporters or banks must wait after the due-date of payment before the export credit agency will pay on the corresponding claim.


The joint or parallel financing of programs or projects through loans or grants to developing countries provided by commercial banks, export credit agencies, other official institutions in association with other agencies or banks, or the World Bank and other multilateral financial institutions.

Commercial Credit

In the context of the Paris Club, loans originally extended on terms that do not qualify as official development assistance (ODA) credits. These are typically export credits on market terms but also include other non-ODA loans by governments.

Commercial Interest Reference Rates (CIRRs)

A set of currency-specific interest rates for major OECD countries. CIRRs have been established for 13 currencies, the majority of which are based on either the five-year government bond yields or on three-, five- and seven-year bond yields, according to the length of the repayment period. CIRRs are adjusted monthly and are intended to reflect commercial rates.

Commercial Risk

In the context of export credits, the risk of nonpayment by a nonsovereign or private sector buyer or borrower in his or her domestic currency arising from default, insolvency, and/or a failure to take up goods that have been shipped according to the supply contract (contrasted with transfer risk arising from an inability to convert domestic currency into the currency in which the debt service is payable, or with broader political risk).


Generally, a firm obligation to lend, guarantee, or insure resources of a specific amount under specific financial terms and conditions. However, in the OECD’s Arrangement on Guidelines for Officially Supported Export Credits (see above), commitment simply refers to any statement, in whatever form, whereby the willingness or intention to provide official support is communicated to the recipient country, the buyer, the borrower, the exporter, or the financial institution.

Commitment Charge (or Fee)

This is the charge made for holding available the undisbursed balance of a loan commitment. Typically, it is a fixed-rate charge (for example, 1.5 percent a year) calculated on the basis of the undisbursed balance.

Commitment, Date of

The date on which the commitment is made.

Comparable Treatment

An understanding in a debt-restructuring agreement with the Paris Club creditors that the debtor will secure at least equivalent debt relief from other creditors.

Complete Market

A financial market place is said to be complete when a market exists with an equilibrium price for every asset in every possible state of the world.

Completion Point

In the context of the HIPC Initiative (see below), when the IMF and World Bank Executive Boards decide that a country has met the conditions for assistance under the Initiative. The timing of the completion point depends on the satisfactory implementation of key structural policy reforms agreed at the decision point, the maintenance of macroeconomic stability, and the adoption and implementation of a poverty reduction strategy developed through a broad-based participatory process. (See also Decision Point.)

Concessional Loans

These are loans that are extended on terms substantially more generous than market loans. The concessionality is achieved either through interest rates below those available on the market or by grace periods, or a combination of these. Concessional loans typically have long grace periods.

Concessional Restructuring

Debt restructuring with a reduction in present value of the debt service. In the context of the Paris Club, concessional restructuring terms have been granted to low-income countries since October 1988 with a reduction in the present value of eligible debt of up to one-third (Toronto terms); since December 1991, with a present value reduction of up to one-half (London terms or “enhanced concessions” or “enhanced Toronto” terms); and, since January 1995, with a present value reduction of up to two-thirds (Naples terms). In the context of the HIPC Initiative, creditors agreed in November 1996 to increase the present value reduction to up to 80 percent (Lyon terms) and then in June 1999 to 90 percent (Cologne terms). Such restructuring can be in the form of flow restructuring or stock-of-debt operations. While the terms (grace period and maturity) are standard, creditors can choose from a menu of options to implement the debt relief.

Concessionality Level

A net present value calculation, measured at the time the loan is extended, that compares the outstanding nominal value of a debt and the future debt-service payments discounted at an interest rate applicable to the currency of the transaction, expressed as a percentage of the nominal value of the debt. The concessionality level of bilateral debt (or tied aid) is calculated in a similar manner, but instead of using the nominal value of the debt, the face value of the loan is used—that is, including both the disbursed and undisbursed amounts, and the difference is called the grant element. (See also Grant Element and Net Present Value.)

Consolidated Amount or Consolidated Debt

The debt-service payments and arrears, or debt stock, restructured under a Paris Club rescheduling agreement.

Consolidated Reporting

Reporting covering the claims and liabilities of all offices worldwide of the same entity, but excluding positions between offices of the same entity. Offices include head offices, branch offices, and subsidiaries. A consolidated balance sheet refers to a balance sheet grouping of assets and liabilities of a parent company and all its offices, after elimination of all unrealized profits on intragroup trading and of all intragroup balances.

Consolidation Period

In Paris Club restructuring agreements, the period in which debt-service payments to be restructured (the “current maturities consolidated”) have fallen or will fall due. The beginning of the consolidation period may precede, coincide with, or come after the date of the Agreed Minute. The standard consolidation period is one year, but sometimes debt payments over a two- or three-year period have been consolidated, corresponding with a multiyear arrangement with the IMF.

Contingent Asset/Liability (Contingencies)

The principal characteristic of a contingency is that one or more conditions must be fulfilled before a financial transaction takes place.


Provision of export credit guarantee or insurance against risks of payment delays or nonpayments relating to export transactions. Cover is usually, though not always, provided for both commercial risk and political risk. In most cases, cover is not provided for the full value of future debt-service payments; the percentage of cover is typically between 90 percent and 95 percent. (See also Quantitative Limits.)

Coverage of Rescheduling Agreements

The debt service or arrears rescheduled. Comprehensive coverage implies the inclusion of most or all eligible debt service and arrears.


An amount for which there is a specific obligation of repayment. Credits include loans, trade credits, bonds, bills, etc., and other agreements that give rise to specific obligations to repay over a period of time usually, but not always, with interest. Credit is extended to finance consumption and investment expenditures, and financial transactions.

Credit Guarantee

Commitment by an export credit agency to reimburse a lender if the borrower fails to repay a loan. The lender pays a guarantee fee.

Credit Insurance

The main business of most export credit agencies is insurance of finance provided by exporters or banks (although some major agencies lend on their own account). Insurance policies provide for the export credit agency to reimburse the lender for losses up to a certain percentage of the credit covered and under certain conditions. Lenders or exporters pay a premium to the export credit agency. Insurance policies typically protect the lender against political or transfer risks in the borrowing country that prevent the remittance of debt-service payments.


An entity with a financial claim on another entity.

Creditor Country

The country in which the creditor resides. In Paris Club terminology, it is an official bilateral creditor.

Creditor Reporting System

A statistical reporting system, maintained by the OECD, to monitor the debt of developing countries. Major creditor countries, primarily the 22 member countries of the Development Assistance Committee (DAC), together with the European Commission, supply information. The data are published in the OECD’s annual External Debt Statistics publication.

Cross-Border Positions

Asset and liability positions of residents of an economy vis-à-vis residents of all other economies.

Currency of Reporting

The unit of account in which amounts are reported either to the compiling agency and/or to an international agency compiling debt statistics. See Chapter 2 for details on unit of account.

Currency of Transaction

The medium of exchange in which an individual transaction occurs. It may be currency, goods, or services. The medium of exchange of one transaction (for example, disbursement) does not necessarily determine the medium of exchange of another (for example, repayment).

