14. Country Experience

International Monetary Fund
Published Date:
June 2003
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14.1 This chapter provides case studies of country experience in various aspects of the compilation and use of external debt data. In addition, Box 14.1 discusses the European Union statistics on the excessive deficit procedure. The country case studies are provided in alphabetical order:

  • Australia: Experience in compiling external debt data—register compilation and form design;
  • Austria: Measurement of IIP;
  • Canada: Measurement of foreign portfolio investment in Canadian bonds;
  • Chile: Reconciliation of external debt statistics with BIS International Banking Statistics;
  • India: How debt information systems are being used for external debt management;
  • India: Monitoring and management of nonresident deposits in India;
  • Israel: Measurement of external debt;
  • Mexico: Registration of private debt;
  • New Zealand: Experience in collecting foreign currency hedging information;
  • Philippines: System for monitoring the external debt of the private sector;
  • Turkey: Measurement of short-term external debt; and
  • Uganda: Data requirements for the HIPC Initiative.

Box 14.1.European Union (EU): Statistics on the Excessive Deficit Procedure

Article 104c of the 1991 Treaty on Monetary Union (the Treaty) states that EU countries should avoid excessive government deficits, and that the European Commission (the Commission) should monitor the development of the budgetary situation and of the stock of government debt. In particular, the Commission should examine compliance with budgetary discipline on the basis of whether the ratio of the planned or actual government deficit to GDP and the ratio of debt to GDP exceed a reference value. The reference values are 3 percent for government deficit, and 60 percent for debt, as specified in the Protocol on the excessive deficit procedure (the Protocol) that is annexed to the Treaty.

The Protocol defines government as general government (that is, central government, state and local government, and social security funds); the deficit as net borrowing as defined in the European System of Accounts: ESA 1995 (Eurostat, 1996), ESA95; and debt as total gross debt at nominal value outstanding at the end of the year, consolidated between and within the sectors of general government. The Protocol also requires EU countries to report their planned or actual deficits and the levels of their debt promptly and regularly to the Commission, which in turn provides the statistical data used for the application of the Protocol to the Council of Finance Ministers.

This basic legislation is further developed in Council Regulation 3605/93 on the application of the Protocol (the Council Regulation). Council Regulation 475/2000 revised this Regulation, in order to introduce the references to ESA95. The Council Regulation defines government debt as total gross debt at nominal value (face value) outstanding at the end of the year for the general government sector, excluding those liabilities for which the corresponding financial assets are owned by the general government sector.

Government debt is constituted by the liabilities of general government in the following categories: currency and deposits; securities other than shares (excluding financial derivatives); and loans, as defined in ESA95.

Some debt instruments, such as trade credits, and other accounts payable, are not included in the list of debt liabilities (because of practical considerations). Liabilities denominated in foreign currency, or exchanged from one foreign currency through contractual agreements to one or more other foreign currency, shall be converted into the other foreign currency at the rate agreed upon in those contracts and shall be converted into the national currency on the basis of the representative market exchange rate prevailing on the last working day of each year. This would also apply in the case of liabilities denominated in the national currency and exchanged through contractual agreements to a foreign currency. Finally, liabilities denominated in a foreign currency and exchanged through contractual agreements to the national currency shall be converted into the national currency at the rate agreed upon in those contracts.

The Council Regulation also establishes the procedure for transmitting data to the Commission. As from the beginning of 1994, EU member states were required to report their planned and actual government deficit and levels of government debt to the Commission twice a year, the first time before March 1 of the current year, and the second time before September 1 of the current year. Before March 1 of year n, EU member states report to the Commission their estimate of the level of actual government debt at the end of year n − 1 and their levels of actual government debt for years n − 2, n − 3, and n − 4. Concerning the deficit, they report to the Commission their planned government deficit for year n, an up-to-date estimate of their actual government deficit for year n − 1, and their actual government deficits for years n − 2, n − 3, and n − 4. They simultaneously provide the Commission for years n, n − 1, and n − 2 with their corresponding public accounts budget deficits according to the definition that is given most prominence nationally and the figures that explain the difference between these public accounts budget deficits data and their government deficit. Before September 1 the data required are the same, but instead of the estimate of the level of actual government debt at the end of year n − 1, actual data are to be provided. In member states, the exercise requires close coordination among the ministry of finance, national statistical institute, and central bank.

EU member states also provide the Commission with the figures for their government investment expenditure and interest expenditure (to calculate other ratios such as, for example, primary deficit—that is, the amount of the deficit without interest expenditure). Finally, EU member states also provide the Commission with a forecast of their GDP for year n and the actual amount of their GDP for years n − 1, n − 2, n − 3, and n − 4 (in order to calculate the ratios).

As mentioned above, the conceptual framework used for the measurement of government deficits and debt is the ESA95. In recent years, ensuring consistent recording treatment in all of the EU member states of economic and financial transactions that are not clearly defined in ESA95 has been a problem. With the aim of ensuring consistency of recording practice, Eurostat has developed a well-defined procedure for dealing with these transactions, including statisticians from all member states working together through task forces, working groups, and other committees. Following this, Eurostat consults the Committee on Monetary, Financial, and Balance of Payments Statistics (CMFB), comprising senior representatives of central banks and national statistical institutes, as well as the European Central Bank, Eurostat, and other Commission services. After having heard the position of its members, the CMFB formulates, and presents to Eurostat, its (nonbinding) opinion. Eurostat makes the final decision in complete independence and neutrality, according to purely technical criteria. It does not decide on the individual cases as they relate to the EU member states, but rather decides on the principles of accounting treatment of specific transactions. Once determined, the Eurostat decision automatically applies to similar cases in all the EU countries. The decision on each issue is recorded in a methodological note addressed to the institutions concerned, notably the Commission, CMFB, central banks, and national statistical institutes. It is also disseminated through press releases and the Internet. The main methodological decisions have been collected in the ESA95 Manual on Government Deficit and Debt (Eurostat, 2000).


Experience in Compiling External Debt Data: Register Compilation and Form Design1

14.2 The Australian Bureau of Statistics (ABS) compiles and publishes balance of payments and IIP statistics quarterly according to the recommendations of both the BPM5 and 1993 SNA. External debt data are a part of an extended IIP dataset, which has been augmented to provide data series that meet high-priority, domestic-user requirements.

14.3 The main data source for IIP data is the Survey of International Investment (SII). This quarterly survey collects information from business enterprises, government, investment managers, and custodians, as appropriate, about investment activity into and out of Australia. Based on Australia’s long experience, this case study provides advice on compiling a register of potential respondents to an external debt survey and on methods for survey form design that will help ensure consistent and high-quality data. Also, for information, some of the external debt data series Australia disseminates that are additional to those included in the IIP data are listed.

Developing a register of respondent entities

14.4 In an open economy with a freely floating exchange rate for nearly two decades, investment flows to or from Australia are not subject to controls or regulatory approval (although for some types of corporations, approval of foreign ownership is required). In order to measure external debt, surveys are undertaken of organizations from which the data can best be obtained. Some organizations are targeted for their role as end-investors/investees, and others are targeted as intermediaries (investment managers or custodians) to report on behalf of their clients. To undertake such surveys, a register of entities to approach has been developed and is maintained by the ABS.

14.5 The main ABS business register—used for surveys of the economy, and generally sourced from business taxation reports—is focused more on operating businesses with employees, rather than enterprise groups. It includes a large number of organizations that have no international investments but is deficient in its coverage of those parts of businesses involved in financing that may have no employees but through which all the international finance accessed by the group is channeled. Thus, any survey population drawn randomly from this large register for measuring international investment would be inefficient in terms of reporting load, public resources, and quality assurance. The ABS has therefore developed a separate register of enterprise groups with international involvement. Sources of information on enterprises for this specialized international investment register, and other suggested sources, are as follows:

  • Existing registers of businesses maintained by the statistical agency or other government agencies. Enterprises on this register can be approached with brief exploratory surveys to ascertain whether they have significant external debt liabilities.
  • Existing business data collections already run by the statistical agency or other government data-collection agencies. Information necessary for an international investment register may be elicited from another survey, either by direct inspection of the other survey’s register or by adding one or two exploratory questions to that survey. A range of ABS surveys include questions that can identify potential respondents to external debt surveys, and vice versa.
  • Government administrative sources. Depending on local legislation and administrative arrangements or the authority of the collection agency, these sources might include:
    • – taxation records, files, or lists;
    • – information held by foreign investment approval or monitoring boards;
    • – information held by other regulatory authorities, such as lists of entities coming under their supervision and data monitored through supervision requirements (for example, registered banks, other deposit-accepting institutions, securities brokers, investment managers, investment advisers, and authorized pension or mutual funds);
    • – listings of registered custodial businesses that can hold debt securities and other assets on behalf of nonresidents, and lists of registered investment managers that can act on behalf of nonresidents;
    • – statutory company reports and company registration details;
    • – records held in foreign exchange control or international transaction-reporting systems—for example, records identifying the originators or recipients of large portfolio investment flows (this source is not available in Australia);
    • – submissions made to the Foreign Investment Review Board, various materials held by the Reserve Bank of Australia, and annual reports of other government bodies; and
    • – other official and regulatory sources, many publicly available, that include annual statutory accounts for public companies held by the Australian Securities and Investment Commission.
  • Media reports. Newspapers and periodicals are particularly useful sources for information on potential reporting entities. A high proportion of significant transactions are reported in the media, and these are used not only to update the register but also to confirm data reported in the SII. Apart from significant transactions, the media have a wide coverage of smaller transactions, and a high proportion of unusual transactions. The use of traditional print media can be supplemented with information obtained electronically from commercial business news services and via the Internet.
  • Publicly available databases from which a wide variety of information is available. The information differs in completeness and accuracy, and in the extent to which it is of use for a survey of international investment. These sources include the stock exchange register, possibly packaged by the stock exchange with additional information; commercial equity registries’ information services; international credit rating agencies’ publications (Moody’s, Standard & Poor’s, etc.); and market research reports or services, such as reviews by accounting or brokerage firms. The ABS uses several Australian Stock Exchange products such as monthly updates of share issues listed on the exchange, and their prices and indices.
  • Trade associations, and their reports and releases, can be a useful source. Apart from the public relations and liaison aspects of a close relationship between the statistical agency and trade associations, many either list publicly or can make available lists of members, often with indications of their importance or the range of services provided. Particularly in the financial sector, their members are also likely to be significant users of official statistics and thus have a vested interest in accurate data and assisting statistical or data collection agencies.

14.6 As enterprises are recognized from the various sources above as potentially engaged in cross-border finance, they are included in an “exploratory survey,” which identifies if they have any foreign investment activity, and if so whether they have a parent organization in Australia from which data should be obtained. The “exploratory survey” also collects some broad investment benchmark information for use in designing the ongoing investment survey.

14.7 The international investment survey register needs to identify the legal entities in the enterprise group not only for efficiency and quality of data collection,2 but also for the identification of direct investment relationships and the categorization of some debt as direct investment capital. Periodic requests are made to the reporting organizations regarding the legal entities covered in their survey returns. This ensures that as new acquisitions are made, the survey reports capture their external debt, and that as businesses are sold off from a group, arrangements are made to continue to capture the external debt of that business.

14.8 Other sources for maintaining the information in the international investment survey register on corporate structures include a regular review of the corporate structure of the top few hundred businesses in Australia, as well as the general press and corporate registration sources listed above.

Survey form design

14.9 In collecting and compiling external debt data, the ABS places a major emphasis on the reconciliation and consistency of data. First, external debt statistics are part of a broader system of financial accounts, which allows many checks for coherence and consistency. For instance, comparing data compiled on the total size of markets for the various debt instruments with individual institutional sectors’ assets and liabilities can help identify possible gaps that might relate to external debt. Second, reporting enterprises are expected to provide balanced balance-sheet data for national accounts purposes, which helps to ensure complete coverage and accuracy in reporting and sets a framework for more detailed data on cross-border positions.

14.10 More specifically, in measuring Australia’s external debt data, the SII survey form collects inward and outward investment for the full range of debt instruments entered into by direct, portfolio, and other investors. For each debt instrument, the SII survey form is structured so that data are reported in line with the IIP reconciliation format,3 including:

  • The position (level or stock) of external financial assets and liabilities of residents at the beginning and end of the survey quarter;
  • Financial transactions (investment flows) resulting in increases and decreases in the levels of these assets and liabilities each quarter;
  • Other changes in the levels of these assets and liabilities; and
  • Income that has accrued on these assets and liabilities.

14.11 Using this IIP reconciliation format not only forces respondents to consider the consistency of the data reported, it also enables compilers to readily identify and query inconsistencies in the reported data. The ABS has found that full data on transactions, and the other reasons for the change in positions each quarter, are usually available.

14.12 The format and wording used in the collection forms, together with the wording in the detailed explanatory notes that are supplied to all respondents, are closely aligned to the wording in BPM5. The explanatory notes provide numerous examples of what should be included (and excluded) for each type of debt instrument.

14.13 One of the advantages of collecting all the data on international investment on the same form (in the case of the SII, on the same page for each instrument) is that the possibility of double counting is eliminated. Because the boundaries between debt and equity, and direct, portfolio, and other investment are subject to different interpretations, and also subject to error and mismeasurement, a valuable consistency check on the data is provided by requiring that the disaggregated data sum to a total; that is, the report form is internally consistent. Collecting debt and equity data separately, sometimes even by different agencies, inevitably creates the potential for under- and/or double counting.

14.14 To further enhance the quality of external debt statistics, a substantial proportion of Australia’s domestically issued external debt securities is measured by the reporting of individual securities owned by nonresidents. These securities are held by custodians on behalf of nonresident clients, and full identification of the holdings is obtained. Information on prices is used to estimate the transactions and price changes between the reported positions.

Extensions to IIP data

14.15 As mentioned above, the ABS has extended the IIP dataset to meet domestic users’ needs for external debt statistics. The more important extensions include:

  • A more detailed institutional sector breakdown of the debtor so that, for example, the external debt of the financial sectors can be analyzed in more detail than set out in BPM5;
  • A public/private ownership dissection of Australian debtors;
  • A presentation of external assets held in the form of debt instruments, as well as external debt liabilities so that each institutional sector’s gross debt can be seen in the context of each sector’s net external debt;
  • A presentation of external debt by location of issuance (debt issued in Australia and debt issued abroad); and
  • The classification of external debt assets and liabilities both by type of currency and by remaining maturity (based on the final maturity date of the debt).

14.16 Remaining-maturity data on a final maturity date basis can be used to approximate debt-service schedules for principal, given that, for Australia, the amounts of part payments of principal on external debt are small and so are not separately collected. The security-by-security reporting for debt issued by entities domiciled in Australia provides precise data for the cash-flow elements of debt amortization schedules, but the requirement for separating principal and interest in amortization schedules necessitates interest rate forecasting for other instruments.


