Addressing Debt Vulnerabilities in Small States : The Potential Role of New Financing Instruments

The papers in this series aim to provide a vehicle for publishing preliminary results on Macroeconomics and Fiscal Management (MFM) topics to encourage discussion and debate. This paper explores two new financing mechanisms that multilateral and bi...

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Main Authors: Haque, Tobias, Partow, Zeinab, Varma, Sona, Oliveira, Luiz Edgard
Format: Working Paper
Language:English
en_US
Published: World Bank, Washington, DC 2016
Subjects:
Online Access:http://documents.worldbank.org/curated/en/2016/03/26067070/addressing-debt-vulnerabilities-small-states-potential-role-new-financing-instruments
http://hdl.handle.net/10986/24009
id okr-10986-24009
recordtype oai_dc
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
en_US
topic DEBT SOURCE
PUBLIC EXTERNAL DEBT
CREDIT MARKETS
PLEDGES
DEFICIT
HOLDING
DEBT ACCUMULATION
CAPITAL MARKETS
DEBT SUSTAINABILITY ANALYSES
INTERNATIONAL CAPITAL
REAL INTEREST RATES
PARTICULAR DEBT
FISCAL DEFICITS
INTEREST
DEBTORS
DEBT STOCK
INTEREST RATE
PRIVATE CREDIT
EXCHANGE
LOCAL GOVERNMENTS
LIQUIDITY
DEBT MANAGEMENT
DEBT STATISTICS
DEVELOPING COUNTRIES
GOVERNMENT BORROWING
REPAYMENTS
REAL INTEREST
TOTAL DEBT
INTERNATIONAL CAPITAL MARKETS
EXPORTERS
REVENUES
PORTFOLIO
LIQUIDITY RISK
DOMESTIC DEBT MARKETS
DEBT PORTFOLIOS
DISCOUNT
MULTILATERAL DEBT RELIEF
MARKET ACCESS
CURRENT ACCOUNT SURPLUSES
INTERNATIONAL BANK
DEBT BURDENS
CREDITORS
DEBT BURDEN
CREDITOR
CASH FLOWS
INSTRUMENTS
DEBT LEVEL
OUTSTANDING DEBT STOCKS
BUDGET
INITIAL DEBT
COMMERCIAL CREDITORS
INDEBTEDNESS
DOMESTIC CURRENCY
NATURAL DISASTER
DISBURSEMENT
GRACE PERIODS
ACCESS TO FINANCING
PORTFOLIOS
CURRENT ACCOUNT
DEBTS
MACROECONOMIC RISKS
INTEREST RATES
BANK DEBT
TOTAL EXTERNAL DEBT
NATURAL DISASTERS
EXTERNAL INDEBTEDNESS
MULTILATERAL CREDITORS
MARKETS
DEBT
RETURN
DEFICITS
DEBT-RELIEF
PUBLIC DEBT MANAGEMENT
INTERNATIONAL DEBT
DEBT SERVICING NEEDS
MULTILATERAL DEBT
DOMESTIC DEBT
REAL INTEREST RATE
AMORTIZATION PAYMENTS
DEBT SERVICE
TRUST FUNDS
FINANCE
CURRENT ACCOUNT DEFICITS
EXPENDITURE
DEBT LEVELS
TRANSACTION
DEBT SUSTAINABILITY ANALYSIS
INTEREST PAYMENTS
EXTERNAL DEBT STOCK
DEBT REDUCTION
EXTERNAL DEBT SERVICE
COUNTRY DEBT
DOMESTIC MARKETS
LEGAL OBLIGATION
FUTURE
DEBT CRISES
DEBT THRESHOLD
COMMERCIAL TERMS
RETURNS
COMMERCIAL DEBT
DEBT RELIEF INITIATIVES
BUDGETS
BAILOUTS
REPAYMENT
DEBT EXCHANGES
CURRENT ACCOUNT DEFICIT
INSTITUTIONAL CAPACITY
DIVERSIFIED PORTFOLIOS
FACE VALUE
REAL EXCHANGE RATE
DEBT STOCKS
MARKET
DEBT RATIOS
NET PRESENT VALUE OF DEBT
PUBLIC DEBT
SOLVENCY