Current Account

The current account of the balance of payments covers all transactions (other than those in financial items) that involve economic values and occur between residents and nonresident entities. Also covered are offsets to current economic values provided or acquired without a quid pro quo. Included are goods, services, income, and current transfers. The balance on goods, services, income, and current transfers is commonly referred to as the “current balance” or “current account” balance.

Current Maturities

In the context of restructuring agreements, principal and interest payments falling due in the consolidation period.

Current Transfers

Current transfers are all transfers—that is, the transfer of a real resource or a financial item without a quid pro quo—that are not transfers of capital. Current transfers directly affect the level of disposable income and should influence the consumption of goods and services.

Cutoff Date

The date (established at the time of a country’s first Paris Club debt reorganization/restructuring) before which loans must have been contracted in order for their debt service to be eligible for restructuring. New loans extended after the cutoff date are protected from future restructuring (subordination strategy). In exceptional cases, arrears on post-cutoff-date debt can be deferred over short periods of time in restructuring agreements.


De Minimis Creditors (or Clause)

Minor creditors that are exempted from debt restructuring to simplify implementation of the Paris Club restructuring agreements. Their claims are payable in full as they fall due. An exposure limit defining a minor creditor is specified in each Agreed Minute.

Debt- and Debt-Service-Reduction (DDSR) Operations

Debt-restructuring agreements are typically undertaken for bank loan debt obligations and involve the buyback and exchange of eligible debt either for financial instruments that are valued at a substantial discount (simple cash buyback) or for new bonds featuring a present value reduction. In some instances, the principal portion of new financial instruments is fully collateralized with zero-coupon bonds issued by the treasury of an industrial country, while interest obligations are also partially secured. DDSR operations are characterized by a “menu approach,” allowing individual creditors to select from among several DDSR options. Under the Brady plan of March 1989, some of these arrangements have been supported by loans from official creditors.

Debt Assumption

The assumption of a debt liability of one entity by another entity, usually by mutual agreement.

Debt Buyback

The repurchase by a debtor of its own debt, usually at a substantial discount. The debtor’s obligations are reduced while the creditor receives a once-and-for-all payment. Although in apparent contravention of standard commercial bank loan agreements, some debtors have bought back their own debt on the secondary market.

Debt Conversion

The exchange of debt for a nondebt liability, such as equity, or for counterpart funds, such as can be used to finance a particular project or policy.

Debt Default

Failure to meet a debt obligation payment, either principal or interest. A payment that is overdue or in arrears is technically “in default,” since by virtue of nonpayment the borrower has failed to abide by the terms and conditions of the debt obligation. In practice, the point at which a debt obligation is considered “in default” will vary.

Debt-for-Charity Swap

The purchase by a nonprofit organization such as a nongovernmental organization (NGO) of the external debt of a country at a discount in the secondary market, which the NGO then exchanges for local currency to be used for philanthropic purposes.

Debt-for-Commodity Swap

The repayment in kind by a debtor country of all or part of its external debt. Typically, the lender takes a specific, earmarked percentage of the receipts from the exports of a particular commodity or group of commodities to service the debt.

Debt-for-Development Swap

Financing part of a development project through the exchange of a foreign-currency-denominated debt for local currency, typically at a substantial discount. The process normally involves a foreign nongovernmental organization (NGO) that purchases the debt from the original creditor at a substantial discount using its own foreign currency resources, and then resells it to the debtor country government for the local currency equivalent (resulting in a further discount). The NGO in turn spends the money on a development project, previously agreed upon with the debtor country government.

Debt-for-Equity Swap

A transaction in which debt of an economy is exchanged, usually at a discount, for equity in an enterprise in the same economy. Although variable in form, such arrangements usually result in the extinction of a fixed-rate liability (for example, a debt security or loan) denominated in foreign currency and the creation of an equity liability (denominated in domestic currency) to a nonresident. There may be clauses in the agreement to prevent the repatriation of capital before some specified future date.

Debt-for-Nature Swap

Similar to a debt-for-development swap, except that the funds are used for projects that improve the environment.

Debt Forgiveness

The voluntary cancellation of all or part of a debt within a contractual arrangement between a creditor in one economy and a debtor in another economy.

Debt Instrument(s)

Existing debt instruments typically arise out of contractual relationships under which an institutional unit (the debtor) has an unconditional liability to another institutional unit (the creditor) to repay principal with or without interest, or to pay interest without principal. These instruments include debt securities, loans, trade credit, and currency and deposits. Debt instruments may also be created by the force of law—in particular, obligations to pay taxes or to make other compulsory payments—or through rights and obligations that results in a debtor accepting an obligation to make future payment(s) to a creditor.

Debt-Reduction Option

Option under concessional Paris Club debt restructurings where creditors effect the required debt reduction in present value terms through a reduction of the principal of the consolidated amount. A commercial interest rate and standard repayment terms apply to the remaining amounts. (See Concessional Restructuring.)

Debt Refinancing

Debt refinancing refers to the conversion of the original debt including arrears, into a new debt instrument. In other words, overdue payments or future debt-service obligations are “paid off” using a new debt obligation. In the Guide, as in BPM5, a change in the terms of a debt instrument is to be reported as the creation of a new debt instrument, with the original debt extinguished.

Debt Relief

Any form of debt reorganization that relieves the overall burden of debt. Debt relief results where there is a reduction in the present value of these debt-service obligations and/or a deferral of the payments due, thus providing smaller near-term debt-service obligations. This can be measured, in most cases, by an increase in the duration of these obligations; that is, payments become weighted more toward the latter part of the debt instrument’s life. However, if debt reorganization results in changes in present value and duration that are countervailing in their impact on the debt burden, then there is no debt relief, unless the net impact is significant—such as could occur if there was a deep reduction in present value (together with small decrease in duration) or a sharp increase in duration (together with a small increase in present value).

Debt Reorganization/Restructuring

Debt reorganization arises from bilateral arrangements involving both the creditor and the debtor that alter the terms established for the servicing of a debt. This includes debt rescheduling, refinancing, forgiveness, conversion, and prepayments.

Debt Rescheduling

Debt rescheduling refers to the formal deferment of debt-service payments and the application of new and extended maturities to the deferred amount. Rescheduling debt is one means of providing a debtor with debt relief through a delay and, in the case of concessional rescheduling, a reduction in debt-service obligations.

Debt Service

Refers to payments in respect of both principal and interest. Actual debt service is the set of payments actually made to satisfy a debt obligation, including principal, interest, and any late payment fees. Scheduled debt service is the set of payments, including principal and interest, that is required to be made through the life of the debt.

Debt-Service (-to-Exports) Ratio

The ratio of debt service (interest and principal payments due) during a year, expressed as a percentage of exports (typically of goods and services) for that year. Forward-looking debt-service ratios require some forecast of export earnings. This ratio is considered to be a key indicator of a country’s debt burden.

Debt-Service-Reduction Option

Option under concessional Paris Club debt reschedulings where creditors effect the required debt reduction in present value terms through a reduction in the applicable interest rate. (See Concessional Restructuring.)

