Document Type

Conference Paper

Publication Date

11-13-1987

Conference Location

Beijing, China

Conference Dates

1987-11-12

Keywords

External debt management, Developing countries, World Bank

Abstract / Description

External debt management refers to the technical and institutional aspects of organizing the external liabilities. Effective external liability management is an essential part of macroeconomic management as borrowing decisions cannot be made independently of macroeconomic policies. The growth of external debt should therefore be planned within the framework of broad economic policy. In the short term, the total financing of the economy has to be consistent with the objectives of aggregate demand management. Some countries have found that borrowing limits can be a useful complement to macroeconomic decision making. In the medium term, the economy must have the capacity to produce real resources, in a timely manner and in sufficient amounts to service the borrowed resources. In other words, the current account deficit is to be contained within the financeable limits, i.e., consistent with the country's access, at all times, to the international financial markets. Debt managers, therefore, need a clear understanding of expected macroeconomic developments, while policymakers must have a good grasp of expected new borrowing requirements and debt service payment. Many countries suffer from a lack of communication between debt managers, reserves managers and macroeconomic planners. A recent study of 20 countries carried out by the IMF found that only one-fifth of LDCs were explicitly managing their debt systematically.

Comments

Presented as a seminar to officials of the Chinese Government at the Ministry of Finance, Beijing, on November 12-13, 1987, by Ishrat Husain, Division Chief, International Finance Division, World Bank. IH0228

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