Measurement of IIP4

14.17 External debt statistics of Austria are derived from the information published on the IIP. This case study sets out the process by which the Austrian IIP data are compiled, and their relationship with external debt and financial accounts data. There are three sections, covering the collection system for the IIP and balance of payments—because some IIP items are compiled by accumulation of flows; the method of compiling the IIP, including all particularities of individual items; and the links among the IIP, external debt, and the financial accounts data.

The collection system

14.18 The current collection system for balance of payments and IIP data was introduced in 1991. It is a “closed system” in that it is self-balancing, with beginning and closing stocks reported along with transactions. The stocks data are used for the compilation of the IIP (mainly other investment), and the transactions are incorporated into all areas of the balance of payments. There is continuous monitoring of foreign payments.

14.19 Reports are received from the banks and nonbanks, with the bank reports comprising information on the banks’ accounts held abroad, and on accounts held with domestic banks by foreign banks and nonbanks. Nonbanks report on their accounts held abroad, intercompany working balances, and clearing accounts. Detailed transactions data reported include the nature of the counterparty, Austrian or foreign, and, if the latter, the country of residence. Reports have to be provided for all combination of currency, country, and type of accounts relevant to the balance of payments (short-/long-term, deposits/loans, assets/liabilities, etc.). Annual and quarterly surveys of trade credits are incorporated both in the balance of payments and the IIP.

14.20 The Oesterreichische Nationalbank (ONB) maintains both a comprehensive company database and a comprehensive database of securities. The company database is used to make correct sectoral allocations of reported transactions, particularly in the area of income, transfers, and the financial account. The securities database is used in conjunction with portfolio investment collected from banks and nonbanks to produce outstanding stocks of portfolio investment (see the section “Measurement of Portfolio Investment,” below).

14.21 Annual surveys of direct investment stocks are conducted, and information on the direct investment relations between Austrian and foreign companies derived from these surveys are used to identify transactions and stocks of direct investment loans, and flows of direct investment income reported elsewhere. In combination with general economic indicators (such as nominal GDP) and expectations, the survey data are used to estimate reinvested earnings. To anticipate and identify direct investment transactions, information is taken from various news sources.

Reporting agents

14.22 In order to reduce the reporting burden for respondents, direct investment below certain thresholds (below Austrian schillings (ATS) 5 million for inward investment and below ATS 10 million for outward investment) only have to be reported every two years by alternate surveys; that is, half of the enterprises concerned report in the first year and the other half in the second year. For those enterprises that do not report direct investment stocks for a certain period, estimates are made on the basis of the report of the previous year.

(i) The banking sector: The following entities are required to report: credit institutions, building and loan associations (Bausparkassen), enterprises that carry out factoring business, and all enterprises undertaking business similar to “banking.” According to the Foreign Exchange Act (Kundmachung DL 1–3/91, 2/93, 1/96), banks are required to report, on a daily/monthly basis, all transactions carried out via the domestic banking system, including transactions on behalf of their customers. More specifically, they report the following:

  • All settlements carried out through the accounts of domestic banks held abroad and through the accounts of foreign banks and nonbanks held by domestic banks as well as the beginning and end-of-month stocks of these accounts (Devisentableaumeldung);
  • All sales/purchases and (beginning/end-of-month) stocks of foreign currency transactions (Valutentableaumeldung, over-the-counter or OTC money); and
  • Monthly stocks of securities, as defined in the BPM5, that banks acting as primary custodians hold for their own account or on behalf of their resident and nonresident customers (Wertpapierstandmeldung).

14.23 In addition, banks (acting as a direct investor and/or as a direct investment company) are requested to respond to an annual survey concerning direct investment if the value of the nominal capital of the direct investment exceeds the threshold of ATS 1 million and 10 percent of overall nominal capital, or if the nominal capital does not exceed ATS 1 million but the balance-sheet total of the direct investment enterprise exceeds ATS 500 million and the 10 percent criterion is fulfilled.

(ii) The nonbank sector (enterprises and households not included in (i)): According to the Foreign Exchange Act (Kundmachung DL 1–3/91, 2/93, 1/96), nonbanks are required to report on a monthly basis all settlements and positions on accounts held with banks abroad as well as short-term and long-term loans granted to nonresidents or provided by nonresidents to residents, if the annual volume of transactions exceeds a certain threshold (Auslandskontenmeldung), or otherwise on an annual basis. Nonbank private companies and private households (acting as a direct investor and/or as a direct investment company) are requested to respond to an annual survey concerning direct investment if the value of the nominal capital of the direct investment exceeds the threshold of ATS 1 million and 10 percent of overall nominal capital. In addition, companies have to submit quarterly and annual surveys (covering a selected sample and a full range, respectively) on trade credits. In addition, nonbanks (including general government) are requested to report annually their holdings of domestic and foreign securities held outside the custody of domestic banks (held in safekeeping, held in custody with banks, etc.), unless the total market value of these holdings of securities is less than the threshold of ATS 1 million at the end of the year.

(iii) General government: Public authorities report all transactions of relevance to the balance of payments to the ONB. In addition, some data that are used for checking purposes are received from the Federal Ministry of Finance (particularly concerning the area of current and capital payments of the public sector vis-à-vis EU institutions).

(iv) Monetary authority: The ONB reports on the external monetary position and monthly flows and stocks in the same way as the banking sector. Special quarterly reports on stocks and flows are also compiled by the Accounting Department of the ONB for balance of payments and IIP purposes. These reports are mainly used to check monthly flows, to obtain data on an accrual basis, and to calculate reserve assets for the IIP.

Measurement of portfolio investment

14.24 Portfolio investment flows and stocks are measured through a comprehensive and reliable compilation system that is based on the reporting of securities on a security-by-security basis. To facilitate this work, a database of individual securities is maintained (see below). This system, developed during 1988–89, is not only reliable but provides the flexibility to meet changing user requirements and market circumstances. Previously, the experience had been that with the fast-developing international financial markets, instructions to reporting agents were becoming increasingly complicated in order to meet the needs of the balance of payments and IIP.

14.25 With the present system, the banks report transactions and stocks of individual securities, identifying each with the ISIN code. The Austrian banks appreciate using the ISIN codes since these codes are required for their own business purpose (for example, the settlement of security transactions). Once a security is reported with an ISIN code, it can be identified in the securities database that the ONB maintains. The database contains the necessary balance of payments and IIP classifications (the nature of the financial instrument, the sector and country of issuer, etc.). Because securities are reported on an individual basis, transactions and stocks can be reconciled.

14.26 The securities database was developed and is maintained by the ONB. The core of the database relies on information purchased from the Austrian and German national numbering agencies (NNAs)—the Oesterreichische Kontrollbank (OKB) and the German Wertpapiermitteilungen. The OKB provides data on securities issued by residents in the domestic market, and Austrian schilling or euro-denominated securities issued by nonresidents in Austria; the Wertpapiermitteilung provides data on securities issued in foreign markets, including securities issued by Austrian residents and denominated in currencies other than the Austrian schilling or euro. Also, reporting banks have to supply information on securities that to the best knowledge of the reporting bank do not have an ISIN code—so-called internal securities. If information on the same security is received from more than one institution, then the OKB data are usually given preference. Information on current market prices is obtained from the Telekurs. The database is updated on a weekly basis.

14.27 Using the information gathered on individual securities, the Statistics Department generates an “internal master file” of data, which is used by the ONB for the compilation of portfolio investment transaction and stock data. In early 2000, this master file contained around 150,000 debt securities and some 50,000 equity securities, thus covering around 99 percent of the securities traded by Austrian residents on a cross-border basis.

14.28 Comprehensive quality checks and amendments are made by the ONB in order to render the information received from external sources suitable for use in the IIP and balance of payments compilation. These checking procedures comprise formal controls (completeness of information), as well as plausibility checks. Detailed quality checks are required not least because the NNAs maintain their databases for their customers (banks), whose business needs for information differ from those of statistical compilers. Consequently, data fields that are particularly important for statistical purposes (for example, outstanding amount) are not always of the desired quality.

Compiling the IIP

14.29 An annual IIP statement is drawn up consistent with the recommendations of BPM5, with a few exceptions. A geographical attribution between euro-area and non-euro-area data is possible to a substantial extent. This section explains the compilation procedure for individual functional categories of the IIP.

Direct investment

14.30 For direct investment, Austria follows the recommendations of the international standards, including both the application of the so-called directional principle (that is, assets and liabilities reported according to the direction of the direct investment relationship) and the inclusion of reinvested earnings. The annual direct investment survey provides final position data some 18 months after the reference end-period (time t). Provisional position data, available six to nine months after the reference end-period (t), are calculated by adding accumulated flows (including reinvested earnings) to the previous end-reference period (t– 1).

14.31 One exception is data for real estate, which are compiled exclusively using accumulated flows (approximately 7 percent on the assets side and 2 percent on the liabilities side of overall assets and liabilities of direct investment stocks, respectively).

14.32 Because the data from the annual survey are valued at book value, the reconciliation with recorded transactions (at market value) is problematic. Although price and other adjustments (in the sense of reclassifications) can be identified to a limited extent, “other adjustments” (in the sense of the residual adjustment between changes in stocks and transactions) can be very high. Exchange rate adjustments are calculated on the basis of average monthly exchange rates when IIP positions are derived from the accumulation of flows, and end-of-month exchange rates when IIP positions are directly measured.

14.33 Market valuation can be compiled additionally based on an “earning-method estimation” (that is, discounting potential future cash earnings).

Portfolio investment

14.34 Portfolio investment data are compiled in conformity with the BPM5 recommendations, including the appropriate instrument and sector attribution. As described above, the security-by-security reporting system combined with the securities database is at the core of the compilation of these data—on both stocks and transactions, and inward and outward investment. On the asset side, the monthly bank and annual nonbank reports provide reliable position data on domestic sector asset holders.

14.35 As a consequence of the security-by-security approach, stocks, transactions, exchange rate, and price adjustments are closely reconciled, with remaining differences calculated by residual; other adjustments for sectoral and instrument adjustments can be identified; and stocks are valued at market prices, including interest costs that have accrued. Country attribution is possible for the asset information, based on the country of residence of the issuer, but the country of the owner of the domestic debt liability is not known.

Financial derivatives

14.36 IIP data for financial derivatives are a combination of stocks (approximately 20 percent of the total) and accumulated transactions (approximately 80 percent of the total). These data largely cover OTC (or off-exchange) derivatives. The stock data, reported using ISIN codes, are highly reliable and are calculated at market prices; for other reported data no clear valuation principle can be identified, although it is believed they are measured at close to market value. Stocks are available on a net basis; there are no fully reliable stock data available on a gross basis.

Other investment

14.37 Other investment data are compiled mainly in conformity with the BPM5 recommendations, with the exception of trade credits between affiliated enterprises, which are indistinguishably included in the “other investment” item instead of being recorded under direct investment. A combination of stocks (approximately 90 percent of the total) and accumulated flows (approximately 10 percent) is used to calculate these data. The stock data are mainly derived from the settlement system with the exception of trade credits, which are measured directly from quarterly and annual surveys. For loans and other assets/liabilities where positions are below the thresholds for direct reporting by reporting agents, accumulated flows are used to calculate positions.

14.38 Reporting agents have to reconcile, in the same report, stocks and flows for “other investment” accounts. Price adjustments (mainly relating to asset trading), other adjustments (reclassifications), and residual adjustments (reporting errors or stock corrections) can be taken directly from the reports provided. Exchange rate adjustments are calculated using average monthly exchange rates for transactions and for reported adjustments, and end-of-month exchange rates for stocks. Other investment assets and liabilities are based on nominal values.

Reserve assets

14.39 The stock position for reserve assets is directly reported by the Accounting Department of the ONB in the form of special quarterly reports. These reports comprise stocks, transactions, and all kinds of adjustments. The data are taken directly from the accounting database. Stocks and transactions of currency and deposits are not included in the special quarterly reports because they are already covered by the regular monthly reports submitted by the ONB (see item (iv) under “Reporting Agents,” above). Discrepancies between accounting principles and BPM5 concepts are seen as being insignificant. Stocks are reported on a market value basis, including closing market prices for gold and closing midmarket exchange rates.

Relationship of IIP with external debt and financial accounts

Gross external debt

14.40 Austria’s gross external debt position can be derived from the IIP. At present, external debt data are compiled at market price and are broken down by sector. Data on a remaining-maturity basis are available in the case of debt securities.

Financial accounts

14.41 The financial accounts implemented by the ONB in accordance with the European System of Accounts: ESA95 (Eurostat, 1996) cover, in the form of asset and liability statements, the financial claims and liabilities of all institutional sectors. The balance sheet of the “rest of the world” sector for the financial accounts draws heavily on the IIP data. Thus, the position “nonresidents’ net financial assets” (financial accounts) corresponds to the domestic sectors’ “net liabilities to the rest of the world” (IIP). The latter denotes a negative net IIP position—that is, “net claims of the rest of the world sector on Austrian residents.”


Measurement of Foreign Portfolio Investment in Canadian Bonds5

14.42 Nonresidents have been sharply increasing their investment in Canadian bonds since the 1980s. From a value of Can$56.5 billion in 1980, the investment of foreigners reached Can$393 billion by 1999, more than 40 percent of the value of all Canadian bonds outstanding. The interest on these debt obligations (Can$27.5 billion in 1999) is a major factor in the deficit for investment income in Canada’s current account. Given the magnitude and the wide diversity of bonds held by nonresidents, Canada has a detailed and complex statistical system to help ensure adequate and consistent statistics.

14.43 Data on nonresident investment in Canadian bonds is largely reported on a security-by-security basis by (1) major investment dealers, banks, insurance companies, and pension and mutual funds, on a monthly frequency, and (2) the largest debt issuers. These data are reported on a monthly basis, mainly on electronic tapes supplied by information service providers. Data are provided using a specific record layout describing the detailed characteristics of the instruments. Each month, more than 500,000 security transactions are collected, of which about 10,000 relate to Canadian bonds. Year-end position data are obtained from an annual census survey, with positions calculated according to four different methods of valuation.

14.44 The Canadian system is dependent on a database that maintains detailed characteristics on each specific bond issued. Indeed, each Canadian bond issue is identified by issuer, sector (federal government, private sector, etc.), and industrial classification; for each bond held by nonresidents the dates of issue and of maturity, the currency of issue, the interest rate, the timing of interest payments, etc. are identified; and nonresident holders are identified on the basis of their respective country of residence, when available, or at least by broad geographical area, and whether or not they are related to the Canadian issuers.

14.45 Using the detailed information on individual bonds, this case study reviews how these statistics are generated for the transactions and positions data and describes the various prices that are used to value bonds.6

Financial transactions and positions

14.46 There are four types of financial transactions that affect the position data: new issues, trade in existing securities, accrual of interest, and redemptions.