Debt-Sustainability Analysis

A study of a country’s medium- to long-term debt situation. A country’s eligibility for support under the HIPC Initiative is determined on the basis of such an analysis, jointly undertaken by the staffs of the IMF, the World Bank, and the country concerned.

Debt Swaps

Debt swaps are exchanges of debt, such as loans or securities, for a new debt contract (that is, debt-to-debt swaps), or exchanges of debt-for-equity, debt-for-exports, or debt-for-domestic currency, such as to be used for projects in the debtor country (also known as debt conversion).

Debt Workout

The process of working out a satisfactory method whereby the debtor country can repay external debt, including restructuring, adjustment, and the provision of new money.

Debtor Country

The country in which the debtor resides.

Debtor Reporting System (DRS)

A statistical reporting system maintained by the World Bank to monitor the debt of developing countries. Information is supplied through reports from debtor countries. The data supplied are the basis for the annual World Bank report, Global Development Finance (formerly World Debt Tables).

Decision Point

In the context of the HIPC Initiative, the point at which a country’s eligibility for assistance is determined by the IMF and World Bank Executive Boards on the basis of a debt-sustainability analysis and three years of sound performance under IMF- and World Bank-supported adjustment programs. The international community enters into a commitment at the decision point to deliver assistance at the completion point, provided that the debtor adheres to its policy commitments. The debt-sustainability analysis is essentially a medium-term balance of payments projection that assesses the debt burden of the country and its capacity to service those obligations. If external debt ratios for that country fall within or above applicable targets, it will be considered for special assistance: the target is 150 percent for the ratio of the present value of debt to exports, with exceptions to this target in the special case of very open economies with a high debt burden in relation to fiscal revenues. (See also Completion Point.)

At the decision point, the Executive Boards of the IMF and World Bank will formally decide on a country’s eligibility, and the international community will commit to provide sufficient assistance by the completion point for the country to achieve debt sustainability calculated at the decision point. The delivery of assistance committed by the IMF and Bank will depend on satisfactory assurances of action by other creditors.

Deferred Payments

In the context of Paris Club debt reschedulings, obligations that are not consolidated but postponed nonconcessionally, usually for a short time, as specified in the Agreed Minute.

Development Assistance Committee (DAC) of the OECD

Established in 1960 as the Development Assistance Group, with the objective of expanding the volume of resources made available to developing countries and to improve their effectiveness. The DAC periodically reviews both the amount and the nature of its members’ contributions to aid programs, both bilateral and multilateral. The DAC does not disburse assistance funds directly, but is concerned instead with promoting increased assistance efforts by its members. The members of the DAC are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom, the United States, and the Commission of the European Communities.

Disbursed Loans

The amount that has been disbursed from a loan but has not yet been repaid or forgiven.


The transactions of providing financial resources. The two counterparties must record the transaction simultaneously. In practice, disbursements are recorded at one of several stages: provision of goods and services (where trade credit is involved); placing of funds at the disposal of the recipient in an earmarked fund or account; withdrawal of funds by the recipient from an earmarked fund or account; or payment by the lender of invoices on behalf of the borrower. The term “utilized” may apply when the credit extended is in a form other than currency. Disbursements should be recorded gross—the actual amount disbursed.

Domestic Currency

The domestic currency is that which is legal tender in the economy and issued by the monetary authority for that economy, or for the common currency area to which the economy belongs.


Duration is the weighted average term to maturity of a debt instrument. The time period until the receipt/payment of each cash flow, such as six months, is weighted by the present value of that cash flow, as a proportion of the present value of total cash flows over the life of the instrument. Present value can be calculated using the yield to maturity or another interest rate. The more the cash flows are concentrated toward the early part of a debt instrument’s life, the shorter the duration relative to the time to maturity.


Eligible Debt or Debt Service

In the context of the Paris Club, debt that can be rescheduled—namely, debt that is contracted before the cutoff date, with maturities of one year or longer.

Enhanced Concessions (or Enhanced Toronto Terms)

See Concessional Restructuring.

Enhanced Structural Adjustment Facility (ESAF)

See Structural Adjustment Facility (SAF). Renamed the Poverty Reduction and Growth Facility (PRGF) in November 1999.


A trust established by the IMF in February 1997 to provide assistance to the countries deemed eligible for assistance under the HIPC Initiative by the Boards of the IMF and the World Bank. Through this trust, the IMF will provide grants (or, in exceptional circumstances, highly concessional loans) that will be used to retire a country’s obligations falling due to the IMF after the completion point.

Escrow Accounts

In the context of external debt payments, accounts typically held in banks outside of the debtor country through which a portion of the export proceeds of a debtor is channeled. Typically involve balances of one-year maturity to cover future debt-service payments. Creditors who are the beneficiaries of such accounts thus obtain extra security for their loans and effective priority in debt service.

Exceptional Financing

As an alternative to—or in conjunction with—the use of reserve assets, IMF credit and loans, and liabilities constituting foreign authorities’ reserves, to deal with payments imbalance, exceptional financing denotes any other arrangements made by the authorities of an economy to finance balance of payments needs. The identification of exceptional financing transactions is linked to an analytical concept rather than being based on precise criteria. Among the transactions regarded as exceptional financing transactions are debt forgiveness, debt-for-equity swaps, and other types of transactions relating to debt reorganizations. Under certain circumstances, some borrowings by the government or other sectors might meet the criterion.

Export Credit

A loan extended to finance a specific purchase of goods or services from within the creditor country. Export credits extended by the supplier of goods—such as when the importer of goods and services is allowed to defer payment—are known as supplier’s credits; export credits extended by a financial institution, or an export credit agency in the exporting country are known as buyer’s credits. (See also Officially Supported Export Credits.)

Export Credit Agency

An agency in a creditor country that provides insurance, guarantees, or loans for the export of goods and services.

Extended Fund Facility (EFF)

An IMF lending facility established in 1974 to assist member countries in overcoming balance of payments problems that stem largely from structural problems and require a longer period of adjustment than is possible under a Stand-By Arrangement. A member requesting an Extended Arrangement outlines its objectives and policies for the whole period of the arrangement (typically three years) and presents a detailed statement each year of the policies and measures it plans to pursue over the next 12 months. The phasing and performance criteria are comparable to those of Stand-By Arrangements, although phasing on a semiannual basis is possible. Countries must repay EFF resources over a period of 4½ to 10 years. (See Stand-By Arrangement.)

External Debt

Gross external debt, at any given time, is the outstanding amount of those actual current, and not contingent, liabilities that require payment(s) of interest and/or principal by the debtor at some point(s) in the future and that are owed to nonresidents by residents of an economy.


Face Value

The amount of principal to be repaid (for example, the redemption amount of a bond). Sometimes called initial contractual value, for loans, the face value is the original amount of the loan as stated in the loan contract. If the loan is not fully disbursed, then the face value will include future disbursements, just as the face value of a zero-coupon bond includes interest that has not yet accrued.

Financial Account

The financial account of the balance of payments consists of the transactions in foreign financial assets and liabilities of an economy. The foreign financial assets of an economy consist of holdings of monetary gold, IMF Special Drawing Rights, and claims on nonresidents. The foreign liabilities of an economy consist of claims of nonresidents on residents. The primary basis for classification of the financial account is functional: direct, portfolio, and other investment, financial derivatives, and reserve assets.

