Debt Build-Up in Frontier Low-Income Developing Countries (Lidcs) Since 2012: Global or Country-Specific Factors and Way Forward?

41 Pages Posted: 8 Apr 2019

See all articles by Constance de Soyres

Constance de Soyres

International Monetary Fund (IMF)

Anna Rogantini Picco

European University Institute

Randa Sab

International Monetary Fund (IMF) - Middle East and Central Asia Department

Date Written: February 2019

Abstract

This paper focuses on the debt build-up that frontier low-income developing countries (LIDCs) have faced since 2012. First, it documents a 20-percentage point increase in the external and government debt-to-GDP ratios, a composition shift toward higher non-concessional debt, and a rise in interest rate payments. Second, using panel regressions, it shows that while both global and country-specific factors are correlated with debt-to-GDP ratios over 1998-2016, global factors dominate for the period 2012-16. Third, through a small open-economy model, it shows that the projected tightening in global financial conditions would reduce debt-to-GDP ratios by less than the increase associated with the expected rise in investment.

Keywords: Domestic debt, Real interest rates, Economic growth, Heavily indebted poor countries, Interest rate increases, Debt build-up, Frontier LIDCs, global and country-specific factors, debt-to-GDP ratio, debt-to-GDP, country-specific, federal fund rate, fund rate

JEL Classification: E60, F30, H60, E6, F3, H6, E01, E62, G21, L31

Suggested Citation

de Soyres, Constance and Rogantini Picco, Anna and Sab, Randa, Debt Build-Up in Frontier Low-Income Developing Countries (Lidcs) Since 2012: Global or Country-Specific Factors and Way Forward? (February 2019). IMF Working Paper No. 19/37. Available at SSRN: https://ssrn.com/abstract=3367422

Constance De Soyres (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Anna Rogantini Picco

European University Institute ( email )

Villa Schifanoia
133 via Bocaccio
Firenze (Florence), Tuscany 50014
Italy

Randa Sab

International Monetary Fund (IMF) - Middle East and Central Asia Department ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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