New issues

14.47 In the Canadian system, new bond issues sold to nonresidents are restricted to newly issued Canadian bonds floated directly abroad (that is, foreign issues and the portion of global issues floated in the foreign markets). Nonresident purchases of new Canadian bonds floated in the domestic market, including the domestic portion of global bonds, are classified as trade in existing issues. Transactions associated with new issues denominated in foreign currencies are entered in the system in their original currencies and are converted into Canadian dollars using the noon average exchange rate of the month in which the transactions took place. When the Canadian dollar proceeds from the new issue are known, this information is directly used as the value of the transaction.

Trading of existing bonds

14.48 Trading in Canadian bonds involving residents and nonresidents largely occurs in domestic issues, especially Government of Canada bonds. For bonds traded in the same month and year of their issue, the system deems the trading to have occurred at the date of new issue; otherwise, the trading is deemed to have occurred on the fifteenth day of the month of trading.

14.49 Bonds traded under repurchase agreements (repos) are effectively loans with the bonds used as collateral. Since respondents include them in their monthly trading, these transactions are reclassified from portfolio investment to loans. This can be easily achieved for financial intermediaries that separately identify trading of securities involving repos. Where financial intermediaries do not separately identify securities involved in repos, the system matches the sale and purchase of the same securities in a single month and evaluates a yield rate in order to identify transactions to be classified as repo transactions.

14.50 Transactions involving stripped securities—that is, the coupon payments are traded separately from the principal amount—are processed as transactions in bonds issued by the original issuer but are not linked back to the specific bond issue that was stripped. The strips are recorded as zero-coupon bonds, with income calculated as the difference between the transaction price and the redemption value.

14.51 For a number of reasons, a few security dealers do not identify transactions in existing bonds on a security-by-security basis. These bonds are regrouped by sector of issuer and are treated as a component of a synthetic single issue of the sector (for example, bonds issued by provincial governments). Once adjusted to exclude bonds under repos and strips, the system checks that each bond traded has previously been recorded in the system as having been issued. If not, an adjustment is made in the inventory to record the bond as a new issue.

Accrual of interest costs

14.52 In the Canadian system, the difference between the issue price and the redemption price accrues as interest over the life of the bond. In addition, the system computes the accrual of coupon payments on each outstanding bond issue. Until paid, these two components continuously increase the value of the bond, and Canada’s stock of external debt in bonds.


14.53 Redemptions represent the amount of the principal payment made by the issuer at the date of maturity of the bond. Redemptions are generated automatically by the system at maturity. While there is generally one date of maturity, some bonds may have several maturity dates as the redemptions are spread over time (for example, sinking funds bond). For bonds issued in tranches, the system prorates the redemptions according to the weight of the tranches. Redemptions of bonds in foreign currencies are converted into Canadian dollars at the monthly noon average rate for the month of redemption. Again, when the Canadian dollar proceeds are known, this information is used to calculate the value of redemptions.

Valuation of financial transactions and positions

14.54 From the time a bond is issued through to the time it is redeemed, its price fluctuates largely as a result of movements in interest rates in the market. In the Canadian statistical system, four prices are maintained: issue price, book value, market price at year-end, and redemption price. In turn, each of these prices is used to derive the related statistics. For example, the prices on new issues are used to derive capital flows associated with new issues, while redemption prices are used to generate redemptions data. Transactions, both sales and purchases for the month, are recorded at market prices. The stock of outstanding bonds is currently valued at book—or nominal—value and at market value.

Issue prices

14.55 At the time of issue, the bonds are generally priced at the prevailing market price. This market price is in turn equivalent to the present value of the stream of future payments, discounted at the market interest rate. If the coupon rate is set equivalent to the prevailing interest rate, the issue price will be the same as the redemption price. If the coupon rate is different from the prevailing interest rate, the issue will be priced at discount or premium to the redemption price.

14.56 In general, a bond is issued on a given date and, hence, has one issue price. There are, however, bonds, especially Government of Canada bonds, that are issued in tranches over a period of time. Each tranche has the same maturity date and coupon rate as an existing issue, but the issue price of each tranche varies according to the interest rate prevailing at the time the tranche was issued. Hence, each tranche of these bonds may have a different issue price.

Book value

14.57 The book value can be calculated from different viewpoints. From the point of view of the issuer of a bond, the book value is the issue price plus the accrual of interest costs not yet paid out. From the viewpoint of the owners of the bond, the book value consists of the acquisition cost plus the income earned but not yet received. Given that bonds may have been purchased at various prices, there could be many book values.

14.58 In the Canadian statistical system, only the book value of the issuer is maintained. This book value is made up of the issue price plus the accrual of interest costs not paid out by the issuer. The interest is calculated as the accrual of the coupon plus the accrual of the difference between the issue price and the redemption price. Hence, at any given time, the book value—nominal value, in the terminology of the Guide—of the issuer is made up of three parts: the issue price, the accrual of the coupon not yet paid out, and the amortization of the discount/premium, if any, between the issue and the redemption prices.

Market prices

14.59Description of market prices. At a given time, the current market price of a bond is usually calculated using a sample of recent buying and selling transactions in financial market. Throughout its lifetime, a bond will have many market prices depending on the time at which the value is observed. For instance, the issue price is, in most cases, the market price that prevailed at the time the bond was issued, and the redemption price is the market price that prevails at the time the bond matures.

14.60Derivation of market prices. In the Canadian system, market prices are either observed from information obtained in the bond trading survey in the month preceding the valuation, or calculated. To the extent that bonds are traded with nonresidents in the month preceding the period of valuation, such as December trading for end-December valuation, the average price in such trading is used as the proxy for market prices when calculating transactions. For bonds whose market price are not readily available, the system estimates the present value of the future stream of payments of the bond using a market yield matrix. The matrix enables one to generate market prices for a broad range of Canadian bonds (by sector, currency, and years left to maturity) and is regularly updated in the system.

Redemption prices

14.61 The redemption price is the amount the issuer is required to pay the holder at maturity of the bond; it is the future value of the principal after the coupons have been paid out. The redemption price of a bond is the same as the market price that will prevail on that bond at the date of its maturity.

Features of the system

14.62 The degree of detail maintained and the flexibility of the Canadian system make it possible to generate numerous outputs on nonresident ownership of Canadian bonds. Canadian bonds can be valued according to four different methods: issue price, maturity price, book (nominal) value, and market value. The market value is published in Canada’s IIP.

14.63 Functions are integrated in the system to derive positions, transactions, interest (paid, accrued, or payable), and commissions for a specific period of time in original currency or Canadian dollars. Exchange rate effects on the positions can also be calculated. In addition, Statistics Canada can calculate the funds that will be needed to service the debt in the years to come, taking into account the coupons to be paid as well as the retirements. The remaining term of maturity can also be calculated by type and by sector.


Reconciliation of External Debt Statistics with BIS International Banking Statistics7

14.64 If international capital markets are to function properly, statistics on debtor countries’ external liabilities are necessary. But when the figures published by a country, from the debtor perspective, differ from those published by international agencies, from the creditor perspective, experience has shown that the credibility of the statistics published by the country is directly affected, leading to uncertainty about actual indebtedness, and so to inefficiency in the capital markets.

14.65 As with a number of other countries, Chile is one of the countries whose external debt statistics, disseminated monthly by the Central Bank of Chile (BCCH), do not coincide with the international banking statistics published by the BIS. To reconcile the two institutions’ figures, in August 1998 the Management Office of the International Division of the BCCH committed resources to undertake extensive research, and establish the necessary contacts with both the BIS and the monetary authorities of various countries, to discover reasons for the discrepancies. The work culminated in a visit by BCCH officials to the BIS in Basel, Switzerland, in late 1999. One of the conclusions of the investigation was that BIS statistics embody a broader concept than external debt as measured by the BCCH. Whereas the central bank publishes external debt statistics, the BIS data refer to claims against the country, including items such as local claims in foreign currencies to residents in Chile and other liabilities that are not within Chile’s core definition of external debt.

14.66 Drawing on this work, and using data for end-June 1999, this case study explains why differences arise between the external liability figures published by the BCCH and the BIS.

14.67 As explained in Chapter 17, the BIS publishes international banking statistics on both a locational and a consolidated basis. This case study first compares BCCH data with BIS locational-based data, and then with BIS consolidated data, before drawing some conclusions.

Comparison with BIS locational data

14.68 BIS locational data provide information on the external assets and liabilities of all banks—known as BIS reporting institutions—located in what is known as the BIS reporting area.8 Within external assets, the value of the external loans outstanding is shown separately, with an attribution by currency, institutional sector, and country of debtor. BCCH’s research has discovered that the statistics published by the BCCH on debt to foreign financial institutions are more comparable with the BIS’s external loans data than with the BIS’s external assets data.

14.69Table 14.1 presents the outstanding external loan claims of BIS reporting institutions on Chile as at end-June 1999, as reported by the BCCH and BIS. As can be seen, the BIS reports a total $2,783 million higher than that reported by the BCCH.

Table 14.1.Outstanding External Loan Claims of BIS Reporting Institutions on Chile, as at End-June 1999
Millions of U.S. Dollars
(1) BCCH reported data15,901
(2) BIS reported data (locational basis)18,684
(3) Discrepancy between sources ((1) − (2))−2,783

14.70 On investigation, the difference is largely explained by three items that the BCCH does not classify as external loans from BIS reporting institutions.

14.71 First, the BIS apparently includes in its figures external loans used to finance foreign trade provided in the form of instruments issued by the debtor to the foreign supplier or third party, which are subsequently discounted by banks (thus becoming a form of forfaiting activity). In Chile these instruments are known as cobranzas. In contrast, at the time of writing, the external debt figures published by Chile include only those cobranzas of medium-and long-term maturity, which are classified as debt owed to suppliers.9 According to the BCCH’s estimates, total cobranzas (short-, medium-, and long-term) at end-June 1999 amounted to approximately $5,425 million, of which $1,900 million could be claims held by BIS reporting institutions, with remaining maturities up to one year,10 and thus reported as short-term claims in BIS statistics.

14.72 Second, in its published data, the BCCH attributes lending provided to Chile by foreign government financial institutions for specific projects to government agencies. On the other hand, even though the government institutions concerned are not BIS reporters, some such lending is included in the BIS locational (and consolidated) banking statistics. For instance, lending by the Kreditanstalt für Wiederaufbau (KFW) is included in the reports sent by Germany to the BIS, while lending by the Export Development Corporation of Canada (EDC), which is also not a BIS reporter, is included in the reports prepared by the financial institutions with which it deals. For end-June 1999 data, these two agencies accounted for $721 million of the difference between BIS and BCCH data.

14.73 Third, loans contracted by Chilean enterprises and used to finance investments directly abroad are not recorded in the BCCH data but are included in both the BIS’s locational and the consolidated banking statistics. At end-June 1999, these loans amounted to $500 million, of which 20 percent was of a short-term remaining maturity.

14.74 As can be seen from Table 14.2, the three factors discussed above more than account for the difference between the BIS and BCCH reported data.

Table 14.2.Adjusted Data for Outstanding External Loan Claims of BIS Reporting Institutions on Chile, as at End-June 1999
Millions of U.S. Dollars
Reported data
(1) BCCH reported data15,901
(2) BIS reported data (locational basis)18,684
(3) Discrepancy between sources ((1) − (2))−2,783
Factors explaining the discrepancy between sources1
(4) Cobranzas (forfaiting activity)1,900
(5) Debt with government financial institutions721
(6) Loans used to finance operations abroad500
(7) Total adjustment ((4) + (5) + (6))3,121
Adjusted difference (discrepancy (3) plus total adjustment (7))338

A positive figure indicates amounts reported by the BIS as external loan claims on Chile that are not included in BCCH data for external loans from BIS reporting institutions.

A positive figure indicates amounts reported by the BIS as external loan claims on Chile that are not included in BCCH data for external loans from BIS reporting institutions.

Comparison with BIS consolidated data

14.75 The BIS consolidated international banking data provide information on the external assets of banks headquartered in the reporting area, excluding banks headquartered in certain offshore centers (which are included in the locational data). Consolidation means that all the claims of each bank, including all offices throughout the world, are reported, except intrabank claims, which are excluded. Branches and subsidiaries of banks located in the reporting area but headquartered outside the reporting area provide information only on their own claims and liabilities (that is, on an unconsolidated basis). The consolidated BIS data include a breakdown by debtor sector and by short-and long-term remaining maturity and present the debtor position of each country vis-à-vis each of the creditor countries. Loans are not shown separately. Taking all this into consideration, it is clear that the asset figures of the locational and consolidated data differ substantially.

14.76 As with the locational data, it can be seen in Table 14.3 that the outstanding external claims of BIS reporting institutions on Chile as at end-June 1999 as reported by the BIS were higher than those reported by the BCCH ($23,491 million and $15,850 million, respectively).11

Table 14.3.Outstanding External Claims of BIS Reporting Institutions on Chile, as at End-June 1999(Millions of U.S. dollars)
TotalShort-term1Medium- and long-term
Reported data
(1) BCCH reported data15,8503,91111,939
(2) BIS reported data (locational basis)23,4919,34714,1442
(3) Discrepancy between sources ((1)−(2))−7,641−5,436−2,205
Factors explaining the discrepancy between sources3
(4) Foreign currency assets of offices of foreign banks3,3432,454889
(5) Bonds823253637
(6) Cobranzas (forfaiting activity)1,9001,9000
(7) Debt with governmental financial institutions72184570
(8) Loans used to finance investments abroad500100400
(9) Total adjustment ((4)+(5)+(6))+(7)+(8))7,2874,7912,496
Adjusted difference (discrepancy (3) plus total adjustment (9))−354−645291

On a remaining maturity of one year or less.

Includes foreign liabilities whose maturity cannot be determined.

A positive figure indicates amounts reported by the BIS as external claims on Chile that are not included in the BCCH data for external liabilities to BIS reporting institutions.

On a remaining maturity of one year or less.

Includes foreign liabilities whose maturity cannot be determined.

A positive figure indicates amounts reported by the BIS as external claims on Chile that are not included in the BCCH data for external liabilities to BIS reporting institutions.

14.77 In addition to the three items discussed above, one of the reasons for the difference is that the BIS considers local foreign exchange positions of offices of foreign banks resident in Chile as external liabilities of Chile, whereas in measuring external debt, liabilities of residents to other residents are excluded. These positions amounted to $3,343 million12 at end-June 1999, and were financed in large part by funds obtained on the local market.

14.78 The data on bond claims of BIS reporting institutions are another potential source of discrepancy. However, the value of the claims of BIS reporting institutions are unclear, since they are not separately identified in either the BIS or BCCH data. Bond liabilities to nonresidents are included by the BCCH in Chile’s external debt statistics, but individual groups of creditors are not identified. At end-June 1999, Chile’s total bond liabilities were valued at $4,116 million, and it is estimated that around 20 percent, or $823 million, represented claims by BIS reporting institutions, on a consolidated basis. Of this total, $253 million were thought to be of short-term maturity. It is known that many of these Chilean liabilities are held in the United States by financial institutions such as investment funds and bank holding companies. These institutions are required to report their holdings of such securities to the U.S. Federal Reserve for inclusion in the report entitled “Country Exposure Lending Survey,” which is the source of the statistics reported to the BIS by the U.S. authorities.