PRIVATE DEBT
MACROECONOMIC VARIABLES
AVERAGE DEBT
GOVERNMENT DEBT
DEBT MARKETS
STOCKS
DEBT SERVICE REDUCTION
INVESTMENT
DEBT SERVICE OBLIGATIONS
OUTSTANDING DEBT
BILATERAL DONORS
SHARE
COMPOSITION OF DEBT
DEBT RESTRUCTURING
DEBT OBLIGATIONS
EXTERNAL PUBLIC DEBT
DEBT SERVICE PAYMENTS
INSTITUTIONAL DEVELOPMENT
DEBT REPAYMENTS
EXTERNAL SHOCKS
EXTERNAL DEBT
INVESTMENTS
TRUST FUND
PUBLIC SECTOR DEBT
DEBT THRESHOLDS
DEBT FORGIVENESS
SWAPS
LEVEL OF DEBT
AMOUNT OF DEBT
EXTERNAL FINANCING
MATURITIES
DEBT SWAP
EXCHANGE RATE
DEBT SERVICING
DEBT SUSTAINABILITY
PUBLIC SPENDING
DEBT CONVERSION
BILATERAL CREDITORS
LIABILITIES
MARKET RETURNS
DEBT REDUCTIONS
EXTERNAL LIQUIDITY
DEBT DYNAMICS
CASH FLOW
DEVELOPMENT BANK
SWAP
DEBT RELIEF
BILATERAL DONOR
INVESTING
spellingShingle DEBT SOURCE
PUBLIC EXTERNAL DEBT
CREDIT MARKETS
PLEDGES
DEFICIT
HOLDING
DEBT ACCUMULATION
CAPITAL MARKETS
DEBT SUSTAINABILITY ANALYSES
INTERNATIONAL CAPITAL
REAL INTEREST RATES
PARTICULAR DEBT
FISCAL DEFICITS
INTEREST
DEBTORS
DEBT STOCK
INTEREST RATE
PRIVATE CREDIT
EXCHANGE
LOCAL GOVERNMENTS
LIQUIDITY
DEBT MANAGEMENT
DEBT STATISTICS
DEVELOPING COUNTRIES
GOVERNMENT BORROWING
REPAYMENTS
REAL INTEREST
TOTAL DEBT
INTERNATIONAL CAPITAL MARKETS
EXPORTERS
REVENUES
PORTFOLIO
LIQUIDITY RISK
DOMESTIC DEBT MARKETS
DEBT PORTFOLIOS
DISCOUNT
MULTILATERAL DEBT RELIEF
MARKET ACCESS
CURRENT ACCOUNT SURPLUSES
INTERNATIONAL BANK
DEBT BURDENS
CREDITORS
DEBT BURDEN
CREDITOR
CASH FLOWS
INSTRUMENTS
DEBT LEVEL
OUTSTANDING DEBT STOCKS
BUDGET
INITIAL DEBT
COMMERCIAL CREDITORS
INDEBTEDNESS
DOMESTIC CURRENCY
NATURAL DISASTER
DISBURSEMENT
GRACE PERIODS
ACCESS TO FINANCING
PORTFOLIOS
CURRENT ACCOUNT
DEBTS
MACROECONOMIC RISKS
INTEREST RATES
BANK DEBT
TOTAL EXTERNAL DEBT
NATURAL DISASTERS
EXTERNAL INDEBTEDNESS
MULTILATERAL CREDITORS
MARKETS
DEBT
RETURN
DEFICITS
DEBT-RELIEF
PUBLIC DEBT MANAGEMENT
INTERNATIONAL DEBT
DEBT SERVICING NEEDS
MULTILATERAL DEBT
DOMESTIC DEBT
REAL INTEREST RATE
AMORTIZATION PAYMENTS
DEBT SERVICE
TRUST FUNDS
FINANCE
CURRENT ACCOUNT DEFICITS
EXPENDITURE
DEBT LEVELS
TRANSACTION
DEBT SUSTAINABILITY ANALYSIS
INTEREST PAYMENTS
EXTERNAL DEBT STOCK
DEBT REDUCTION
EXTERNAL DEBT SERVICE
COUNTRY DEBT
DOMESTIC MARKETS
LEGAL OBLIGATION
FUTURE
DEBT CRISES
DEBT THRESHOLD
COMMERCIAL TERMS
RETURNS
COMMERCIAL DEBT
DEBT RELIEF INITIATIVES
BUDGETS
BAILOUTS
REPAYMENT
DEBT EXCHANGES
CURRENT ACCOUNT DEFICIT
INSTITUTIONAL CAPACITY
DIVERSIFIED PORTFOLIOS
FACE VALUE
REAL EXCHANGE RATE
DEBT STOCKS
MARKET
DEBT RATIOS
NET PRESENT VALUE OF DEBT
PUBLIC DEBT
SOLVENCY
PRIVATE DEBT
MACROECONOMIC VARIABLES
AVERAGE DEBT
GOVERNMENT DEBT
DEBT MARKETS
STOCKS
DEBT SERVICE REDUCTION