Financial Asset

Financial assets are stores of value, over which ownership rights are enforced and from which their owners may derive economic benefits—such as property income and/or holding gains and losses—by holding them over a period of time. Most financial assets differ from other assets in the system of national accounts in that they have counterpart liabilities on the part of another institutional unit.

Financial Claim

A financial claim (1) entitles a creditor to receive a payment, or payments, from a debtor in circumstances specified in a contract between them; or (2) specifies between the two parties certain rights or obligations, the nature of which requires them to be treated as financial.

Financial Derivatives

Financial derivatives are financial instruments that are linked to a specific financial instrument or indicator or commodity, and through which specific financial risks can be traded in financial markets in their own right. The value of a financial derivative derives from the price of an underlying item, such as an asset or index. Unlike debt instruments, no principal amount is advanced to be repaid, and no investment income accrues. Financial derivatives are used for a number of purposes including risk management, hedging, arbitrage between markets, and speculation. Transactions in financial derivatives should be treated as separate transactions rather than integral parts of the value of underlying transactions to which they may be linked.

Financial Liability

A financial liability (1) requires a debtor to make a payment, or payments, to a creditor in circumstances specified in a contract between them; or (2) specifies between the two parties certain rights or obligations, the nature of which requires them to be treated as financial.

Flag-of-Convenience Countries

Countries with favorable tax rules and other regulations attracting companies whose main business (originally, primarily shipping—but increasingly, production or services) is outside the country.

Flow Rescheduling

In the context of the Paris Club, the rescheduling of specified debt service falling due during the consolidation period and, in some cases, of specified arrears outstanding at the beginning of the consolidation period. (See Stock-of-Debt Operation.)

Foreign Currency

In this Guide, a foreign currency is a currency other than the domestic currency.


A mechanism, most commonly used in medium- and long-term credit, involving the purchase of promissory notes or bills of exchange by the forfaiter, at a discount. Banks or other financial services entities often own forfait companies.

Fund Credit

See Use of IMF Credit and Loans in Appendix I.


Geographical Distribution of the Flows of Financial Resources to Aid Recipients (Annual)

An annual publication of the OECD that shows the sources of official development financing to individual developing countries and territories. Included in this publication are detailed data on the geographical distribution of net and gross disbursements, commitments, terms, and the sectoral allocation of commitments.

Goodwill Clause

Clause used in Paris Club agreements under which creditors agree in principle, but without commitment, to consider favorably subsequent debt-relief agreements for a debtor country that remains in compliance with the restructuring agreement as well as with its IMF arrangement, and has sought comparable debt relief from other creditors. The clause can be intended for a future flow restructuring or a stock-of-debt operation.

Grace Period and Maturity

The grace period for principal is the period from the date of signature of the loan or the issue of the financial instrument to the first repayment of principal. The repayment period is the period from the first to last repayment of principal. Maturity is the sum of both periods: grace plus repayment periods.

Graduated Payments (or “Blended Payments”)

In the context of Paris Club reschedulings, the term refers to a repayment schedule where principal repayments gradually increase over the repayment period, reflecting an expected improvement in the repayment capacity of a debtor country. Creditors have made increasing use of the graduated payments, replacing flat payment schedules where equal amounts of principal repayments were made over the repayment period: from the creditor perspective, graduated payments provide for principal repayments starting earlier, and, from the debtor perspective, they avoid a large jump in debt service.

Grant Element

Measure of the concessionality of a loan, calculated as the difference between the face value of the loan and the sum of the discounted future debt-service payments to be made by the borrower expressed as a percentage of the face value of the loan. A 10 percent rate of discount is used by the Development Assistance Committee (DAC) and the World Bank to measure the grant element of official loans. (See also Development Assistance Committee, Concessionality Level, and Official Development Assistance.)

Grant-Like Flows

Loans for which the original agreement stipulates that payments to service the debt are to be placed into an account in the borrowing country and used in the borrowing country to the benefit of that country. These transactions are treated as grants in the OECD-DAC statistics because their repayment does not require a flow of foreign currency across the exchanges. They are nevertheless counted as external debt because the creditor is nonresident.

(The classification of these transactions as grants is not consistent with BPM5 recommendations. In BPM5, grants are regarded as transfers: transactions where a real resource or financial item is provided but no quid pro quo is received. In the above transaction, in return for a reduction in outstanding debt, domestic currency is provided.)

Gross Domestic Product (GDP)

Essentially, the sum of the gross value added of all resident producer units. For further details, see 1993 SNA, paragraphs 2.171–2.174.

Gross National Product (GNP)

GDP plus net income from abroad. For further details, see 1993 SNA, paragraphs 7.16 and 7.17. In the 1993 SNA, GNP was renamed gross national income.


Heavily Indebted Poor Countries (HIPCs)

Group of 41 developing countries classified as being heavily indebted poor countries. These are those countries that are eligible for highly concessional assistance from the International Development Association (IDA), and from the IMF’s Poverty Reduction and Growth Facility (PRGF, previously the Enhanced Structural Adjustment Facility, ESAF), and that face an unsustainable debt situation even after the full application of traditional debt-relief mechanisms.

Helsinki Package

Agreement that came into force in 1992. This agreement prohibits (with some exceptions) the provision of tied aid loans to high-income countries (based on World Bank per capita income), and for commercially viable projects. (See also Arrangement on Guidelines for Officially Supported Export Credits.)

High-Income Countries

The World Bank classifies as high-income those countries with GNP per capita income of $9,266 or more in 2000.

HIPC Initiative

Framework for action to resolve the external debt problems of heavily indebted poor countries (HIPCs) that was developed jointly by the IMF and the World Bank and was adopted in September 1996. The Initiative envisaged comprehensive action by the international financial community, including multilateral institutions, to reduce to sustainable levels the external debt burden on HIPCs, provided they build a track record of strong policy performance.

Following a comprehensive review of the HIPC Initiative, a number of modifications to the Initiative were approved in September 1999 to provide faster, deeper, and broader debt relief and strengthen the links between debt relief, poverty reduction, and social policies.

HIPC Trust Fund

The Trust Fund administered by the International Development Association (IDA) to provide grants to eligible heavily indebted poor countries (HIPCs) for relief on debt owed to participating multilaterals. The Trust Fund will either prepay, or purchase, a portion of the debt owed to a multilateral creditor and cancel such debt, or pay debt service, as it comes due. The HIPC Trust Fund receives contributions from participating multilateral creditors and from bilateral donors. Contributions can be earmarked for debt owed by a particular debtor or to a particular multilateral creditor. Donors can also provide contributions to an unallocated pool and participate in decisions regarding the use of these unallocated funds. The Trust Fund allows multilateral creditors to participate in the Trust Fund in ways consistent with their financial policies and aims to address the resource constraints for certain multilateral creditors. (See also ESAF-HIPC Trust.)

Home Country

The country of residence of the head office of the institutional entity.

Host Country

The country in which the institutional entity is located.

Houston Terms

See Lower-Middle-Income-Country Terms.