14.79 From the research undertaken by the BCCH, the following conclusions can be drawn:

  • To ensure proper use of data, and for comparisons to be made between figures that are conceptually measuring the same thing, the methodological framework used to compile published data should be clearly explained by each disseminating agency.
  • The primary data sources (debtors for the BCCH and creditors for the BIS) are responsible for significant differences, especially in the case of debt transferred to a different creditor. In particular, for certain claims reported to the BIS, such as bonds, while they are included in Chile’s external debt statistics published by the BCCH, they cannot be allocated to a specific creditor.
  • There is the need to clarify the nature of the items reported to the BIS. For instance, the BIS considers local foreign exchange positions of offices of foreign banks in Chile an external liability, although they represent a claim by a resident on another resident. Whether these claims should be regarded as external liabilities is obviously debatable (they are not in this Guide), since the position is financed with local resources and therefore does not represent net indebtedness abroad.
  • Quality control is essential and has a major impact on the comparability of statistics published by different institutions. Consequently, ensuring correct application of established methodology should always be a concern.
  • To provide more complete external debt statistics, Chile is currently working on the compilation of data for instruments such as cobranzas and loans used to finance investments abroad, which, although falling into the category of external debt, are not included in Chile’s debt statistics because the necessary information is not available. To solve this problem, surveys and other data-collection methods are being introduced.


How Debt Information Systems Are Being Used for External Debt Management13

14.80 Effective monitoring is a prerequisite for successful debt management. Indeed, information on the status and composition of external debt and debt-service payments provides the basic input for debt-management decisions. With the enormous growth in the volume and complexity of loan records, debt-management decisions require the easy retrieval of information, and the ability to undertake analysis and scenario-building exercises, such as the examination of the impact of alternative debt-management strategies. In this context, manual record keeping is no longer sufficient; rather, there is a need to develop a computerized database that will facilitate both information retrieval and scenario exercises.

14.81 In India, comprehensive coverage, active monitoring, and the computerization of external debt data have all played a key role in the continuous improvement of the country’s external debt position (Table 14.4). The exhaustive coverage and timely availability of data has allowed effective monitoring of the debt stock and debt-service payments. For instance, information on projected debt-service payments—that is, contractual liabilities in future years—has provided policymakers with early warning against the bunching of repayments, so that corrective steps could be taken in advance. Also, the computerized database has facilitated the evaluation of the impact of alternative borrowing strategies. Effective monitoring through computerization, therefore, has become essential to India’s debt management.

Table 14.4.India’s External Debt and Key Debt Indicators
As at March 31
(Billions of U.S. dollars, end-period)
(1) Long-term debt75.378.294.788.786.788.593.394.4
(2) Short-term debt8.
(3) Total external debt83.885.399.093.793.593.597.798.4
(Ratios, in percent)
(4) Ratio of external debt to GDP30.441.030.927.124.724.423.522.0
(5) Ratio of debt service to current receipts35.330.225.926.223.019.519.016.0
(6) Ratio of short-term debt to total debt10.
(7) Ratio of short-term debt to foreign exchange reserves382.1125.620.529.530.119.414.910.6



Benefits of a good information system

14.82 The benefits of a good debt information system are outlined here, drawing on India’s experience.

External debt management

14.83 One of the salient features of external debt management in India has been an annual cap or ceiling on External Commercial Borrowings (EComBs). EComBs are defined to include commercial bank loans, export credits, and bonds issued in the international capital markets. The borrowers are public sector, financial institutions, and private sector entities. As a sovereign entity the Government of India does not borrow in the international capital markets.

14.84 Every year a cap is fixed on EComB approvals, which takes into consideration the commercial borrowing requirement of different sectors of the economy, and medium-term balance of payment projections. The end-objective is to keep the debt-service ratio within the prudent limits of debt management. The exercise is undertaken with the help of computerized scenario building, the inputs for which are (1) projected debt-service payments on disbursed outstanding debt; (2) disbursements of debt “in the pipeline” and the projected debt service; (3) future EComB approvals and their impact on inflows and debt service based on an assessment of the international capital market situation.

Sovereign external debt management

14.85 India does not access international capital markets as a sovereign entity. But the need for sovereign external debt management has arisen because the World Bank now requires borrowers to make their own decisions regarding choice of currency, interest, and maturity mix on Bank borrowings. Some other multilateral institutions are also considering a similar approach. Also, with the World Bank soon to offer free-standing hedging products (derivatives products), such as interest and currency swap, interest rate caps, collars, etc., active management of sovereign external debt will become necessary.

14.86 To meet the new circumstances, India is developing a modeling exercise for sovereign external debt. The objective is to develop benchmarks that lead to an optimal currency, interest, and maturity mix of sovereign external debt so as to minimize the costs of government borrowings for any given level of risk. These benchmarks would be a guide for future borrowing and active debt-management decisions. Since the debt data for the government account are 100 percent computerized, historical data can be retrieved, and projections of future payments made readily available, for analysis and scenario-building exercises.

14.87 A separate exercise is also under way to consider the prepayment of World Bank fixed-rate loans, which have interest rates significantly above prevailing market rates.

Contingent liabilities

14.88 The Government of India has provided guarantees on a selective basis for borrowings from abroad by public sector enterprises, developmental financial institutions, and, in some instances, private sector companies. By maintaining records of such explicit contingent liabilities in the computer system along with external debt data, these liabilities are regularly monitored. Because the government is now discouraging the issue of fresh guarantees, except where considered absolutely necessary (such as for certain infrastructure projects), total outstanding guarantees are on a declining trend—the share of government guaranteed debt in total nongovernment debt declined from 33.1 percent at end-March 1994 to 14.4 percent at end-December 1999. Table 14.5 provides these data and a disaggregation of guarantees by institutional sector (financial, public, and private).

Table 14.5.India’s Central Government Guarantees on External Debt
March 31December 31
(Billions of U.S. dollars, end-period)
(1) Government debt55.959.553.149.146.546.146.9
(2) Nongovernment debt36.839.540.744.447.051.552.1
(3) Of which with government guarantee (a) + (b) + (c)212.212.310.
(a) Financial sector3.
(b) Public sector8.
(c) Private sector0.
(4) Total external debt (1) + (2)92.799.093.793.593.597.799.0
(5) Government debt and guaranteed debt (1) + (3)68.171.863.257.353.853.254.4
(Ratios, in percent)
(6) Ratio of government debt and guaranteed debt to total external debt (5)/(4)73.572.567.461.357.554.555.0
(7) Ratio of government guaranteed debt to nongovernment debt (3)/(2)


Direct guarantees on external debt provided by the central government.


Direct guarantees on external debt provided by the central government.

Computerization and networking

14.89 Nearly 80 percent of external debt data is computerized using the Commonwealth Secretariat’s Debt Recording and Management System (CS-DRMS).14 The adoption of the CS-DRMS system, in the late 1980s, was a major step forward, marking the beginning of the use of external debt data as a management information system input for debt-management decisions. Efforts are now under way to extend the scope of computerization to the remaining data, which are currently captured on a manual reporting basis.

Interagency involvement

14.90 The main agencies involved in the compilation of external debt data are the Ministry of Finance, the Reserve Bank of India, and the Ministry of Defense. The computerized database containing data reported by all the different agencies is housed in a central server in the External Debt Management Unit (EDMU) in the Ministry of Finance. The information from the centralized database is then available for analysis and scenario-building exercises. Through Local Area Network, the database is also accessible to various users in the Ministry of Finance as an input for policy decisions.

14.91 External debt data are updated on a quarterly basis. The dissemination policy is that of full transparency of reporting, with statistics published in the Economic Survey of the Ministry of Finance and the Annual Report of the Reserve Bank of India. In addition, since 1993 the Ministry of Finance has published an annual Status Report on External Debt, which is circulated in the Parliament of India. This report, which provides an exhaustive analysis of external debt data, has helped raise public awareness of external debt issues.

14.92 Such transparency and awareness also leads to public feedback, which acts as an early warning system, especially in situations where key debt indicators are beginning to move in the wrong direction. The transparency and comprehensive monitoring also ensures that no component of debt is unreported. This, together with low levels of short-term debt, contributed to India’s success in withstanding the effects of the financial crises of 1997/98.

14.93 Senior staff in the key government agencies undertake periodic reviews of the measurement of external debt to ensure best practice and continuous improvement in the quality and coverage of data. In 1992, the Task Force/Policy Group Report on External Debt Statistics recommended adoption of internationally accepted classifications and definitions, and stressed the need for transparency of data, unusual at the time for an emerging economy. On the report’s recommendation, the EDMU was set up in the Ministry of Finance to coordinate debt-monitoring activities, and provides data inputs for debt-management decisions. A World Bank Institutional Development Fund (IDF) grant of $0.475 million played a key role in providing funding support for the various debt-monitoring and management activities undertaken by the EDMU. The Report of the Technical Group on External Debt, which came out in 1998, took into consideration the changing international requirements for debt data monitoring and reporting.

14.94 There are ongoing efforts to further improve the quality of data and increase the scope of computerization. Thus, for example, given the significance of short-term debt for overall external debt management, a Study Group has been created to look into ways of ensuring its more effective monitoring and coverage. The group is expected to suggest that a computerized short-term debt database be created that is amenable to analysis and scenario exercises. Given the volatility of short-term debt flows and the possibility of their nonrenewal in times of crisis, such flows are already strictly monitored and permitted only for trade-related purposes. Another Study Group has been created to look into ways of ensuring more effective monitoring and computerization of nonresident Indian deposits data (see the next section). Further, since external debt flows are to be seen in the overall balance of payments context, other balance of payments components become important and can have a bearing on external debt flows. A separate Study Group, therefore, has been set up for streamlining monitoring and computerization of nondebt flows.

14.95 Efforts are also under way to make India a “resource center” and a “center of excellence” for external debt-management activities so that Indian experience and expertise can be shared with other countries, and learning opportunities broadened.

Monitoring and Management of Nonresident Deposits in India15

14.96 In the 1970s, the growth of the current account deficit prompted India to explore alternatives to the traditional source of external finance: concessional borrowing. This led to borrowing from commercial sources, and the introduction of special deposit schemes for nonresident Indians (NRIs). Different NRI deposit schemes were developed in order to meet the various asset preferences of NRIs. This section describes the features of these schemes, the method of data collection, information on their evolution during the 1990s, and some lessons from the Indian experience.

Nonresident deposit schemes

14.97 Essentially there are two types of nonresident deposit schemes: domestic-currency-denominated deposits and foreign-currency-denominated deposits. The first nonresident deposit scheme, introduced in February 1970, was a domestic currency account called the Non-Resident External Rupee Account [NR(E)RA]. Under this scheme, both principal and interest could be repatriated without any restriction, while the exchange risks were borne by the depositors. The rates of interest were initially set by the Reserve Bank of India (RBI) but were fully freed from official control by September 1997. The first foreign-currency-denominated scheme was introduced in November 1975 and was entitled the Foreign Currency Non-Resident (Account) [FCNR(A)]. This account was repatriable, with interest rates fixed by the RBI, taking into account movements in international interest rates. Although the deposit liabilities were held by the commercial banks, the exchange risk was borne by the RBI, and implemented through a mechanism of purchases and sales of foreign currency at notional exchange rates by the RBI from the banks. This scheme was withdrawn with effect from August 1994 in view of its quasi-fiscal costs and implications for the central bank’s balance sheet.

14.98 Subsequently, additional schemes have been introduced, and discontinued, as circumstances have warranted. In particular, nonrepatriable deposit schemes were introduced in the early 1990s. At the time of writing, the latest in the series of non-resident rupee accounts is the Non-Resident Special Rupee Account [NR(S)RA] introduced in April 1999, and, among foreign currency accounts, the Foreign Currency Non-Resident (Bank) [FCNR(B)] scheme. The exchange risk for the latter is managed by the commercial banks and not the RBI. Furthermore, a large proportion of FCNR(B) deposits—for instance, over 90 percent at end-March 2000—are matched by foreign currency assets, which facilitates asset-liability management by accepting banks.

14.99 Also, there has occasionally been issuance of bonds by the State Bank of India, a commercial bank, aimed at nonresidents. Furthermore, nonresident Indians and Overseas Corporate Bodies can channel funds into India through direct investment, the nonresident ordinary deposit (NRO) scheme, private remittances, and a special scheme for returning citizens to import gold and silver.


14.100 As a part of overall financial sector management, the RBI monitors total NRI deposits, both stocks and flows, and adjusts its policies relating to these deposits as warranted by the domestic and international circumstances. Banks are required to report the necessary information on NRI deposits through various regular statements and returns provided to the RBI, including a fortnightly return. The reports are specifically designed to capture the stock and flow data on the various NRI deposits. Further, a study group financed from the IDF of the World Bank is reviewing the reporting arrangements for NRI deposits.

14.101 NRI deposits data come from a large number of branches of commercial banks at widely spread places across India, and many of these branches do not have enough communication infrastructure to submit data in electronic form. These limitations may not be serious since the flow data in respect of such branch offices do not vary significantly over short periods of time. In fact, it was estimated that about 500 large branches of commercial banks in India accounted for over 85 percent of the overall foreign exchange business, including NRI deposits. The deficiency of coverage could, however, be addressed by remote branches reporting data to their regional or zonal offices, which, in turn, could transmit the consolidated information in electronic form to the RBI through their Head Offices. This new reporting system would provide the stock position of NRI deposits disaggregated by account type, by country of creditor, by maturity (both remaining and original) and by type of currency at the end of every quarter for principal, and, separately, interest costs that have accrued.


14.102Table 14.6 provides information on the evolution of various nonresident deposit accounts during the 1990s. The outstanding balances under NRI deposits have increased from $14 billion at end-March 1991 to $23 billion at end-March 2000. NRI deposits as a percentage of India’s external debt remained broadly unchanged over the decade. There was a marked shift in the composition of NRI deposits from foreign currency deposits (about 74 percent of the total in 1991 to about 40 percent in 2000) to domestic-currency-denominated deposits (from about 26 percent in 1991 to 60 percent in 2000), with a significant decline in short-term deposits. Indeed, foreign-currency-denominated deposits actually fell over the decade. This shift occurred as the government decided to stop providing exchange rate guarantees on foreign currency deposits, as losses emerged; and to deregulate interest rates—previously interest rates on these deposits were held at levels significantly above interest rates prevailing in international markets. Also, while not shown in the table, nonrepatriable rupee deposits have been increasing, to over 30 percent of the total NRI deposits as at end-March 2000. Of the total repatriable NRI deposits, the proportion of short-term repatriable deposits declined from around 27 percent at end-March 1991 to about 9 percent at end-March 2000.

