Push and Pull : Emerging Risks in Frontier Economy Access to International Capital Markets
Over the past decade, a large number of low- and lower-middle income ‘frontier economies’ have begun to access international private capital markets to meet fiscal financing needs. In this paper we seek to identify drivers of this trend, identify a...
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World Bank, Washington, DC
2017
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| Online Access: | http://documents.worldbank.org/curated/en/448611487936936412/Push-and-pull-emerging-risks-in-frontier-economy-access-to-international-capital-markets http://hdl.handle.net/10986/26273 |
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okr-10986-262732021-05-25T08:58:27Z Push and Pull : Emerging Risks in Frontier Economy Access to International Capital Markets Haque, Tobias Bogoev, Jane Smith, Greg debt Eurobonds debt sustainability macroeconomics finance frontier markets Over the past decade, a large number of low- and lower-middle income ‘frontier economies’ have begun to access international private capital markets to meet fiscal financing needs. In this paper we seek to identify drivers of this trend, identify associated risks, and present policy implications for frontier-market policy-makers. Through simple analysis of the characteristics of recent frontier market issuers, we show that smaller, poorer, and less well-governed economies are now accessing global credit markets. Through cross-country regression analysis, however, we demonstrate that the capacity of these countries to issue debt (and the cost of this debt) continues to be influenced by their macroeconomic performance and quality of governance. Drawing on evidence from Ghana and Zambia, we illustrate potential risks arising from recent expansions of access to global debt markets, where rapid debt accumulation of foreign-denominated debt in the context of lessened market discipline and following recent debt relief is now posing pronounced debt sustainability and refinancing risks. We conclude that increased access to international debt markets presents both opportunities and risks to frontier issuers. The new cohort of frontier issuing economies should: i) take careful account of debt risks and debt sustainability considerations when developing fiscal policy and debt strategies; ii) work to reduce the costs of ongoing external borrowing through adopting sound economic policies and protecting credit ratings; and iii) develop domestic debt markets as a potential alternative source of fiscal financing through which to reduce reliance on foreign-denominated Eurobond debt with its associated refinancing and currency risks. 2017-03-15T19:34:14Z 2017-03-15T19:34:14Z 2017-02 Working Paper http://documents.worldbank.org/curated/en/448611487936936412/Push-and-pull-emerging-risks-in-frontier-economy-access-to-international-capital-markets http://hdl.handle.net/10986/26273 English en_US MFM Discussion Paper;No. 17 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 |
| 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 Eurobonds debt sustainability macroeconomics finance frontier markets |
| spellingShingle |
debt Eurobonds debt sustainability macroeconomics finance frontier markets Haque, Tobias Bogoev, Jane Smith, Greg Push and Pull : Emerging Risks in Frontier Economy Access to International Capital Markets |
| relation |
MFM Discussion Paper;No. 17 |
| description |
Over the past decade, a large number of
low- and lower-middle income ‘frontier economies’ have begun
to access international private capital markets to meet
fiscal financing needs. In this paper we seek to identify
drivers of this trend, identify associated risks, and
present policy implications for frontier-market
policy-makers. Through simple analysis of the
characteristics of recent frontier market issuers, we show
that smaller, poorer, and less well-governed economies are
now accessing global credit markets. Through cross-country
regression analysis, however, we demonstrate that the
capacity of these countries to issue debt (and the cost of
this debt) continues to be influenced by their macroeconomic
performance and quality of governance. Drawing on evidence
from Ghana and Zambia, we illustrate potential risks arising
from recent expansions of access to global debt markets,
where rapid debt accumulation of foreign-denominated debt in
the context of lessened market discipline and following
recent debt relief is now posing pronounced debt
sustainability and refinancing risks. We conclude that
increased access to international debt markets presents both
opportunities and risks to frontier issuers. The new cohort
of frontier issuing economies should: i) take careful
account of debt risks and debt sustainability considerations
when developing fiscal policy and debt strategies; ii) work
to reduce the costs of ongoing external borrowing through
adopting sound economic policies and protecting credit
ratings; and iii) develop domestic debt markets as a
potential alternative source of fiscal financing through
which to reduce reliance on foreign-denominated Eurobond
debt with its associated refinancing and currency risks. |
| format |
Working Paper |
| author |
Haque, Tobias Bogoev, Jane Smith, Greg |
| author_facet |
Haque, Tobias Bogoev, Jane Smith, Greg |
| author_sort |
Haque, Tobias |
| title |
Push and Pull : Emerging Risks in Frontier Economy Access to International Capital Markets |
| title_short |
Push and Pull : Emerging Risks in Frontier Economy Access to International Capital Markets |
| title_full |
Push and Pull : Emerging Risks in Frontier Economy Access to International Capital Markets |
| title_fullStr |
Push and Pull : Emerging Risks in Frontier Economy Access to International Capital Markets |
| title_full_unstemmed |
Push and Pull : Emerging Risks in Frontier Economy Access to International Capital Markets |
| title_sort |
push and pull : emerging risks in frontier economy access to international capital markets |
| publisher |
World Bank, Washington, DC |
| publishDate |
2017 |
| url |
http://documents.worldbank.org/curated/en/448611487936936412/Push-and-pull-emerging-risks-in-frontier-economy-access-to-international-capital-markets http://hdl.handle.net/10986/26273 |
| _version_ |
1764461564950216704 |