IMF Adjustment Program

An adjustment program in a member country of the IMF. An IMF-supported program is a detailed economic program that is based on an analysis of the economic problems of the member country. It specifies the policies being implemented or that will be implemented by the country in the monetary, fiscal, external, and structural areas, as necessary, in order to achieve economic stabilization and set the basis for self-sustained economic growth. It usually, though not necessarily, refers to a program that is supported by the use of IMF resources.

IMF Arrangement

Agreement between the IMF and a member country on the basis of which the IMF provides financial assistance to a member country seeking to redress its balance of payments problems and to help cushion the impact of adjustment. Nonconcessional resources are provided mainly under Stand-By Arrangements and the Extended Fund Facility (EFF), and concessional resources are provided under the Poverty Reduction and Growth Facility (PRGF).

Institutional Sector

The grouping of institutional units with common economic objectives and functions. (See also Sector Classification.)

Institutional Unit

In the 1993 SNA institutional units are the entities that undertake the activities of production, consumption, and the accumulation of assets and liabilities. In other words, economic activity involves transactions between institutional units be they households or corporations. An institutional unit is defined in the 1993 SNA as “an economic entity that is capable, in its own right, of owning assets, incurring liabilities and engaging in economic activities and in transactions with other entities” (1993 SNA, paragraph 4.2).

Insured (Guaranteed) Export Credit

An export credit that carries a guarantee, issued by an export credit agency, protecting the creditor against political, commercial, or transfer risks in the debtor country that may prevent the remittance of debt-servic e payments. (See also Export Credit Agency.)

Interbank Positions

Asset and liability positions that banks have with other banks.


For the use of principal, interest can, and usually does, accrue on the principal amount, resulting in an interest cost for the debtor. When this cost is paid periodically, as commonly occurs, it is known in this Guide as an interest payment. Interest can be calculated either on a fixed-interest-rate or on a variable-interest-rate basis. In this Guide, in contrast to a fixed interest rate, which remains unchanged over a period of years, a variable interest rate is linked to a reference index (for example, the London interbank offered rate, LIBOR), or the price of a specific commodity, or the price of a specific financial instrument that normally changes over time in a continuous manner in response to market pressures. (See also Principal.)

International Bank for Reconstruction and Development (IBRD)

The International Bank for Reconstruction and Development (IBRD) was set up as an intergovernmental financial institution in 1946 as a result of the Bretton Woods Accord. It is the original agency of the World Bank Group and is commonly referred to as the World Bank. (See also World Bank Group.)

International Banking Business (BIS Data)

For these data, the term “international” refers to banks’ transactions in any currency with nonresidents plus their transactions in foreign (nonlocal) currency with residents.

International Development Association (IDA)

IDA, established in 1960, is the concessional lending arm of the World Bank Group. IDA provides low-income developing countries with long-term loans on highly concessional terms: typically a 10-year grace period, a 40-year repayment period, and only a small servicing charge.

International Interbank Market

An international money market in which banks lend to each other—either cross-border or locally in foreign currency—large amounts of funds, usually at short term (between overnight and six months).

International Investment Position (IIP)

The IIP is the stock of external financial assets and liabilities on a specified reference date, usually the end of the quarter or year. The change in position between two end-periods reflects financial transactions, valuation changes, and other adjustments occurring during the period.

International Monetary Fund (IMF)

Following the Bretton Woods Accords and established in 1945, the IMF is a cooperative intergovernmental monetary and financial institution with 184 member countries. Its main purpose is to promote international monetary cooperation so to facilitate the growth of international trade and economic activity more generally. The IMF provides financial resources to enable its members to correct payments imbalances without resorting to trade and payments restrictions.

International Security Identification Number (ISIN)

The ISIN is a unique international security code issued by National Numbering Agencies (NNAs) to securities issued in their jurisdiction. The Association of National Numbering Agencies (ANNA) is the authority responsible for coordinating all aspects of the implementation of the ISIN numbering system. More information on the ISIN code system is available in Appendix VII of the IMF’s Coordinated Portfolio Investment Survey Guide, 2nd ed. (IMF, 2002).


Joint Venture

An enterprise in which two or more parties hold major interests.


Late Interest Charges

The additional interest that may be levied on obligations overdue beyond a specified time; in some Paris Club agreements, late interest charges have been specifically excluded from the debt consolidation.


Having exposure to the full benefits arising from holding a position in a financial asset, without having to fully fund the position with own funds.

Line of Credit

An agreement that creates a facility under which one unit can borrow credit from another up to a specified ceiling usually over a specified period of time. Lines of credit provide a guarantee that funds will be available, but no financial asset/liability exists until funds are actually advanced.

Loan Agreement

The legal evidence and terms of a loan.

Loan Guarantee

A legally binding agreement under which the guarantor agrees to pay any or all of the amount due on a loan instrument in the event of nonpayment by the borrower.

London Club

A group of commercial banks whose representatives meet periodically to negotiate the restructuring of debts of sovereign borrowers. There is no organizational framework for the London Club comparable to that of the Paris Club.

London Interbank Offered Rate (LIBOR)

The London interbank offered rate for deposits, such as the six-month dollar LIBOR. LIBOR is a reference rate for the international banking markets and is commonly the basis on which lending margins are fixed. Thus, an original loan agreement or a rescheduling agreement may set the interest rate to the borrower at six-month dollar LIBOR plus 1.5 percent, with semiannual adjustments for changes in the LIBOR rate. Also, interest rate swap rates are quoted in reference to LIBOR; that is, the quoted rate is the fixed-rate side of the swap because the floating-rate side is LIBOR.

London Terms

See Concessional Restructuring.

Long-Maturities Option

In the context of the Paris Club, an option under which the consolidated amount is rescheduled over a long period of time, but without a reduction in the present value of the debt.

Long-Term External Debt

External debt that has a maturity of more than one year. Maturity can be defined either on an original or remaining basis. (See also Original Maturity and Remaining Maturity.)

Low-Income Countries

In the context of the Paris Club, countries eligible to receive concessional terms. The Paris Club decides eligibility on a case-by-case basis, but only countries eligible to receive highly concessional IDA credits from the World Bank Group are included. The World Bank classifies as low-income those countries with GNP per capita income of $755 or less in 2000.

Lower-Middle-Income-Country Terms

In the context of the Paris Club, refers to the rescheduling terms granted, since September 1990, to lower-middle-income countries. These terms are nonconcessional and originally provided for flat repayment schedules, but in recent years graduated payment schedules have often been agreed upon for commercial credits, namely, with a maturity of up to 18 years, including a grace period of up to 8 years. Official development assistance credits are rescheduled over 20 years, including a grace period of up to 10 years. This set of rescheduling terms also includes the limited use of debt swaps on a voluntary basis. The World Bank classifies as lower-middle income those countries with GNP per capita income of between $756 and $2,995 in 2000.

Lyon Terms

See Concessional Restructuring.


Market Valuation

Amounts of money that willing buyers pay to acquire something from willing sellers; the exchanges are made between independent parties on the basis of commercial considerations only. The market value of a debt instrument should be based on the market price for that instrument prevailing at the time to which the position statement refers; that is, current market prices as of the dates involved (beginning or end of the reference period). Chapter 2 provides more details. (See also Nominal Value.)