Table 14.6.Indicators of Nonresident Deposits in India(Millions of U.S. dollars)
As at end-March
Total NRI deposits13,98615,01517,16620,39321,30123,098
Domestic-currency-denominated NRI deposits3,6183,3617,04210,58712,97814,029
 (Percent of total NRI deposits)(25.9)(22.4)(41.0)(51.9)(60.9)(60.7)
Foreign-currency-denominated NRI deposits10,36811,65410,1249,8068,3239,069
 (Percent of total NRI deposits)(74.1)(77.6)(59.0)(48.1)(39.1)(39.3)
Total external debt883,80190,02399,00893,47097,66698,435
Proportion of NRI deposits in India’s external debt916.7%16.0%14.8%15.8%14.9%16.3%
Proportion of long-term NRI deposits in long-term external debt913.6%13.2%13.1%12.7%12.6%15.4%
Proportion of short-term NRI deposits in short-term external debt43.8%53.3%53.4%56.1%50.1%36.6%
Proportion of long-term repatriable NRI deposits in total repatriable NRI deposits73.2%76.7%84.5%74.5%84.9%90.8%
Proportion of short-term repatriable NRI deposits in total repatriable NRI deposits26.8%23.3%15.5%25.5%15.1%9.2%
Note:This table does not include amounts mobilized from nonresident Indians through issuance of bonds from time to time.

Foreign Currency Non-Repatriable (Account) [FCNR(A)] was withdrawn effective August 1994.

Foreign Currency Non-Resident (Banks) [FCNR(B)] was introduced in May 1993.

Foreign Currency (Banks and Others) Deposits [FC(B&O)D] were withdrawn with effect from July 1993.

Foreign Currency (Ordinary Non-Repatriable) Deposit Scheme [FCON] was withdrawn from August 1994.

Non-Resident (External) Rupee Account [NR(E)RA] was introduced in February 1970.

Non-Resident (Non-Repatriable) Rupee Deposits [NR(NR)RD] was introduced in June 1992.

Non-Resident Special Rupee Account [NR(S)RA] was introduced in April 1999.

Repatriable nonresident deposits(both foreign-currency- and domestic-currency-denominated—such as FCNR(A), FCNR(B), NR(E)RA and FC(B&O)D form part of India’s external debt.

Excludes NR(NR)RD accounts, which are not repatriable and so are not included in external debt.

Note:This table does not include amounts mobilized from nonresident Indians through issuance of bonds from time to time.

Foreign Currency Non-Repatriable (Account) [FCNR(A)] was withdrawn effective August 1994.

Foreign Currency Non-Resident (Banks) [FCNR(B)] was introduced in May 1993.

Foreign Currency (Banks and Others) Deposits [FC(B&O)D] were withdrawn with effect from July 1993.

Foreign Currency (Ordinary Non-Repatriable) Deposit Scheme [FCON] was withdrawn from August 1994.

Non-Resident (External) Rupee Account [NR(E)RA] was introduced in February 1970.

Non-Resident (Non-Repatriable) Rupee Deposits [NR(NR)RD] was introduced in June 1992.

Non-Resident Special Rupee Account [NR(S)RA] was introduced in April 1999.

Repatriable nonresident deposits(both foreign-currency- and domestic-currency-denominated—such as FCNR(A), FCNR(B), NR(E)RA and FC(B&O)D form part of India’s external debt.

Excludes NR(NR)RD accounts, which are not repatriable and so are not included in external debt.

Lessons from the Indian experience

14.103 A number of lessons emanate from the Indian experience with nonresident deposit schemes.

14.104 First, for policy purposes, good information is required. In particular, as a part of external debt management, there needs to be careful monitoring of the currency portfolio, especially in terms of currency denomination of deposits, and of the maturity profile, both in terms of original and remaining maturity. The latter data help to identify any bunching of payments, and so it is useful to program the debt-recording software systems to generate data on a remaining-maturity basis.

14.105 Second, from a policy viewpoint, the central bank or the government should refrain from providing exchange guarantee to the depositors, since such guarantees take the form of contingent external liabilities and could pose a systemic threat when reserves are low and exchange rates depreciate very sharply. The focus should be on domestic currency deposits of longer maturity. A steady repayment schedule is preferred because this enables the commercial banks to reduce the potential for serious asset-liability mismatches that may arise.

14.106 Third, when devising these schemes, interest rates on the deposits should be aligned with domestic and international rates, so as to ensure that deposits are attracted while remaining cost effective. Also, an assessment of the degree of substitution between NRI deposits and normal flows from non-residents in the form of private transfers, workers’ remittances, and other non-debt-creating flows from NRIs is required.

14.107 Finally, following the residence criterion, all nonresident deposits should be part of external debt. However, India does not include nonresident nonrepatriable deposits in its external debt statistics because the principal is not repatriable and hence no external liabilities arise, and the funds stay within the Indian economy.


Measurement of External Debt16

14.108 The Bank of Israel’s Foreign Exchange Activity Department (FEAD) measures Israel’s external debt position, using detailed loan-by-loan data provided by the Israeli Government and the nonbank private sector. Reported balance sheet data are used to compile external debt data of banks. The external debt data are published quarterly and, along with external assets owned by Israeli residents, are included in the Israeli IIP statement. This case study describes the loan-by-loan system used by the FEAD and the output it generates.

Reporting of loan-by-loan data

14.109 Most of the external debt data of the public sector are obtained, on a regular basis, from the Ministry of Finance. These data cover all loans that the government receives from creditors abroad, including government bond issues in international markets. The nonbank private sector (a private individual or a firm) must report within 15 days of receipt any loans received from abroad that have a value equivalent to $100,000 or more. These data cover all loans that firms and individuals receive from creditors abroad, including Israeli companies’ issues of bonds in international markets and ownership loans received.

14.110 The following details of each loan are reported (see Figure 14.1) and entered into the FEAD’s system:

  • Primary details: Loan receipt date, amount, and currency;
  • Borrower: Name and borrower type (such as government, central bank, firm, or individual);
  • Lender: Name, country of residence, and lender type (such as foreign bank, branch of Israeli bank abroad, foreign government, IMF, World Bank, issue of tradable bonds, foreign firm, individual foreign resident, or ownership loan);
  • Interest rate type: Fixed or variable rate;
  • Interest rate (percent): Fixed rate or spread above variable rate;
  • Principal payment schedule: Includes final payment date; and
  • Interest payment schedule.

Figure 14.1.Israel: Report Form on Loans Received by Local Residents from Foreign Residents1

1 Reporting requirement is that of the local resident—an individual or a corporation—receiving a loan of at least $100,000; with the report to be submitted within 15 days of loan receipt.

14.111 Also, during the entry of these details into the database the following additional fields are automatically calculated:

  • Credit term (months): Defined as the number of months from the date of receipt of the loan until final repayment; this field can be used to attribute the debt by loan term: short-term debt, medium-term debt, and long-term debt;
  • Grace (months): the number of months between the date of receipt of the loan and the first repayment of the principal;
  • Calculated interest (on loan receipt date): For fixed-rate loans, this is the interest rate figure itself; for variable-rate loans, this is equal to the value of the variable rate base plus the spread above it; and
  • Spread above LIBOR (on loan receipt date): For fixed-rate loans, this is the calculated spread above LIBOR (London interbank offered rate).

Aggregate data compiled17

14.112 In addition to calculated aggregated loan and bond figures, and commercial bank balance-sheet data, the FEAD maintains aggregate external debt data on nonresidents’ ownership of domestically issued bonds, and on the balance of suppliers’ credit received by Israeli importers (and extended by Israeli exporters), based on an FEAD quarterly survey of companies involved in foreign trade. The same system contains figures on external assets owned by residents, including equities, bonds, loans, deposits, and direct investment (ownership loans).

14.113 Data quality checks are undertaken at the individual loan level and also by comparing the loan-by-loan data with information on transactions, which are drawn mainly from bank reports, and with the balance-sheet data of large companies. The database covers all public and banking sector loans and over 90 percent of the nonbank private sector loans.


14.114 From the information held on the database, the Bank of Israel publishes quarterly tables on the external debt, in U.S. dollar terms. For the public, nonbank private, and banking sectors, and by source of external debt, data are presented on the stock of outstanding external debt; the original term to maturity; the principal currency composition; and external debt receipts and principal payments. Also provided is information by sector on net debt—that is, gross debt liabilities less ownership of foreign debt liabilities by Israeli residents—and principal and interest repayment schedules.


Registration of Private Debt18

14.115 The Mexican system of measuring private sector external debt has developed over the past two decades. Beginning with external debt difficulties of the early 1980s, the system has evolved as exchange controls have been repealed and economic conditions have changed. This case study explains that evolution, and sets out the present situation.

14.116 On August 5, 1982, Mexico declared a moratorium on principal payments on external debt. On September 1, 1982, across-the-board exchange controls were instituted and replaced three months later by a simple exchange control system, whereby two foreign exchange markets would operate simultaneously: one subject to control and the other not.

Data collection methods in the era of exchange controls

14.117 At the time of the introduction of exchange controls in 1982, the Mexican government had no official data on the amount of private sector external debt outstanding. So there was a need to develop a debt-registration system, whose main purpose was to facilitate exchange control operations. In the payments moratorium notice of August 5, 1982, and subsequently in the exchange control decree published on December 13, 1982, those private enterprises requesting foreign exchange to service their debts were required to register their financing with the Secretaría de Hacienda y Crédito Público (Secretariat of Finance and Public Credit—SHCP). A special unit within the SHCP was set up to start monitoring private external debt, and this unit created a Register of Loans Payable in Foreign Exchange to Financial Institutions Abroad (the Register), and introduced a report form called the Constancia de Registro (Record of Registration) to collect the data. This report form needed to be completed for a private enterprise to receive authorization to obtain foreign exchange from national banks.

14.118 The report form identified the main contractual features of foreign exchange borrowing by private sector enterprises from foreign financial institutions. It covered the type of financing, the existing loan balance, the method of payment, and the payment schedule listing each outstanding payment with due date, and principal and interest amounts. When the registration requirement was introduced, all the enterprises quickly came forward to register their external debt because they could not otherwise obtain foreign exchange to service their debts.

14.119 In addition to the loans registered in the SHCP, a register of debt to nonbank foreign suppliers was created in October 1982 in the Secretariat of Trade and Industrial Development (SECOFI), with the same purpose as the register of foreign currency loans. In other words, the record of registration provided information on debt service to the authorities, and was a requirement for residents if they needed to obtain foreign currency from national banks. This register was closed in January 1983, and the outstanding balances were refinanced by suppliers under a long-term scheme.

14.120 Also, in 1983, the central bank set up a fund through which private sector debtors could repay foreign creditors. This helped to improve the registration of private sector debt. This fund was part of the program known as FICORCA (Trusteeship Coverage of Exchange Risk), and existed from April to October 1983. This program required private sector enterprises to restructure their foreign debts—for instance, into maturities of eight years with four years’ grace, or six years with three years’ grace. If the enterprise made the payments in local currency, FICORCA would pay principal and interest in foreign currency to the account of the enterprise, so that the enterprise could service its restructured debts to foreign banks. A similar program was reintroduced for a short period in 1987 and 1988 and was known as the FICORCA Facility Agreement.

14.121 Once private enterprises regained access to external financing, in 1984, they were required to register new debt with the SHCP. Indeed, the authorities decided that, in order to continue to have access to foreign exchange, private enterprises would be required not only to report new debt at the time of creation, but also to report twice a year on their outstanding debt. This continued until 1991. So, twice a year the authorities made public announcements to all private sector enterprises and published in the most widely distributed major newspapers in the country the registration numbers of loans to report between January 1 and March 31 and between July 1 and September 30 of each year. Enterprises were required to provide the authorized documentation for the original borrowing and the subsequent debt servicing.

14.122 In addition to the loans registered in the SHCP, a register of debt to nonbank suppliers was created in SECOFI. Thus, in October 1982, the register of amounts owed to foreign suppliers was set up with the same purpose as the register of foreign currency loans. In other words, the record of registration provided information on debt service, and permitted the purchase of foreign currency from national banks by the debtors. This register was closed in January 1983, and the outstanding balances were refinanced by suppliers under a long-term scheme.

14.123 Outstanding amounts payable by the Mexican banking system, nationalized in September 1982, were never subject to registration. The central bank only required completion of a survey form that is still used, showing the position of the banks’ accounts but not future payments.

Data collection methods following the repeal of exchange controls

14.124 An official Exchange Control Decree repealed exchange controls on November 10, 1991, since there was no longer any reason to maintain the two-tiered foreign exchange market at the controlled and market rates as established. Also, the Register of Foreign Currency Loans Payable Abroad to Financial Institutions and the Constancia de Registro were abolished. Indeed, since the termination of the exchange control regime, private enterprises are no longer legally required to report the status of their external liabilities to the SHCP. However, the SHCP has found it necessary to continue to monitor and publish data on private sector external debt. This required the reestablishment of a means of collecting data that covered the main features of borrowing by private sector enterprises from foreign financial institutions.

14.125 Initially after the repeal of exchange controls, data were collected periodically through survey questionnaires sent to the major enterprises having a representative level of indebtedness relative to total private external debt. With the cooperation of some 100 indebted industrial groups, a database was designed for processing the data collected. This was used to draw up a statistical bulletin on private sector external debt and included a number of statistical tables that gave a clear picture of the level of external indebtedness. The level of participation by debtors was initially excellent.

14.126 However, following another crisis in the mid-1990s, it was once again necessary to implement a system whereby private enterprises provided information on an ongoing as opposed to periodic basis. An official request, similar to the public announcements mentioned above, was prepared requiring the private enterprises to report estimates of principal payments both on recent borrowing and on earlier outstanding amounts. In addition, data began to be sourced from the Mexican Stock Market (BMV) to complement the private external debt statistics; the BMV releases a quarterly financial report on borrowing by industrial corporations.

14.127 Most recently, the system has evolved such that data on private sector external debt are collected from a number of sources so as to ensure that the data published are reliable, are collected expeditiously, and are informative.

14.128 The principal source of information is now the BMV, which collects data quarterly on Mexican corporate liabilities. The BMV report form includes a breakdown of external debt by type of credit, using the following classification system: commercial banks, bonds, and foreign trade credit. The report form also provides the name of the creditor, the amount of the financing, currency of issuance, the borrowing date, the maturity date, and the estimated payments over the next four years, including the outstanding balances, the repayment schedule for the coming four years, and a classification by loan type.

14.129 Other external data sources include foreign-owned credit rating agencies, such as Duff and Phelps, Moody’s, and Standard & Poor’s. The publications of these agencies include information on debt they rate, which SHCP consults. Also, the debt unit frequently checks with the Undersecretariat of the SHCP for the information submitted by private enterprises when they withhold tax payments on interest payable abroad.

14.130 With this information, the SHCP reviews each credit and cross-checks the different sources, so as not to duplicate information.