INVESTMENT
DEBT SERVICE OBLIGATIONS
OUTSTANDING DEBT
BILATERAL DONORS
SHARE
COMPOSITION OF DEBT
DEBT RESTRUCTURING
DEBT OBLIGATIONS
EXTERNAL PUBLIC DEBT
DEBT SERVICE PAYMENTS
INSTITUTIONAL DEVELOPMENT
DEBT REPAYMENTS
EXTERNAL SHOCKS
EXTERNAL DEBT
INVESTMENTS
TRUST FUND
PUBLIC SECTOR DEBT
DEBT THRESHOLDS
DEBT FORGIVENESS
SWAPS
LEVEL OF DEBT
AMOUNT OF DEBT
EXTERNAL FINANCING
MATURITIES
DEBT SWAP
EXCHANGE RATE
DEBT SERVICING
DEBT SUSTAINABILITY
PUBLIC SPENDING
DEBT CONVERSION
BILATERAL CREDITORS
LIABILITIES
MARKET RETURNS
DEBT REDUCTIONS
EXTERNAL LIQUIDITY
DEBT DYNAMICS
CASH FLOW
DEVELOPMENT BANK
SWAP
DEBT RELIEF
BILATERAL DONOR
INVESTING
Haque, Tobias
Partow, Zeinab
Varma, Sona
Oliveira, Luiz Edgard
Addressing Debt Vulnerabilities in Small States : The Potential Role of New Financing Instruments
geographic_facet Caribbean
Oceania
Sub-Saharan Africa
description The papers in this series aim to provide a vehicle for publishing preliminary results on Macroeconomics and Fiscal Management (MFM) topics to encourage discussion and debate. This paper explores two new financing mechanisms that multilateral and bilateral development agencies could consider deploying to address problems of debt sustainability in small states. In this paper the authors provide an initial assessment of these proposals, informed by analysis of small state indebtedness and recent debt dynamics. Proposed financing instruments are predicated on assumptions that small states face high levels of indebtedness, and that reducing debt levels while increasing climate resilience could sustainably reduce such vulnerabilities. The authors find that levels of indebtedness vary widely across small states. Analysis of small state debt dynamics shows that small state debt accumulation has been driven by large primary and current account deficits and slow economic growth. Debt reduction from new mechanisms can only be expected to be sustainable, therefore, if countries simultaneously address the macroeconomic imbalances driving debt accumulation. The authors demonstrate that, while exposure to natural disasters is likely to have exacerbated economic management challenges in some small states, such exposures are unlikely to be the only important cause of indebtedness. The authors conclude that proposed new financing instruments can potentially help reduce small state debt burdens and gain fiscal space for climate adaptation but will not present a sustainable solution to problems of small state debt risks unless they involve macroeconomic and structural reforms to address the underlying imbalances driving rapid debt accumulation.