Maturity Date (Final)

The date on which a debt obligation is contracted to be extinguished. (See also Original Maturity and Remaining Maturity.)

Maturity Structure

A time profile of the maturities of claims or liabilities. Also known as “maturity profile” or “maturity distribution.”

Mixed Credits

A credit that contains an aid element, so as to provide concessional credit terms—such as a lower rate of interest or a longer credit period.

Moratorium Interest

Interest charged on rescheduled debt. In the Paris Club, moratorium interest rates are negotiated bilaterally between the debtor and creditor countries and thus can differ among creditors. In the London Club, where all creditors are deemed to have access to funds at comparable rates, the moratorium interest rate applies equally to all rescheduled obligations under an agreement.

Multilateral Creditors

These creditors are multilateral institutions such as the IMF and the World Bank, as well as other multilateral development banks.

Multiyear Rescheduling Agreement (MYRA)

An agreement granted by official creditors that covers consolidation periods of two or more years in accordance with multiyear IMF arrangements, such as the Extended Fund Facility (EFF) and the Poverty Reduction and Growth Facility (PRGF). The modalities of the agreement are that a succession of shorter consolidations (tranches) are implemented after certain conditions specified in the Agreed Minute are satisfied, such as full implementation to date of the rescheduling agreement and continued implementation of the IMF arrangements.


Naples Terms

See Concessional Restructuring.


Country of residence of the head office of an institutional entity.

National Numbering Agencies (NNAs)

NNAs have the sole right to allocate International Security Identification Number (ISIN) codes to securities within their own jurisdiction.

Net Flow

From the viewpoint of a loan, the net flow is gross disbursements less principal repayments.

Net Present Value (NPV) of Debt

The nominal amount outstanding minus the sum of all future debt-service obligations (interest and principal) on existing debt discounted at an interest rate different from the contracted rate.

The concept is closely related to that of opportunity cost: if the debtor has a loan that bears a 3 percent rate of interest, it is clear that the debtor is better off than by borrowing at 10 percent. But by discounting the future debt-service obligations at 10 percent and comparing the outcome with the amount borrowed, the NPV will tell how much the opportunity to borrow at 3 percent, rather than at 10 percent, is worth to the debtor. The NPV can be used to assess the profitability of buying back bonds, although account needs to be taken of how the buyback is to be financed.

The Development Assistance Committee (DAC) OECD grant element is an NPV concept, since the grant element is the percentage that the NPV, using a 10 percent rate of discount, represents of the face value of the loan. In the context of the Paris Club and the HIPC Initiative, sometimes present value is misdescribed as NPV. (See Present Value, Concessionality Level, and Grant Element.)

Net Resource Transfer

A net resource transfer is a current account deficit excluding any net interest payments.

Nominal Value

The nominal value of a debt instrument is the amount that at any moment in time the debtor owes to the creditor at that moment; this value is typically established by reference to the terms of a contract between the debtor and creditor. The nominal value of a debt instrument reflects the value of the debt at creation, and any subsequent economic flows, such as transactions (for example, repayment of principal), valuation changes (independent of changes in its market price), and other changes. Conceptually, the nominal value of a debt instrument can be calculated by discounting future interest and principal payments at the existing contractual interest rate(s) on the instrument; the latter may be fixed-rate or variable-rate. Chapter 2 provides more details. (See also Market Valuation.)

Nonconsolidated Debt

The debt that is wholly or partly excluded from rescheduling. It has to be repaid on the terms on which it was originally borrowed, unless creditors agree otherwise.

Notional (Nominal) Amount of a Financial Derivatives Contract

The notional amount is that underlying a financial derivatives contract and is necessary for calculating payments or receipts, but which may or may not be exchanged.


OECD Working Party on Export Credits and Credit Guarantees

This is a forum for discussing export credit issues and for exchanging information among 28 of the 29 member countries of the OECD (only Iceland does not participate).

Official Development Assistance (ODA)

Flows of official financing administered with the promotion of the economic development and welfare of developing countries as the main objective, and which are concessional in character with a grant element of at least 25 percent (using a fixed 10 percent rate of discount). By convention, ODA flows comprise contributions of donor government agencies, at all levels, to developing countries (“bilateral ODA”) and to multilateral institutions. ODA receipts comprise disbursements by bilateral donors and multilateral institutions. Lending by export credit agencies—with the pure purpose of export promotion—is excluded.

Official Development Assistance (ODA) Loans

Loans with a maturity of over one year meeting the criteria set out in the definition of ODA, provided by governments or official agencies and for which repayment is required in convertible currencies or in kind.

Official Development Bank

A nonmonetary financial intermediary controlled by the public sector. It primarily engages in making long-term loans that are beyond the capacity or willingness of other financial institutions.

Official Development Finance (ODF)

Total official flows to developing countries excluding (1) officially supported export credits, (2) official support for private export credits (both are regarded as primarily trade promoting rather than development oriented), and (3) grants and loans for nondevelopmental purposes. ODF comprises official development assistance (ODA) and other official development finance flows.

Officially Supported Export Credits

Loans or credits to finance the export of goods and services for which an official export credit agency in the creditor country provides guarantees, insurance, or direct financing. The financing element—as opposed to the guarantee/insurance element—can be extended by an exporter (supplier’s credit), or through a commercial bank in the form of trade-related credit provided either to the supplier, or to the importer (buyer’s credit). It can also be extended directly by an export credit agency of the exporting countries, usually in the form of medium-term finance as a supplement to resources of the private sector, and generally for export promotion for capital equipment and large-scale, medium-term projects. Under the rules of the Arrangement on Guidelines for Officially Supported Export Credits covering export credits with duration of two years or more, up to 85 percent of the export contract value can be officially supported.

Offshore Financial Center

Countries or jurisdictions with financial centers that contain financial institutions that deal primarily with nonresidents and/or in foreign currency on a scale out of proportion to the size of the host economy. Nonresident-owned or -controlled institutions play a significant role within the center. The institutions in the center may well gain from tax benefits not available to those outside the center.

Organisation for Economic Co-operation and Development (OECD)

The OECD provides governments of its member countries with a setting in which to discuss, develop, and perfect economic and social policy. The exchanges may lead to agreements to act in a formal way, but more often, the discussion makes for better-informed work within government on the spectrum of public policy and clarifies the impact of national policies on the international community. The chance to reflect and exchange perspectives with other countries similar to their own is provided. The OECD’s objectives are to promote growth, employment, free trade, and a rising standard of living in both member countries and nonmember countries.

Original Maturity

The period of time from when the financial asset/liability was created to its final maturity date.

Other Official Flows (OOFs)

Official flows of a creditor country that are not undertaken for economic development purposes or, if they are mainly for development, whose grant element is below the 25 percent threshold that would make them eligible to be recorded as ODA. They include export credits extended or rescheduled by the official sector.

Own Offices

Different offices of the same entity, including head offices, branch offices, and subsidiaries. Also sometimes called “related offices.”