14.131 Enterprises that are not listed on the BMV, have no debt ratings, and file no tax returns are requested to cooperate by completing a survey questionnaire, providing information to the SHCP on all the characteristics of their liabilities, updating the information on balances on a quarterly frequency.

14.132 All the information collected is maintained in a database, which is carefully checked to ensure that the debt of enterprises is not entered more than once, so as to avoid duplicate reports. From this database, a number of outputs can be generated, including the level of indebtedness and debt classification by enterprise, creditor, currency, and maturity.

Verification of figures

14.133 When exchange controls were established and after having registered the debt of most industrial groups, reports were produced from the database classifying the debt by creditor and with the details of each financing. This information was cross-checked with data from the major foreign creditor banks through their representative offices in Mexico. The overall balances by creditor bank were verified with the unit that received the report form from the creditor bank. This type of verification is not undertaken today, since it is mandatory for creditor banks to report to the central bank under the rules authorizing them to grant loans to Mexico. The report now covers both public sector and private sector external debt. Efforts are currently being made to have the form include information not only on the balances outstanding as traditionally reported, but also on the payment schedule for the outstanding debt, by quarter for the first year and annually for the following three years.19


14.134 The statistical data on Mexico’s total external debt, including private debt, are published in the statistical tables in Mexico Economic and Financial Statistics—Data Book, a biannual document published by the SHCP and distributed to foreign banks in the SHCP’s quarterly review entitled Estadísticas oportunas de finanzas públicas y deuda pública (Timely Public Finance and Public Debt Statistics), published through the Directorate General of Financial Planning. The data also appear in the quarterly presentation on the Internet via the SHCP’s webpage.

14.135 Information on private sector debt is presented for the commercial banks and the nonbank private sector, and the sources of finance are provided—commercial banks, and other liabilities for commercial bank debtors; and capital markets, commercial banks, and external trade-related debt for nonbank private sector debtors. An annual amortization schedule for the nonbank private sector external debt for the remaining portion of the current year, and the following three years, is provided.

New Zealand

Experience in Collecting Foreign Currency Hedging Information20

14.136 In 1998, major users of external debt statistics in New Zealand were concerned that by not taking account of hedging activity, New Zealand’s published external debt statistics were overstating the extent of the economy’s exposure to currency movements. As a consequence, in June 1999, Statistics New Zealand (SNZ) first published indicative information about the hedging of New Zealand’s external debt denominated in foreign currency—for March 31, 1998 and 1999—alongside, and as a supplement to, New Zealand’s Overseas Debt statistics.21 These supplementary data—disaggregated by currency and into two institutional sectors—provided estimates of the extent of hedging of New Zealand’s foreign currency external debt using financial derivatives contracts and natural hedges. The data also provided estimates of unhedged external debt. In addition, net market value estimates of the financial derivatives contracts were published, also with a sectoral breakdown. SNZ has continued to publish supplementary hedging information annually. This case study sets out the experience of SNZ in setting up and operating the survey in its early years, and the lessons learned.

14.137 In the presentation of external debt statistics, foreign-currency-denominated external debt is converted into New Zealand dollars at the exchange rate prevailing at the survey date (March 31). Given this methodology, and with external debt denominated in foreign currencies accounting for about half of New Zealand’s gross external debt at the time, the depreciation of the New Zealand dollar between March 31, 1997 and 1998 was estimated to have accounted for 38 percent of the increase in the value of New Zealand’s external debt between those two dates. Anticipating significant user interest when the March 1998 external debt statistics data were published, the SNZ gave prominence to this estimate and to the compilation methodology used. Nevertheless, some major users of the statistics questioned their relevance, believing that the total external debt statistics overstated the true external exposure of the economy, because a significant portion of the debt was probably hedged against exchange rate movements.

The project

14.138 With the collection and publication of statistics on New Zealand’s net asset and liability positions in financial derivatives not due until 2001, in 1998 the SNZ felt an immediate need for hedging information that would place the published external debt statistics into a risk-management context. Consequently, the SNZ undertook a project to collect data on:

  • The extent of the foreign currency hedging of New Zealand’s overseas debt; and
  • Estimates of the net market value of the financial derivatives contracts.

14.139 Data were to be collected from those resident enterprises that accounted for approximately 80 percent of external debt denominated in foreign currencies. In view of the limited coverage of the hedging supplement, the results were intended to be indicative estimates.

14.140 The project began in October 1998, with the intention of collecting retrospective data as at March 31, 1998, by December 31, 1998. Thereafter, a decision would be made about whether to proceed with a further collection of data as at March 31, 1999. It was expected that the need for the hedging supplement would cease once the project to implement BPM5 in full was completed, in 2001.

14.141 The project was undertaken by the staff of the Balance of Payments Division (BOP staff) of the SNZ. An essential feature of the early stages of the project was the close consultation between the BOP staff and Reserve Bank of New Zealand (RBNZ) staff, and, separately, a private sector bank with which the BOP staff had had previous discussions on the impact of financial derivatives on balance of payments statistics. The RBNZ offered advice and consultation on several occasions during the course of the project. The private sector bank offered advice from the perspectives of a user of the published statistics, and the perspective of being a market participant and data supplier. The cooperation and advice received from both these organizations was invaluable to the success of the project.

14.142 Initial development work within SNZ included determining an initial set of data requirements and identifying the enterprises to be surveyed from the population of the Total Overseas Debt survey. In the event, 20 enterprises (plus the official sector) were selected, of which all except one reported the data for the 1998 survey. While one further enterprise was unable to supply data for the 1999 and 2000 surveys, nevertheless the effective sample of the hedging supplement encompassed 75 to 81 percent of total foreign-currency-denominated external debt in the 1998, 1999, and 2000 surveys. While these enterprises were at first expected to be mostly banks, in fact nine of the enterprises selected were nonbank corporates. For the purposes of the survey, a two-sector classification was used: banks, and the “corporate and official” sector.


14.143 The initial set of data requirements was discussed with the private sector bank, and separately with the RBNZ. This first round of consultations identified:

  • The need for a short-term/long-term split based on original maturity, since some respondents were expected to find the reporting of hedges for short-term instruments too difficult due to daily refinancing (“rollover”) and pricing;
  • The need to split the data request into “hedging by financial derivatives contract” and “natural hedge”;
  • The need to ask respondents to report their hedging with both residents and nonresidents; by asking respondents to report all their positions, the likelihood of double counting would be reduced.

14.144 Following the amendments to the draft hedging supplement questionnaire, a second round of consultation was undertaken—an essential aspect of the project. This consultation comprised personal visits by BOP staff to ten of the enterprises selected to be surveyed, involved a discussion of the objectives of the questionnaire and its reporting requirements, and allowed BOP staff to hear the views of the respondents. Those respondents not visited personally were contacted by telephone, and a copy of the draft questionnaire sent for comment; in nearly all these cases feedback on the questionnaire was received. SNZ staff encountered a high level of cooperation among virtually all of the respondents visited or contacted, certainly once the objectives of the hedging supplement were explained.

14.145 A clear message arising from the consultations, which were reviewed with the RBNZ, was the need to customize the questionnaire, both in terms of the sector of the respondent and each individual respondent within each sector. For the nonbank corporates, it was decided to differentiate the “natural hedge” question into “hedging by balance sheet assets,” and “hedging by other means—for example, expected foreign exchange receipts from exports.” This made the scope of the inquiry clearer to respondents and enhanced the usefulness of the results for risk analysis purposes by separating hedges that take the form of balance-sheet assets from those that do not. The process for the collection of retrospective data for March 31, 1998 was too far advanced for this distinction to be included in that survey, but it was incorporated into the 1999 survey.

14.146 Other features of particular interest emerging from the second round of consultations were as follows:

  • Whatever the term of the underlying liability, associated derivatives contracts are often of a shorter term and rolled over (or renegotiated) through the life of the underlying liability. The effect is that at each rollover, the issuer will book to their accounts profits and losses made on their derivatives contracts. Because the survey is a snapshot of the market value of contracts in place as at March 31, the market-value results take no account of profits or losses recorded from the earlier succession of contracts.
  • Banks in general, and some of the nonbanks with complex financial operations, found it difficult to extract the required market-value information. Given that frequent rollovers of debt, and the pooling of assets and liabilities for risk-management purposes characterized banks’ operations, direct matching of an overseas liability to a particular hedge was often not possible, and alternative ways of providing information were established on a case-by-case basis. Therefore, the market-value results for banks were regarded as indicative estimates only. Generally, the market-value estimates for the less complex nonbanks were regarded as of better quality, since these were typically enterprises with a small number of external foreign currency liabilities matched to specific financial derivatives contracts.
  • Distinguishing the residence of counterparties to the derivatives contracts was a problem for some respondents. Those nonbank corporates who dealt directly with nonresident counterparties were easily able to do this; other nonbank corporates who dealt with resident intermediaries indicated that their usual practice was to deal with a resident bank. Banks indicated that their practice was to engage with nonresident counterparties.

Hedging supplement questionnaire

14.147 Incorporating the lessons of the consultations, the data requirements were set out in two questionnaire types: one type structured for banks, the other for nonbank corporates (Figure 14.2). In addition, within each questionnaire type, the basic form was customized into several versions to meet the needs of various respondents. Typically, the customized form of the questionnaire was determined during the consultation meeting with a respondent, redrafted by BOP staff, and sent back to the respondent for confirmation and then completion. Additionally, a set of definitions of terms used and a guide to the questionnaire with worked examples were supplied to each respondent.

Figure 14.2.New Zealand: Foreign Currency Liabilities—Questionnaires for Banks and Nonbank Corporate Entities

14.148 Each of the two questionnaire types had two parts; the first part requested foreign currency external debt data and established the extent and type of hedging; the second part requested market-value information. Separate tables requested data on a long-term and short-term attribution (original maturity basis).

14.149 In the section on the extent and type of hedging, respondents are asked to report:

  • The currency of their original contractual overseas liabilities as at the survey date, March 31;
  • The foreign currency amounts of their contractual overseas liabilities as at the survey date, March 31 (this figure was to be the same as reported in the overseas debt survey); and
  • The percentage of these overseas liabilities that at the survey date were:
    • – hedged, using financial derivatives;
    • – hedged naturally against balance sheet assets;
    • – hedged naturally against other receipts (nonbank corporates only); or
    • – not hedged.

14.150 In the market-value section of the questionnaire, respondents were asked to report the market value of derivatives contracts that hedge overseas liabilities as at the survey date. Net asset and net liability positions were asked for separately, and by resident and nonresident counterparties.


14.151 After the first survey, it was decided that the results were of sufficient quality and significance to warrant continuation of the project. So, data were collected as at March 31, 1999, and the 1998 and 1999 results were published as supplementary information alongside the 1999 Overseas Debt statistics. In line with expectations at the start of the project, the supplementary hedging information was published with a status of “indicative estimates” (as opposed to “official statistics”), because of the limited coverage of the survey and the indicative nature of the net market-value financial derivatives data from the banks and certain nonbanks. Nonetheless, users reacted favorably to the release of these data, and there was an increase in confidence in the quality of the Overseas Debt statistics.

14.152 Therefore, the hedging supplement was repeated in 2000, with the sample of respondent enterprises updated using more recent information available from the Total Overseas Debt and Annual Capital Account surveys.

Lessons learned

14.153 Responsiveness to the needs of users of published statistics and of respondents is important. The hedging supplement project arose from user concerns, while the responsiveness to the circumstances of respondents contributed to the usefulness of the published results. For instance, customizing the questionnaire according to sector and within sectors ensured better-quality data than would have been achieved with one standard questionnaire, and discussing alternatives with respondents when they were unable to supply the market-value financial derivatives data as originally requested allowed the BOP staff to produce estimates that might not otherwise have been possible.

14.154 Consultation was essential. There were several aspects to this:

  • Consultation with respondents was essential. Personal visits were of greatest value because they allowed a two-way exchange of information; increased respondent understanding of, and support for, the survey objectives; and enabled BOP staff to learn more about market practice, resulting in a better questionnaire, better-quality data, and a greater understanding of the data supplied.
  • Bringing together respondents (those people who actually complete the questionnaire) and users of the published statistics from the same organization was very useful; these two groups sometimes had little knowledge of each other’s positions. Bringing them together with the BOP staff provided the opportunity for all parties to better appreciate the roles of all the parties involved.
  • Pooling of knowledge was key. The consultation and liaison between the SNZ and the private bank, and the statistical office and the central bank, were an essential feature of the project. The private bank provided the perspectives of a user of the statistical output, a market participant, and a data supplier; and the central bank offered conceptual and technical advice, and an overall perspective of financial market operations. In addition, consultation between SNZ and the survey respondents gave further insight into market operations. This pooling of information was especially beneficial because the measurement of hedging was a new and highly technical subject, and new territory for a national statistical office.

Future of the supplement

14.155 The original intention had been that, provided the results warranted, the hedging supplement would continue only until 2001, when the project to implement BPM5 in full would be completed. However, following the positive user response, it was decided to continue the supplement, but in a modified form. Net market-value data are to be collected in the new Quarterly International Investment Survey—a balance of payments form being brought into line with BPM5 requirements—which, as originally planned, will cover both hedged and trading positions in financial derivatives. The hedging supplement will continue to be repeated annually, for data as at March 31, but will collect data only on the extent of hedging by type, sector, and currency. That is, the function of the hedging supplement will be to continue to complement the external debt statistics.


System for Monitoring the External Debt of the Private Sector22

14.156 The Philippines extensively taps foreign funds to help support its large development financing requirements. Cognizant of the need for a systematic approach to managing external borrowings, the government enacted a law on foreign borrowings in the mid-1960s that instituted broad policies and safeguards on foreign borrowings. Subsequent legislation defined borrowing limits and vested authority in the central bank to oversee compliance with the law from a foreign exchange standpoint.

14.157 Administrative mechanisms were established in the early 1970s to implement the provisions of law and rationalize the debt-management process. The monitoring system covers foreign borrowings of both the public and private sectors. The government has always recognized the important role that the private sector plays in spurring economic growth and development, and hence the need to monitor its foreign borrowing. With exchange controls then in place, it was not difficult to implement the system and ensure compliance therewith. The system has evolved over the years to address new developments, including the progressive dismantling of barriers to capital movements. The 1990s also highlighted the importance of monitoring private sector borrowings as private sector enterprises incurred substantial amounts of external debt during the period to finance their development projects and other major undertakings, including those under build-operate-transfer and similar arrangements.

14.158 Management of the country’s external debt involves the concerted efforts of various government agencies, including the central socioeconomic planning body—a top-level interagency committee and the Finance Department. The Bangko Sentral ng Pilipinas (Bangko Sentral, or the Bank)23 is at the forefront of these activities, having been mandated to ensure compliance with the provisions of law regarding foreign exchange concerns. The Bank keeps track of the debt stock, maintains outstanding liabilities within manageable levels, and ensures that borrowings are obtained on the best available terms. It currently performs these activities through the Monetary Board (its highest policymaking body) and the International Operations Department24 (which handles the day-to-day activities of debt management).