format Working Paper
author Haque, Tobias
Partow, Zeinab
Varma, Sona
Oliveira, Luiz Edgard
author_facet Haque, Tobias
Partow, Zeinab
Varma, Sona
Oliveira, Luiz Edgard
author_sort Haque, Tobias
title Addressing Debt Vulnerabilities in Small States : The Potential Role of New Financing Instruments
title_short Addressing Debt Vulnerabilities in Small States : The Potential Role of New Financing Instruments
title_full Addressing Debt Vulnerabilities in Small States : The Potential Role of New Financing Instruments
title_fullStr Addressing Debt Vulnerabilities in Small States : The Potential Role of New Financing Instruments
title_full_unstemmed Addressing Debt Vulnerabilities in Small States : The Potential Role of New Financing Instruments
title_sort addressing debt vulnerabilities in small states : the potential role of new financing instruments
publisher World Bank, Washington, DC
publishDate 2016
url http://documents.worldbank.org/curated/en/2016/03/26067070/addressing-debt-vulnerabilities-small-states-potential-role-new-financing-instruments
http://hdl.handle.net/10986/24009
_version_ 1764455513373802496
spelling okr-10986-240092021-05-25T10:54:44Z Addressing Debt Vulnerabilities in Small States : The Potential Role of New Financing Instruments Haque, Tobias Partow, Zeinab Varma, Sona Oliveira, Luiz Edgard DEBT SOURCE PUBLIC EXTERNAL DEBT CREDIT MARKETS PLEDGES DEFICIT HOLDING DEBT ACCUMULATION CAPITAL MARKETS DEBT SUSTAINABILITY ANALYSES INTERNATIONAL CAPITAL REAL INTEREST RATES PARTICULAR DEBT FISCAL DEFICITS INTEREST DEBTORS DEBT STOCK INTEREST RATE PRIVATE CREDIT EXCHANGE LOCAL GOVERNMENTS LIQUIDITY DEBT MANAGEMENT DEBT STATISTICS DEVELOPING COUNTRIES GOVERNMENT BORROWING REPAYMENTS REAL INTEREST TOTAL DEBT INTERNATIONAL CAPITAL MARKETS EXPORTERS REVENUES PORTFOLIO LIQUIDITY RISK DOMESTIC DEBT MARKETS DEBT PORTFOLIOS DISCOUNT MULTILATERAL DEBT RELIEF MARKET ACCESS CURRENT ACCOUNT SURPLUSES INTERNATIONAL BANK DEBT BURDENS CREDITORS DEBT BURDEN CREDITOR CASH FLOWS INSTRUMENTS DEBT LEVEL OUTSTANDING DEBT STOCKS BUDGET INITIAL DEBT COMMERCIAL CREDITORS INDEBTEDNESS DOMESTIC CURRENCY NATURAL DISASTER DISBURSEMENT GRACE PERIODS ACCESS TO FINANCING PORTFOLIOS CURRENT ACCOUNT DEBTS MACROECONOMIC RISKS INTEREST RATES BANK DEBT TOTAL EXTERNAL DEBT NATURAL DISASTERS EXTERNAL INDEBTEDNESS MULTILATERAL CREDITORS MARKETS DEBT RETURN DEFICITS DEBT-RELIEF PUBLIC DEBT MANAGEMENT INTERNATIONAL DEBT DEBT SERVICING NEEDS MULTILATERAL DEBT DOMESTIC DEBT REAL INTEREST RATE AMORTIZATION PAYMENTS DEBT SERVICE TRUST FUNDS FINANCE CURRENT ACCOUNT DEFICITS EXPENDITURE DEBT LEVELS TRANSACTION DEBT SUSTAINABILITY ANALYSIS INTEREST PAYMENTS EXTERNAL DEBT STOCK DEBT REDUCTION EXTERNAL DEBT SERVICE COUNTRY DEBT DOMESTIC MARKETS LEGAL OBLIGATION FUTURE DEBT CRISES DEBT THRESHOLD COMMERCIAL TERMS RETURNS COMMERCIAL DEBT DEBT RELIEF INITIATIVES BUDGETS BAILOUTS REPAYMENT DEBT EXCHANGES CURRENT ACCOUNT DEFICIT INSTITUTIONAL CAPACITY DIVERSIFIED PORTFOLIOS