Paris Club

An informal group of creditor governments that has met regularly in Paris since 1956 to reschedule bilateral debts; the French treasury provides the secretariat. Creditors meet with a debtor country to reschedule its debts as part of the international support provided to a country that is experiencing debt-servicing difficulties and is pursuing an adjustment program supported by the IMF. The Paris Club does not have a fixed membership, and its meetings are open to all official creditors that accept its practices and procedures. The core creditors are mainly OECD member countries, but other creditors attend as relevant for a debtor country. Russia became a member in September 1997.

Political Risk

The risk of nonpayment on an export contract or project due to action taken by the importer’s host government. Such action may include intervention to prevent transfer of payments, cancellation of a license, or events such as war, civil strife, revolution, and other disturbances that prevent the exporter from performing under the supply contract or the buyer from making payment. Sometimes physical disasters such as cyclones, floods, and earthquakes come under this heading.

Post-Cutoff-Date Debt

See Cutoff Date.

Poverty Reduction and Growth Facility (PRGF)

An IMF facility known until November 1999 as the Enhanced Structural Adjustment Facility (ESAF). The PRGF is available to those countries that are facing protracted balance of payments problems and are eligible to borrow on concessional terms under the International Development Association (IDA). The PRGF supports programs that are consistent with strategies elaborated by the borrowing country in a Poverty Reduction Strategy Paper (PRSP). The PRSP is a comprehensive, nationally owned strategy that is prepared by the borrowing country and endorsed in their respective areas of responsibility by the Boards of the IMF and World Bank. Funds are provided at an annual interest rate of 0.5 percent. They are repayable over 10 years, including a grace period of 5½ years. (See Structural Adjustment Facility.)


In the context of export credits, the amount paid, usually in advance, by the party to an export agency for its facilities. Cover will often not be fully effective until the premium has been paid. Premiums are normally calculated on the basis of the exposure, length of credit, and the riskiness of transacting with the importing country. Premium income, an important source of revenue for export credit agencies, is intended to cover the risk of nonpayment of the credit.


The partial or full repayment by the borrower, perhaps at a discount, of an outstanding debt obligation in advance of the maturity date. The prepayment may be at a discount from the current outstanding principal amount.

Present Value

The present value is the discounted sum of all future debt service at a given rate of interest. If the rate of interest is the contractual rate of the debt, by construction, the present value equals the nominal value, whereas if the rate of interest is the market interest rate, then the present value equals the market value of the debt.

In debt-reorganization discussions, the present value concept is used to measure, in a consistent manner, the burden sharing of debt reduction among creditors. This can be illustrated by the following example.

Debtor A owes 100 to both creditor B and creditor C. The maturity of both loans is the same. Creditor B’s loan has an interest rate of 3 percent and that of C an interest rate of 6 percent. The “market rate” is assumed to be 8 percent—that is, B and C could have lent the money at this higher rate. So, for both B and C, the opportunity cost of lending at their respective interest rates, rather than at the market rate, can be calculated by discounting future payments at the market rate of 8 percent (present value), and comparing the outcome with the outstanding nominal value of 100. If PV(B) represents the present value for B and PV(C) represents the present value for C, then:

PV(B) < PV(C) < 100

PV(B) is less than PV(C) because the size of the future payments to be made by A to B is less than those to be made to C. In turn, the payments by A to C are less than would have been the case if a market rate of interest had been charged. This is illustrated by the annual interest payments. Debtor A would annually pay 3 to B; 6 to C; and 8 at the market rate of interest.

In deciding upon burden sharing of debt reduction, since B’s claims on A are already lower than those of C, despite the same nominal value, debt reduction required from B might well be less than that required from C. So, it can be seen that by using a common interest rate to discount future payments, the burden on the debtor of each loan can be quantified in a comparable manner.

Present Value of Debt-to-Exports Ratio (PV/X)

Present value (PV) of debt as a percentage of exports (usually of goods and services) (X). In the context of the Paris Club and HIPC Initiative, sometimes present value is misdescribed as net present value (NPV). In this context NPV/X has the same meaning as PV/X.

Previously Rescheduled Debt

Debt that has been rescheduled on a prior occasion. This type of debt was generally excluded from further rescheduling in both the Paris and London Clubs until 1983. Since then, however, previously rescheduled debt has frequently been rescheduled again for countries facing acute payment difficulties.


The provision of economic value by the creditor, or the creation of debt liabilities through other means, establishes a principal liability for the debtor, which, until extinguished, may change in value over time. For debt instruments alone, for the use of the principal, interest can, and usually does, accrue on the principal amount, increasing its value.

Principal Repayment Schedule

The repayment schedule of principal by due date and installment amount.

Private Creditors

Creditors that are neither governments nor public sector agencies. These include private bondholders, private banks, other private financial institutions, and manufacturers, exporters, and other suppliers of goods that have a financial claim.


Funds set aside in an entity’s account for potential losses arising from financial claims that are not serviced by the debtor, and/or from claims on the entity arising out of insurance cover and/or guarantees given. In many export credit agencies’ accounts, provisions are divided into general and specific provisions. General provisions apply to the overall business, while specific provisions are on a case-by-case basis. Banks make provisions.

Public Debt

The debt obligations of the public sector.

Public External Debt

The external debt obligations of the public sector.


Quantitative (or Cover) Limits

A ceiling on the amount of insurance or credit that an export credit agency will provide under certain circumstances. Limits can apply to individual buyers or to total exposure on buying countries or to maximum contract sizes.



Repayments made to an export credit agency by a borrowing country after the agency has paid out on claims by exporters or banks.


See Debt Refinancing.

Reinsurance by Export Credit Agencies

Export credit agencies may reinsure amounts originally insured by a private sector insurer or commercial bank (some large official agencies are also providing reinsurance for smaller official agencies). For example, a private insurer might keep the commercial risk of a loan on its own books, but seek reinsurance against specific political risks. Also, some export credit agencies may receive reinsurance from their governments or purchase it in the private reinsurance market.

Remaining (Residual) Maturity

The period of time until debt payments fall due. In the Guide, it is recommended that short-term remaining maturity of outstanding external debt be measured by adding the value of outstanding short-term external debt (original maturity) to the value of outstanding long-term external debt (original maturity) due to be paid in one year or less.

Repayment Period

The period during which the debt obligation is to be repaid.


A revision of the terms of repayment of a debt obligation.

Reporting Banks

In BIS terminology, all those deposit-taking institutions (plus some non-deposit-taking financial institutions) that submit data to be included in the BIS International Banking Statistics.

Repudiation of Debt

A unilateral disclaiming of a debt instrument obligation by a debtor.


See Debt Rescheduling.

Rescheduling Agreement

An agreement between a creditor, or a group of creditors, and a debtor to reschedule debt. This term is sometimes used loosely to apply to a debt-reorganization/restructuring agreement, one element of which is rescheduling.