Debt-management tools

14.159 The Bank presently employs a number of debt-management tools that were initiated and fine-tuned during the past three decades. These include Bangko Sentral policy issuances, which outline the rules, regulations, guidelines, and procedures for foreign borrowing activities (new issuances are promptly disseminated to the public and are complemented by press releases and structured briefing sessions, as appropriate); and administrative mechanisms, including an approval and registration process and a debt-monitoring system, both of which cover liabilities of all sectors of the economy.

Loan approval and registration

14.160 Approval for a loan proposal is applied for by a private sector borrower and must be granted by the Bangko Sentral before the covering documents may be executed and the funds disbursed. The Bank’s evaluation process involves a thorough review of the proposal to determine, among other things, consistency of loan purpose with the country’s overall development thrust, benefits expected from the project, reasonableness of financial terms and conditions, and the loan’s impact on the country’s total debt-service burden vis-à-vis the economy’s capacity to meet maturing obligations.

14.161 In order to ensure compliance with the terms and conditions of the Bangko Sentral’s approval, the private sector is required to register foreign loans following receipt of borrowed funds. The borrower is required to submit a copy of the signed loan documents as well as proofs of disbursement and utilization of loan proceeds. After documents are found to be satisfactory, a Bangko Sentral Registration Document (BSRD) is issued that authorizes the borrower to buy foreign exchange from local banks for debt servicing on scheduled due dates. However, purchases of foreign exchange from banks to cover any payments not consistent with the loan terms reflected in the BSRD require prior Bangko Sentral approval.

14.162 Prior to the 1990s, and consistent with existing controls on foreign exchange inflows and outflows, all foreign borrowing proposals had to be approved and registered by the old central bank. Each purchase of foreign exchange from the banking system for debt servicing was likewise subject to prior central bank approval. But with the liberalization of foreign exchange rules starting in the early 1990s, regulations were modified such that private sector borrowers25 were, in general, given the option not to undergo the approval and registration processes, provided they did not purchase foreign exchange for debt servicing from the banking system.26 This approach is consistent with the freedom residents now have in the use of their foreign exchange receipts that were previously subject to the mandatory surrender requirement.

14.163 Nonetheless, despite the relaxation of foreign exchange regulations, most borrowers (particularly those with substantial funding requirements) choose to obtain approval from the Bangko Sentral for their foreign borrowings to ensure access to banking system resources, whenever necessary, to meet maturing debt payments. A large number of international creditors also require Philippine enterprises to have their borrowings approved by and registered with the Bangko Sentral to preclude any possible difficulty in servicing the account.

Monitoring system for external debt

14.164 The current (September 2000) external-debt-monitoring system covers all external obligations under any maturity category (short-, medium-, and long-term) in any form (loans, advances, deposits, bonds, etc.) owed by the different sectors of the economy (the monetary authority, central government, bank and nonbank enterprises, both state-and privately owned) to all types of creditors (multilateral and bilateral sources, foreign banks and nonbank financial institutions, foreign suppliers and buyers, bondholders/noteholders, and others).

14.165 The system, which relies on reports from various sources, processes and stores information in a central database, and generates reports using programs developed by the Bangko Sentral. Banks transmit data electronically while others submit hard-copy reports. Steps are being undertaken for a gradual shift to electronic reporting, at least for the major nonbank entities.

Reporting system

14.166 Report forms are designed considering the type of data required (data collected are used both for regulatory as well as statistical purposes) and the source of information. There are four major data sources that report to the Bangko Sentral on a regular basis.

  • Borrowers: Borrowers (bank and nonbank) are important data sources because they have firsthand knowledge of transactions in, and balances of, their foreign loans. Familiarity with the reporting system, which was instituted during the era of exchange controls, facilitates compliance by borrowers because the required internal systems and procedures have long been established. With the liberalization of foreign exchange rules, the Bangko Sentral has become more aggressive in propagating information on, and compliance with, its reporting requirements. It takes a proactive approach in this regard by directly communicating with borrowers (particularly new ones with substantial funding requirements); providing advice on the Bank’s reporting requirements; explaining the need for, and uses of, data requested; and exerting moral suasion to obtain the borrower’s cooperation. Even with the more relaxed regulatory environment, the Bangko Sentral continues to wield substantial influence and enjoys high credibility in the country, allowing it to successfully solicit the cooperation of data providers.
  • Major foreign creditors: Creditors’ reports allow validation of data provided by the borrowers on their stock (and flows in some instances) of external debt, and also supplement data obtained from other sources.
  • Local banks (including branches/subsidiaries of foreign banks operating in the Philippines): Bank reports provide data on individual cross-border transactions involving purchases and sales of foreign exchange that are external-debt-related, particularly those that no longer require prior approval and/or registration. Monetary penalties and other sanctions help ensure compliance with reporting requirements.
  • Major institutional investors in the country (such as nonbank financial institutions): In order to produce a more accurate measure of external debt, information on investments by these institutions in Philippine debt instruments floated offshore is used to adjust the external debt stock since these transactions are between residents.

14.167 In general, data are required in absolute values in original currencies, although the U.S. dollar equivalent is required for bank reports to facilitate comparison and cross-checking with data that are submitted in aggregate pesos and U.S. dollar equivalent to other Bangko Sentral departments/units.

14.168 Reported data on private sector accounts are strictly confidential to the Bangko Sentral; thus, figures are released only in aggregates. Disclosure of data on individual accounts or transactions requires clearance at the highest level (the Monetary Board), and the concerned party’s consent to the release of data or waiver of right to confidentiality is normally sought.

The external debt database

14.169 The external debt database was designed to allow monitoring of information on individual foreign loan accounts through the entire loan cycle from approval through disbursement, registration, and repayment.

14.170 A master record for each account is created and updated for any changes in basic loan information during the life of the loan. Details of each account maintained in the database include the contracting parties (debtor, creditor, and guarantor/s) and credit terms (maturity, repayment terms, interest rate, and commitment fee).

14.171 Loan transactions (drawings, principal, and interest payments) are entered into the system after reports received have been verified for consistency and accuracy. These transaction data are reflected in the reports on external debt and on the balance of payments.

14.172 Data are maintained in original currencies but can be easily converted into U.S. dollars or other currencies. The system makes use of several libraries—foreign exchange rates of major currencies, country, and institution libraries (debtor, creditor, and guarantor).

Output reports

14.173 The system can produce consolidated or detailed reports such as basic loan information and transactions; different profiles of debt stock (such as by maturity—original or remaining basis, borrower’s sector, currency, and creditor’s country, based either on residency or head office/citizenship); transaction summaries and projected debt-service burden. An example of a debt table generated from the system is shown in Table 14.7. The database structure allows generation of summaries of any data element—for example, outstanding balances, loan disbursements, and principal payments.

Table 14.7.Total Philippine External Debt1(Millions of U.S. dollars, end-period)
1990199119921993199419951996199719981999March 2000June 2000
By borrower29,95531,39232,08935,53538,72339,36741,87545,43347,81752,21052,41552,164
Public sector24,45825,55225,66629,71830,88330,11627,38526,95830,31034,80035,44134,932
Private sector25,4975,8406,4235,8177,8399,25114,49018,47517,50717,41016,97317,232
Branches of foreign banks9961,055603422376259348609494423383394
Domestic banks715747845996041,7415,0315,3694,9163,7353,5143,286
By maturity29,95531,39232,08935,53538,72339,36741,87545,43347,81752,21052,41552,164
Medium- and long-term25,57926,56526,83330,50033,52634,08834,66836,99440,63246,46546,40646,232
By creditor type29,95531,39232,08935,53538,72339,36741,87545,43347,81752,21052,41552,164
Banks and other financial institutions10,81510,2275,6925,1775,5306,3458,37310,1769,67210,34010,20610,284
By country29,95531,39232,08935,53538,72339,36741,87545,43347,81752,21052,41552,164
United States5,8085,5527,1567,0643,8123,7714,1904,5694,5665,3144,7044,993
United Kingdom1,1411,1086411,297363611511445399438537481
Multilateral agencies7,4117,9358,3239,2029,8599,6178,6348,63810,05810,2459,9349,864
By currency29,95531,39232,08935,53538,72339,36741,87545,43347,81752,21052,41552,164
U.S. dollar13,01612,93113,47114,24714,95316,57321,66025,94625,60027,38128,20628,069
Multicurrency loans5,8886,1646,2646,9317,5297,5436,7185,9656,3335,9395,6475,547
Japanese yen7,1938,2738,53010,60512,26311,63510,60010,26011,87814,48014,39214,340
Special drawing rights1,2581,5541,6831,9101,8241,5761,1921,6802,4252,7002,6542,644

Covers BSP approved/registered debt owed to nonresidents, with classification by borrower based on primary obligor per covering loan/rescheduling agreement/document.

Excludes the following monitored private sector accounts:

199419951996199719981999March 2000June 2000
(1) Intercompany accounts (gross “Due to head office/branches”) of Philippine branches of foreign banks5198612,6943,0743,0602,9062,4732,369
(2) Private sector loans without BSP approval/registration1004555629251,4041,3311,3371,316
(3) Private sector obligations under capital lease agreements3961,2961,2281,5971,5861,574

Covers BSP approved/registered debt owed to nonresidents, with classification by borrower based on primary obligor per covering loan/rescheduling agreement/document.

Excludes the following monitored private sector accounts:

199419951996199719981999March 2000June 2000
(1) Intercompany accounts (gross “Due to head office/branches”) of Philippine branches of foreign banks5198612,6943,0743,0602,9062,4732,369
(2) Private sector loans without BSP approval/registration1004555629251,4041,3311,3371,316
(3) Private sector obligations under capital lease agreements3961,2961,2281,5971,5861,574

Review of debt statistics

14.174 Statistics on the debt stock produced from the system are compared with those contained in other publications such as the BIS’s Quarterly Review, as well as the World Bank’s Global Development Finance.


14.175 The country’s external-debt-monitoring system remains robust, enabling the Bangko Sentral to meet vital data user requirements. However, potential reporting gaps could emerge in the liberalized foreign exchange regulatory environment. Thus, the system is continuously reviewed and refined, and additional possible sources of information and mechanisms for data capture are being explored. The objective is to further strengthen the Bangko Sentral’s capability to produce comprehensive, reliable, and timely debt statistics necessary for the exercise of its regulatory mandate, for policy formulation, and for meeting the requirements of other data users.


Measurement of Short-Term External Debt27

14.176 In Turkey, external debt statistics are compiled in two different institutions: the Undersecretariat of Treasury, and the Central Bank (CBRT). The treasury is responsible for medium- and long-term debt, which mainly consists of project and program finance, international money markets credits, bond securities, as well as other private sector credits, whereas the CBRT is responsible for short-term debt, including that of the central bank, banks, as well as other nonbank private and public institutions (other sectors). The CBRT disseminates monthly data on short-term debt, identifying short-term debt of the central bank, banks, and other sectors; trade credit is separately identified for the other sectors.

Legal framework

14.177 Turkish legislation currently in force allows residents to borrow freely abroad. Banks can act as intermediaries to such credits by guaranteeing or not guaranteeing them. For short-term foreign borrowings, banks are responsible for reporting to the central bank on a credit information form the details of their own activity, and for collecting and reporting the details of the transactions of their clients.

Definition of institutional sectors

14.178 The institutional sector classification used by the CBRT in compiling short-term external debt data is consistent with BPM5.


14.179 The short-term external debt of the central bank consists of (1) foreign currency deposit accounts, (2) overdrafts, and (3) nonguaranteed trade arrears (NGTAs). The foreign currency accounts correspond to approximately 99 percent of the entire CBRT short-term external debt stock as of the end of 1999. These accounts are opened by Turkish citizens, over 18 years of age, who have residence or working permits abroad, and possess valid Turkish passports. Individuals in public agencies authorized to work abroad for a long term, and those employed at the representative offices and bureaus abroad of public and private sector organizations are also entitled to open such accounts.

14.180 The short-term borrowing of the banks includes (1) foreign exchange credits obtained abroad; (2) foreign exchange deposit accounts of nonresidents; and (3) foreign exchange deposit accounts of nonresident banks.

14.181 The short-term debt of private and public nonbank entities (other secto rs) is divided between trade credits and other credits. Trade credit includes import-related short-term debt, and prefinancing of exports. It accounted for approximately 80 percent of the other sector’s short-term external debt at end-1999. Import-related debt, which has the largest share, consists of acceptance credits; letters of credit (reflecting import payments to be made, rather than actual liabilities themselves); and deferred payments for imports—essentially suppliers’ credit. Other credits include foreign exchange credits extended by nonresident banks or corporations abroad.

Methods of data collection

14.182 Balance of payments data are compiled by the CBRT within the framework of the concepts and recording principles of BPM5. The data for short-term external debt mainly rely on banks’ foreign exchange records. An exception is data on short-term debt arising from imports, which are derived from the import figures of the State Institute of Statistics (SIS) for the creation of the debt, and an estimation method for repayments.

14.183 The bank reporting system provides data on short-term foreign exchange credits obtained from nonresidents by banks and other sectors, as well as foreign exchange accounts opened with domestic banks by nonresidents and nonresident banks. Also, banks report trade financing credits in the form of acceptances and prefinancing credits for exports.

14.184 For data on credit arising from deferred payments for imports, in 1997 the central bank began using data from the SIS for the extension of credit, and data from banking records for the repayment of this credit, with the change in the stock of debt estimated as the difference between the two. This method of measuring short-term debt gave rise to sharp annual increases in the estimated stock of trade credit, which became especially noticeable in 1999, when a sharp increase occurred despite a significant decline in imports. From a survey of banks, it was discovered that these kinds of transactions have short maturity. Also, it was discovered that the data from the banks did not accurately capture all repayments, and so the stock of trade credits was overestimated. Consequently, the central bank developed a new methodology for measuring repayments, on the assumption that this form of trade credit is essentially repaid within a three-month period. Data were revised for the period 1996–99. The consequence was a significant downward revision to the stock of short-term external debt.

14.185 Data on short-term loans are provided by the banks on a transaction basis when they are received by the banks and the maturity exceeds 180 days, and, without a maturity exemption, received by other sectors for which the domestic banks act as intermediaries or as guarantors. The details reported include the creditor, the country from which the credit is received, the borrowing sector (public/private), the repayment schedule, the date of agreement, the date of last payment, the interest rate, the amount of the loan, and the currency. The outstanding value of these short-term loans is computed by accumulating the monthly flow data in U.S. dollar equivalent by applying cross-rates prevailing on the date of the transaction, and adding these cumulated transactions to the previous month’s end-of-period stock data, valued at exchange rates at the end of the month.