FACE VALUE REAL EXCHANGE RATE DEBT STOCKS MARKET DEBT RATIOS NET PRESENT VALUE OF DEBT PUBLIC DEBT SOLVENCY PRIVATE DEBT MACROECONOMIC VARIABLES AVERAGE DEBT GOVERNMENT DEBT DEBT MARKETS STOCKS DEBT SERVICE REDUCTION INVESTMENT DEBT SERVICE OBLIGATIONS OUTSTANDING DEBT BILATERAL DONORS SHARE COMPOSITION OF DEBT DEBT RESTRUCTURING DEBT OBLIGATIONS EXTERNAL PUBLIC DEBT DEBT SERVICE PAYMENTS INSTITUTIONAL DEVELOPMENT DEBT REPAYMENTS EXTERNAL SHOCKS EXTERNAL DEBT INVESTMENTS TRUST FUND PUBLIC SECTOR DEBT DEBT THRESHOLDS DEBT FORGIVENESS SWAPS LEVEL OF DEBT AMOUNT OF DEBT EXTERNAL FINANCING MATURITIES DEBT SWAP EXCHANGE RATE DEBT SERVICING DEBT SUSTAINABILITY PUBLIC SPENDING DEBT CONVERSION BILATERAL CREDITORS LIABILITIES MARKET RETURNS DEBT REDUCTIONS EXTERNAL LIQUIDITY DEBT DYNAMICS CASH FLOW DEVELOPMENT BANK SWAP DEBT RELIEF BILATERAL DONOR INVESTING The papers in this series aim to provide a vehicle for publishing preliminary results on Macroeconomics and Fiscal Management (MFM) topics to encourage discussion and debate. This paper explores two new financing mechanisms that multilateral and bilateral development agencies could consider deploying to address problems of debt sustainability in small states. In this paper the authors provide an initial assessment of these proposals, informed by analysis of small state indebtedness and recent debt dynamics. Proposed financing instruments are predicated on assumptions that small states face high levels of indebtedness, and that reducing debt levels while increasing climate resilience could sustainably reduce such vulnerabilities. The authors find that levels of indebtedness vary widely across small states. Analysis of small state debt dynamics shows that small state debt accumulation has been driven by large primary and current account deficits and slow economic growth. Debt reduction from new mechanisms can only be expected to be sustainable, therefore, if countries simultaneously address the macroeconomic imbalances driving debt accumulation. The authors demonstrate that, while exposure to natural disasters is likely to have exacerbated economic management challenges in some small states, such exposures are unlikely to be the only important cause of indebtedness. The authors conclude that proposed new financing instruments can potentially help reduce small state debt burdens and gain fiscal space for climate adaptation but will not present a sustainable solution to problems of small state debt risks unless they involve macroeconomic and structural reforms to address the underlying imbalances driving rapid debt accumulation. 2016-04-05T19:47:42Z 2016-04-05T19:47:42Z 2016-03 Working Paper http://documents.worldbank.org/curated/en/2016/03/26067070/addressing-debt-vulnerabilities-small-states-potential-role-new-financing-instruments http://hdl.handle.net/10986/24009 English en_US CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Working Paper Caribbean Oceania Sub-Saharan Africa