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Geneva, 23th – 25th November 2015
Exogenous Shocks and Debt
by
Mr. John Panzer Director
Global Practice for Macroeconomics & Fiscal Management The World Bank Group
The views expressed are those of the author and do not necessarily reflect the views of UNCTAD
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Exogenous Shocks and Debt In Developing Countries
John Panzer
Director Global Practice for Macroeconomics
& Fiscal Management
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Outline
3
• Development and Poverty Reduction
• Debt in Developing Countries (LICs)
• Outlook and Vulnerabilities
• Policy Options
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4
Era of unprecedented growth
Source: World Bank Global Monitoring Report
0
1
2
3
4
5
6
7
World Emerging Markets andDeveloping Countries
Sub-Saharan Africa Low Income DevelopingCountries
Ave
rage
Re
al G
DP
Gro
wth
(%
)
2001-2008 2009-2012 2013
Real GDP Growth by Country Group
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Positive but Uneven Outcomes in Twin
Goals Economic developments leading to IDA17
World
IDA
IDA FCS
IDA [SERIES NAME]
0%
10%
20%
30%
40%
50%
60%
70%
198
1
198
4
198
7
199
0
199
3
199
6
199
9
200
2
200
5
200
8
201
0
201
1
201
2
Povert
y R
ate
Average
-6
-4
-2
0
2
4
6
8
10
12
14
Bo
livia
Ta
nzan
ia
Cam
bo
dia
Con
go
, R
ep.
Nep
al
Bh
uta
n
Vie
tna
m
Ta
jikis
tan
Kyrg
yz R
ep
ub
lic
Mo
ldova
Nic
ara
gu
a
Rw
an
da
Hon
du
ras
Mo
zam
biq
ue
Uga
nd
a
Pa
kis
tan
Sri
La
nka
Ma
li
Ba
ng
lade
sh
Lao
PD
R
Se
ne
ga
l
Nig
eri
a
Eth
iop
ia
Ma
law
i
To
go
Ma
da
ga
sca
r
In p
erc
ent*
Income growth of bottom 40% Income growth of total population
Source: World Development Indicators.
* Average annual growth in mean income/consumption per
capita during a 5-year period between 2002-2012.
Source: PovCal Net, The World Bank.
Strong (but uneven) progress against twin goals
Convergence in poverty reduction Growth inclusive in IDA countries
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Benign external environment
Source: World Development Indicators, DSAs
LIC commodity exporters
80
90
100
110
120
130
140
150
0
50
100
150
200
250
300
350
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Exp
ort
s
Index (
100=
2001)
Co
mm
od
ity P
rice
s a
nd
FD
I In
de
x (
10
0=
20
01
)
Commodity Price index FDI Exports
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LICs able to diversify financing
Debt disbursements to Low Income Countries by type
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Multilateral Bilaterals Other Private Commercial Banks Bonds
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8
Broader access to global bond markets
Global Bond Issuances – Sub-Saharan Africa (Excl. SA)
0
1
2
3
4
5
6
7
2009 2010 2011 2012 2013 2014 2015
Bill
ions (
US
D)
Angola Cote d'Iviore Ethiopia Gabon Ghana
Kenya Mozambique Namibia Nigeria Rwanda
Senegal Seychelles Tanzania Zambia
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Source: World Development Indicators
9
HIPC gains sustained A
vera
ge E
xte
rnal D
ebt to
GD
P
DP = HIPC Decision Point
Change in External Debt After HIPC
0
20
40
60
80
100
120
140
160
180
Average 25 Percentile 75 Percentile
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10
15 16 17 19 22 23 24 23 22 20
18 18 19 22
22 22 24 29
30 34
26 26 26 24 22 23 20
16 19 19
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Low Moderate High/In Debt Distress
Until very recently, reduced risks of debt distress
Number of Countries by Risk Rating and Year
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Changing Context
Source: World Economic Outlook, April 2014 and October 2015, IMF.
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
2016 2017 2018 2019
CA
B in p
erc
ent
of G
DP
Higher Current Account Deficits
0.0
10.0
20.0
30.0
40.0
50.0
60.0
2016 2017 2018 2019
Gro
ss p
ublic
debt
in p
erc
ent
of
GD
P
Larger and Increasing Projected Debt
0
20
40
60
80
100
120
140
160
180
2016 2017 2018 2019
Index (
2005=
100)*
Lower Projected Commodity Prices
*Commodity Price Index includes both Fuel and Non-Fuel Price Indices
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
2016 2017 2018 2019Annual perc
enta
ge c
hange
Lower Projected Growth
Outlook in April 2014 Outlook in October 2015
A more challenging global outlook
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Transitioning into headwinds
12
• Country specific
• Oil and commodity exporters vs. diversified economies
• Buffers and vulnerabilities
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Oil Exporters
1) Fiscal
2) External
Commodity Exporters
1) External
2) Fiscal
Diversified
1) Fiscal
Transitioning into headwinds - vulnerabilities
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14
Transitioning into headwinds – external sector and
erosion of buffers Change in FX Reserves and Depreciation Since 2014
Source: World Bank Survey of Commodity Exporters
-80%
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
-30%
-25%
-20%
-15%
-10%
-5%
0%
Ch
an
ge
in
LC
U v
alu
e a
ga
inst U
SD
Ch
an
ge
in
Re
se
rve
s
Change in FX Reserves (%) Change in FX vs. USD
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15
• Speed of adjustment a function of policy space • Market debt
• Reserves
• IFIs
• If possible, support domestic demand
• In the longer run: • Debt risk management
• Diversification (RER, structural reforms)
Policy options in an era of headwinds
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Policy options in an Era of “Headwinds”
• Efficiency in Public Finance
o Domestic Resource Mobilization and its cross-cutting effects
o Public Investment and debt management to sustain
infrastructure development
o Human capital
But external financing is critical
• Relentless focus on productivity/transformation
o Ambition in policy reforms in agriculture, resource
management and infrastructure
• Importance of Equity and Measurement
o Constantly checking and measuring progress
How we are helping countries transition and increase gains
Policy options in an era of “headwinds”