Data Requirements for the HIPC Initiative28

14.186 In 1998, Uganda became the first country to receive relief under the IMF’s first Heavily Indebted Poor Countries (HIPC) Initiative, and again in 2000, it was the first country to receive assistance under the Enhanced HIPC Initiative. For Uganda, the intention of the HIPC Initiative is to reduce the external debt burden to a sustainable level, so that the savings can be used for social development. On each occasion it sought relief, Uganda was required to provide accurate external debt statistics. This case study sets out how Uganda was able to produce these data, and the external data required.

14.187 Even before the HIPC Initiative, Uganda had already taken steps to reduce its external debt burden and hence had begun the work to develop good external debt data.

  • Negotiations for debt rescheduling with Paris Club creditors. Debt rescheduling was effected under Toronto (1989), enhanced Toronto (1992), and Naples terms (1995), where Uganda had reached an exit to any Paris Club rescheduling. But reschedulings were applied to pre-cutoff loans—which was about 4 percent of the total stock of debt, given that Uganda’s cutoff date was June 1981.
  • In 1991, the government implemented the first debt strategy. Among other things, this placed strict limits on borrowings—loans were only to be contracted for priority projects. Also, Uganda bought back a big portion of its commercial debt using a grant from the International Development Association (IDA) and other bilateral donors, totaling $153 million.
  • An enhanced debt strategy was implemented following a 1995 study undertaken by a consultant, in consultation with Ugandan officials. The finding that the biggest burden was multilateral debt, and that it would continue to increase from 1998 onward as long-term obligations matured, resulted in the formation of the Multilateral Debt Fund. A total of $135 million was contributed to this fund—by the Netherlands, Sweden, Switzerland, Denmark, Norway, and Austria—to meet debt obligations from the four major multilateral creditors—IDA, the African Development Bank, the African Development Fund, and the IMF.
  • Uganda continued not to pay its non–Paris Club creditors until they accepted Paris Club comparable terms. This is in line with the debt strategy of 1991, and the enhanced debt strategy of 1995, but excludes those creditors from whom new disbursements are received for new projects.
  • Uganda continued to adhere to borrowing on highly concessional terms (IDA terms) and requests for grants where applicable.

14.188 Notwithstanding all of the above endeavors, Uganda found that its debt was still unsustainable and so sought relief under the HIPC Initiative, which required good external debt statistics.

Institutional arrangements

14.189 By act of parliament (the Loans and Guarantee Act), public external debt borrowing is vested in the Ministry of Finance. The minister signs all public debt loan agreements or gives powers of attorney to other senior officials to sign on his/her behalf. The ministry, therefore, performs the functions of negotiating, loan contracting, disbursement authorization and monitoring, repayment authorization, and recording of the external debt position. It also handles other aspects of the financial flows to the country, including grants and aid from nongovernmental organizations.

14.190 In the early 1980s, the ministry delegated part of the function of data recording, monitoring, and effecting payments to the Bank of Uganda (central bank) because records on loan documents in the ministry had been destroyed during the 1979 war. Once it acquired the responsibility, the central bank created the External Debt Management Office (EDMO), which was subsequently combined with the then Exchange Control Department to form the Trade and External Debt Department (TEDD) within the research function.

14.191 At that time of the handover of responsibility, debt data records were not accurate because all creditors were not known, and so what Uganda owed could not be verified easily. Therefore, the tendency was to rely on creditor billing statements, which at times were inflated. Later, in 1991, to establish Uganda’s stock of debt and streamline the debt records, a consultant—S.G. Warburg—was employed to carry out a comprehensive audit report of the external debt data. Letters were written by the minister of finance to all known creditors to avail information on their claims, and the information received was cross-checked by the consultants with records from other international institutions, and with Uganda’s own data.

14.192 As part of the process the consultant, together with the central bank staff, created a new system for recording all loans, which continues to the present. UNCTAD’s Debt Management and Financial Analysis System (DMFAS) was introduced,29 with each loan given a unique DMFAS number, and loan details captured in a computerized database. The data captured are similar to those shown in Table 11.1, in Chapter 11, and cover, for each instrument, details of its type, disbursements, borrowing terms, debt-service payments, exchange and interest rates, and, if necessary, any debt-restructuring activity. Also, new filing cabinets were put in place, so that for each loan Uganda has a manual file with the loan agreement and all correspondence.

14.193 When the ministry contracts debt and signs an agreement, it sends a copy of the loan agreement to the central bank, where the loan terms are entered in the database. As the loan is disbursed, various types of disbursement information are received from the creditor, posted in the computer, and filed in the manual file. To process payments, bimonthly meetings are held between the central bank and the ministry to consider debt-service projections, which are produced from the DMFAS system. These projections are cross-checked with the billing statements received from the creditors and, according to the debt strategy, a decision is made on which creditors are to be paid.

14.194 Uganda is now using DMFAS version 5.1.1, which has the World Bank’s Debt Sustainability Module Plus (DSM Plus) for calculating the (net) present value of debt, a requirement for the HIPC Initiative.

Uganda’s stock of debt

14.195Table 14.8 presents Uganda’s stock of debt as at June 30, 2000. It totaled $3.57 billion. This debt is broken down into three major categories: multilateral debt, bilateral debt, and commercial debt.

Table 14.8.Uganda’s External Debt Obligation by Creditor as at June 30, 2000(Millions of U.S. dollars)
CreditorTotal DebtPercent of Total
Paris Club259.07.2
 PC pre-cutoff110.13.1
 PC post-cutoff148.94.2
Non-OECD (Non–Paris Club)333.59.3
Source: Trade and External Debt Department, Bank of Uganda.
Source: Trade and External Debt Department, Bank of Uganda.

Data requirements of the HIPC Initiative

14.196 The HIPC Initiative required Uganda to undertake a debt-reconciliation exercise with all creditors as at end-June 1997 for the first HIPC, and end-June 1999 for the Enhanced HIPC.

Exposure to the HIPC Initiative

14.197 During the preparation for the first HIPC Initiative it was necessary to train TEDD and ministry staff on its requirements. Consequently, a pre-HIPC debt-sustainability analysis workshop was organized by External Finance for Africa (now Debt Relief International), the Macroeconomic and Financial Management Institute for Eastern and Southern Africa (MEFMI), the World Bank, and UNCTAD, and sponsored jointly by the Swedish International Development Agency, the Bank of Uganda, and the Ministry of Finance to help build capacity in producing the external debt data required for the HIPC Initiative.

14.198 Following attainment of the first HIPC Initiative, a workshop on post-HIPC debt-sustainability analysis, sponsored by MEFMI, Debt Relief International, UNCTAD, the Bank of Uganda, and the Ministry of Finance was held in Uganda in January 1999. From this workshop it was discovered that Uganda’s debt was not sustainable, and so more relief was needed. In addition to the above workshops, regional workshops were organized by the same groups to enlighten Uganda’s awareness on HIPC issues. Indeed, Uganda will always remain indebted to these agencies for the good work done, so allowing Ugandan officials to participate fully in the tripartite negotiations with the IMF, World Bank, and other bilateral donors.

Debt data coverage

14.199 External debt that is covered under the HIPC Initiative is limited in all cases to that owed or guaranteed by the public sector. For Uganda, this includes all medium- and long-term borrowings of the central government, the central bank, and parastatals from multilateral institutions (including the IMF), bilateral governments (Paris Club and non-OECD), and commercial credits from banks, export guarantee agencies, and suppliers’ credits whether or not a government guarantees them. Therefore, all the creditors presented in Table 14.8 are covered.

Data validation

14.200 Uganda had to reconcile the debt data with all creditors, since it is normally expected under the HIPC Initiative that 95 percent of the value of external debt be fully reconciled with creditors at the decision point, with some allowance for delay in reconciling disputed debts or failure of some creditors to reply. To carry out this exercise effectively, the ministry wrote letters to all the relevant creditors requesting data on external debt outstanding and disbursed as at end-June 1997 for the first HIPC, and later for end-June 1999 for the Enhanced HIPC. The finance minister signed all the letters. They were sent to the latest-known address, but where the latest addresses could not be traced, the letters were sent to the embassies of the creditors in Uganda or Nairobi for onward transmission.

14.201 The detailed information requested was as follows:

  • Creditor’s name;
  • Amount of the loan;
  • Date of signature;
  • Availability date;
  • Amount disbursed;
  • Undisbursed amount;
  • Amount of principal paid;
  • Amount of interest paid;
  • Amount of principal arrears;
  • Amount of interest arrears; and
  • Amount canceled.

14.202 In the ministry and the central bank, a master file was opened up to store all the replies, with a copy of each reply placed in the individual files of creditors. The next step was to compare the loan position kept on the DMFAS system with that reported by the creditors. Where applicable, differences were identified for each loan, and there was correspondence with the creditors to sort out the differences. In some cases it was realized that there had been some disbursements that were not captured on DMFAS, or payments had been made that were applied differently on the maturities by the creditor (that is, payments for current maturities had been applied to arrears by the creditor), or different exchange rates had been used. Other creditors, like Egypt, said that they did not have any outstanding claims on Uganda, so their loans were removed from the database. Once the differences were resolved, where necessary, loan data were corrected.

14.203 However, complicated and controversial issues arose on the following:

  • The acknowledgement of disputed debts, such as military debts arising from past wars. This was true for a Tanzanian loan for which a verification exercise is still required, although the amount indebted was accepted in principle by Uganda.
  • The exchange rate used for converting debts to the currency of repayment. For instance, some debts denominated in, say, Burundi francs in which the supplies were originally quoted.
  • The “ownership” of debts that had been traded directly or on the secondary market. For instance, the loan that was supposed to be a claim of COFACE (France) had been sold to Centenary Rural Development Bank.
  • The level of arrears on “old” loans (for example, for Libya and commercial debts), particularly if late interest charges had been accruing.

14.204 Also, although the response was good for creditors that were being paid on schedule—such as multilateral and the bilateral Paris Club creditors—and for the Paris Club creditors that had just signed the bilateral agreements, some bilateral non-OECD creditors were reluctant to reply. Various reminders had to be sent. On the other hand, some of them replied quickly, hoping to be repaid. The majority of commercial creditors never replied.

14.205 For those creditors who responded, the reconciled data were sent to the IMF and the World Bank as requested, for further cross-checking with data received from the creditors. For all the multilateral creditors, where the reconciliation exercise indicated that arrears had accumulated, these had to be paid off before Uganda could qualify for the HIPC Initiative. For those creditors where no information was received, IMF and World Bank figures were taken and reconciled with the information included in the database, which had been agreed upon in the S.G. Warburg audit report.

Data needs for measuring debt-burden indicators and debt relief

14.206 In Uganda’s experience, a country must make realistic assumptions when projecting data for new disbursements, macroeconomic indicators, balance of payments transactions, and budget revenue and expenditures because accuracy in these projections will affect the realization of sustainability ratios. For example, the impact of El Niño rains on export projections was a factor in Uganda’s external debt being unsustainable even after relief under the first HIPC Initiative was received. Also, even after making realistic assumptions and calculating the relevant balance of payments and budget projections, consideration is required about how financing gaps, either in the balance of payments or budget, will be filled.

14.207 Sensitivity analysis is important to test alternative macroeconomic scenarios and to provide government with a picture of what would happen if the central assumptions changed. Uganda uses models developed in both the World Bank’s DSM Plus and in the private sector (Debt Pro) for calculating debt sustainability for the HIPC Initiative.

1Prepared by the Australian Bureau of Statistics.
2The enterprise groups that report are the Australian head offices on behalf of all branches, subsidiaries, and consolidated associates, rather than each legal entity that might have an element of overseas investment or debt. Approaching entities at the group level limits the number of respondent organizations to those that can best report the information.
3That is, the difference in opening and closing positions is “explained” by transactions, valuation changes, and “other adjustments.”
4Prepared by the Oesterreichische Nationalbank. For further reference, see Oesterreichische Nationalbank (2000); European Central Bank (1999); Oesterreichische Nationalbank (1995), Reports and Summaries, 1/1995; and Oesterreichische Nationalbank (1999), Focus on Austria, 1/1999.
5Prepared by Statistics Canada.
6A fuller description of the Canadian system is available on the Internet at the IMF website,
7Prepared by the Central Bank of Chile.
8At the time of writing, the reporting area comprises the G-10 plus eight countries: Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom, and the United States. The quarterly reports also include the so-called offshore centers: The Bahamas, Bahrain, Cayman Islands, Hong Kong SAR, the Netherlands Antilles, and Singapore.
9Because debtors are the source of information, these loans are classified as debt to suppliers, even though they are subsequently discounted by banks in the BIS reporting area (forfaiting).
10The estimate of short-term claims is derived from the BIS consolidated data, which does provide a breakdown of claims by short-term remaining maturity.
11The BCCH reported data in Table 14.3 are those for loans with BIS reporting institutions in the reporting area, converted to a consolidated basis so as to make the data comparable with those of the BIS.
12Source: Financial information of the Superintendency of Banks and Financial Institutions.
13Prepared by the Ministry of Finance of India.
14The CS-DRMS is described in Chapter 18.
15Prepared in the Division of International Finance, Department of Economic Analysis and Policy, Reserve Bank of India, Mumbai.
16Prepared by the Bank of Israel.
17Apart from debt-related data, the same system contains data on nonresident portfolio investment in Israeli equities and direct investment of nonresidents in Israel.
18Prepared by the Department of Public Credit, Mexico.
19While the compilation of these creditor bank data is the exclusive responsibility of the central bank, the obligation to report to the authorities and the public on the performance of external private debt is the responsibility of the Finance Secretariat. Also, the Finance Secretariat is responsible for establishing the guidelines for authorization of the operations of foreign financial institutions in Mexico, and, in conjunction with the central bank, it verifies the activity of foreign banks.
20Prepared by Statistics New Zealand.
21“Overseas debt” is the term used for the SNZ survey that collects data on New Zealand’s external debt, and the published statistics. The survey measures New Zealand’s total overseas debt as at March 31 each year, and collects data from both private and government sector organizations.
22Prepared by the Bangko Sentral ng Pilipinas.
23The former Central Bank of the Philippines was reorganized into the Bangko Sentral ng Pilipinas effective July 3, 1993. As the new central monetary authority provided for in the Philippine Constitution, it enjoys fiscal and administrative autonomy.
24Formerly the Management of External Debt Department (MEDD), which was originally organized in 1970 as the External Debt Monitoring Office. MEDD was renamed as International Operations Department in October 1999 with the broadening of its responsibilities to include trade and investments.
25There was no change in policy on public sector borrowings because the policy emanates from provisions of the Philippine Constitution and other legislation.
26Exceptions to this rule are borrowings that would involve or result in any liability, whether real or contingent, on the part of a public sector enterprise or a local bank to a nonresident (for example, arising from guarantees), which continue to be covered by the approval and registration process.
27Prepared by the Central Bank of Turkey.
28Prepared by the Bank of Uganda.
29The DMFAS system is described in detail in Chapter 18.

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