Rights Accumulation Program

An IMF program of assistance established in 1990 whereby a member country with long overdue obligations to the IMF, while still in arrears, may accumulate “rights” toward a future disbursement from the IMF on the basis of a sustained performance under an IMF-monitored adjustment program. Countries incurring arrears to the IMF after end-1989 are not eligible for assistance under this program. Rights Accumulation Programs adhere to the macroeconomic and structural policy standards associated with programs supported by the Extended Fund Facility (EFF) and the Poverty Reduction and Growth Facility (PRGF), and performance is monitored, and rights accrue, quarterly.


Sector Classification

In the 1993 SNA and BPM5, institutional sectors are formed by the grouping of similar kinds of institutional units according to their economic objectives and functions.

Short-Term Commitments or Credits

In the context of export credits, short-term commitments are those that provide for repayment within a short period, usually six months (although some export credit agencies define short-term credits as those with repayment terms of up to one or two years). Short-term business represents the bulk of that of most export credit agencies and normally includes transactions in raw materials, commodities, and consumer goods.

Short-Term Debt

Debt that has maturity of one year or less. Maturity can be defined either on an original or remaining basis. (See also Original Maturity and Remaining Maturity.)

Special Accounts

In the context of the Paris Club, deposits into special accounts were first introduced in 1983 for debtor countries that had a history of running into arrears. After signing the Agreed Minute, the debtor makes monthly deposits into an earmarked account at the central bank of one of the creditor countries. The deposit amounts are roughly equal to the moratorium interest that is expected to fall due on the rescheduled debt owed to all Paris Club creditors combined, and any other payments falling due during the consolidation period. The debtor then draws on the deposited funds to make payments as soon as the bilateral agreements with the individual Paris Club creditors are signed and as other payments fall due.

Stand-By Arrangement

An IMF lending facility established in 1952 through which a member country can use IMF financing up to a specified amount to overcome short-term or cyclical balance of payments difficulties. Installments are normally phased on a quarterly basis, with their release conditional upon the member’s meeting performance criteria, such as monetary and budgetary targets. These criteria allow both the member and the IMF to assess the member’s progress in policy implementation and may signal the need for further corrective policies. Stand-By Arrangements typically cover a period of one to two years (although they can extend up to three years). Repayments are to be made over a period of 3¼ to 5 years. The expected repayment period is shortened to 2¼–4 years if the country’s external position allows it to repay earlier.

Stand-By Credit

A commitment to lend up to a specified amount for a specific period, to be used only in a certain contingency.


This is an interim agreement between a debtor country and its commercial banking creditors that defers principal repayments of medium- and long-term debt and rolls over short-term obligations, pending agreement on debt reorganization. The objective is to give the debtor continuing access to a minimum amount of trade-related financing while negotiations take place and to prevent some banks from abruptly withdrawing their facilities at the expense of others.

Stock Figures

The value of financial assets and liabilities outstanding at a particular point in time.

Stock-of-Debt Operation

In the context of the Paris Club, restructuring of the eligible stock of debt outstanding. These restructuring operations were granted to Egypt and Poland in 1991 and, partially, for Russia and Peru in 1996 and are being implemented for low-income countries under Naples, Lyon, and Cologne terms (see Concessional Restructuring), provided that certain conditions are met: the debtor country has implemented earlier flow rescheduling agreements for at least three years and has an appropriate arrangement with the IMF.

Stress Test

A stress test is a “what if” scenario that takes the world as given but assumes a major change in one or more variables in order to see what effect this would have on various indicators. For instance, for an economy, the impact on growth, inflation, and external debt of a huge change in oil prices could be considered. Stress tests are particularly useful for financial institutions: for instance, an individual entity might consider the impact on net worth of a sharp movement in financial market prices, in order to help determine the appropriate level of capital to hold.

Structural Adjustment Facility (SAF)/ Enhanced Structural Adjustment Facility (ESAF)

The SAF was established by the IMF in 1986 and is no longer operational. The ESAF was established by the IMF in 1987 and was made a permanent, rather than a temporary, facility in September 1996. It was renamed the Poverty Reduction and Growth Facility in November 1999. (See Poverty Reduction and Growth Facility.)

Subordination Strategy

The policy of Paris Club creditors is that loans extended after the cutoff date are not subject to rescheduling; therefore, pre-cutoff date loans are effectively subordinated to post-cutoff loans. (See Cutoff Date.)

Supplier’s Credit

A financing arrangement under which an exporter extends credit to the buyer.


Technical Cooperation Grants

There are two basic types of technical cooperation: (1) free-standing technical cooperation (FTC), which is the provision of resources aimed at the transfer of technical and managerial skills or of technology for the purpose of building up general national capacity without reference to the implementation of any specific investment projects; and (2) investment-related technical cooperation (IRTC), which denotes the provision of technical services required for the implementation of specific investment projects.

Terms-of-Reference Rescheduling

Paris Club rescheduling involving only a small number of creditors. Typically this does not require a rescheduling meeting between the debtor country and its creditors, with the agreement being reached through an exchange of letters.

Tied-Aid Loans

Bilateral loans that are linked to purchases of goods and services by the debtor country from the creditor country.

Toronto Terms

See Concessional Restructuring.

Total Official Flows (Gross or Net)

The sum of official development assistance (ODA) and other official flows (OOF). Represents the total (gross or net) disbursements by the official sector of the creditor country to the recipient country.


A particular portion of a financial claim or liability with its own specific terms as opposed to the general terms governing the whole claim or liability.

Transfer Clause

A provision that commits the debtor government to guarantee the immediate and unrestricted transfer of foreign exchange in all cases, provided that the private sector pays the local currency counterpart for servicing its debt.

Transfer Risk

The risk that a borrower will not be able to convert local currency into foreign exchange, and so be unable to make debt-service payments in foreign currency. The risk normally arises from exchange restrictions imposed by the government in the borrower’s country. This is a particular kind of political risk.


Transfers are transactions where there is a transfer of a real resource or a financial item without a quid pro quo.



Funds committed by the creditor but not yet utilized by the borrower. In BIS terminology, this refers to open lines of credit that are legally binding on lending banks. A transaction in the balance of payments or a position in the international investment position ( IIP) is only recorded when an actual disbursement takes place.

Unrecovered Claims

See Claim Payments.

Upper-Middle-Income Countries

In the context of the Paris Club, countries not considered lower-middle-income or low-income countries. These countries receive nonconcessional rescheduling terms, originally with flat repayment schedules, but in the 1990s increasingly with graduated payment schedules that have a maturity of up to 15 years and a grace period of 2–3 years for commercial credits. Official development assistance credits are rescheduled over 10 years, including a grace period of 5–6 years. The World Bank classifies as upper-middle-income those countries with GNP per capita income of between $2,996 and $9,265 in 2000.


World Bank Group

Founded in 1944, the World Bank Group (or World Bank) consists of five closely associated institutions: the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID). The World Bank is the world’s largest source of development assistance; its main focus is on helping the poorest people and the poorest countries through IDA credits (concessional lending) and on providing IBRD loans to low- and middle-income countries for developmental purposes. To achieve its poverty-reduction mission, the World Bank focuses on investing in people, particularly through basic health and education; protecting the environment; supporting and encouraging private business development; and promoting reforms to create a stable macroeconomic environment and long-term economic growth.


A financial claim that a creditor regards as unrecoverable and so no longer carries on its books.

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