b Total public debt denominated in pesos and foreign currency.

Several speakers pointed out the importance of avoiding the accumulation of foreign currency denominated debt and borrowing in local currency as a hedge against foreign exchange rate risk.

Currency mismatches caused by the build up of enormous amounts of foreign currency denominated debt were also identified as a major source of instability in developing countries.

Debt instruments linked to a foreign currency

The notable exceptions to this trend are countries that manage cross border capital flows, especially the corporate sector s exposure to foreign currency debt. Indeed, certain types of capital flow management including limiting domestic debt denominated in foreign currency for both firms and households have been shown to increase resilience.

Another possibility is the development of foreign investment funds investing in a diversified portfolio of domestic currency denominated debt of developing countries, which provide, through diversification, risk adjusted rates of return that are attractive to foreign investors.

The Bank of Mexico had now imposed a limit on the foreign currency denominated liabilities that commercial banks could take on.

Select the currency in which this account is denominated.

By the end of the currency crises in East Asia and elsewhere in the late 1990s, emerging market governments had learned some important lessons. Five reforms were particularly effective more flexible exchange rates, larger foreign currency holdings, less pro cyclical fiscal policy, stronger current accounts, and less debt denominated in dollars or other foreign currencies.

Finally, it is no longer appropriate to judge whether a country s foreign currency reserves are adequate based on how many months of imports they can cover. Instead, the question to ask is whether the reserves can comfortably service the public and private sectors debt denominated in foreign currencies.

Expanding local currency bond markets could expedite a shift from dollar denominated cross border loans to local currency loans, bringing benefits to both investors and borrowers.

Poverty increased, the currency suffered repeated devaluations, foreign and domestic debt registered an increase and the growth rate of the economy fell.

Despite these developments, the Government of Burundi continued to pay its foreign debt servicing, thus reducing the country apos s hard currency reserves.

Currency fluctuation is not a major issue for IMO, since the budget is denominated in pounds sterling and 80 per cent of expenditure is disbursed in that currency.

While China s government should make greater efforts to rebalance the economy by conventional measures, it also should focus more attention on adjusting the currency structure of the country s gross assets and gross liabilities. In particular, China should try to replace its dollar denominated assets with renminbi denominated assets, and its renminbi denominated liabilities with dollar denominated liabilities.

Until recently, Russia has pursued an admirably conservative macroeconomic policy, running up huge budget and current account surpluses. It has paid off its foreign debt and built up foreign currency reserves of 450 billion.

14. As may be agreed from time to time by the parties, all grants provided by the Foundation to the United Nations shall be in the form of cash, denominated in the currency of the United States of America or in the form of stock or other financial instruments denominated in such currency.

More specifically, it was suggested that this would enhance opportunities for the creation of low correlation local currency denominated portfolios of government debt securities that would give investors risk adjusted returns that compared favourably with security indexes in the major capital markets.

In November 2001, the authorities again restructured the public debt, this time exchanging dollar denominated bonds for domestic guaranteed loans.

Conventional monetary policy operates by altering short term interest rates, which includes the central bank buying and selling short term government debt. No intervention in the foreign exchange market buying and selling foreign currency is involved.

Borrowing in domestic currency avoids the risks associated with currency mismatches and pro cyclical foreign capital flows.

3. Foreign debt (paras. 189 198)

Interest rates had decreased significantly for domestic and foreign currency.

IV. Foreign debt, expansion of grant financing

Furthermore, with the budget denominated in dollars, but a significant proportion of expenditures in euros, the financial situation is subject to the vagaries of currency fluctuations.

Like the project company, the foreign construction contractors and suppliers will expect to be able to convert into foreign currency and transfer abroad any revenue earned in local currency.

Now that oil price has reached 80 per barrel, Russia s central bank can start buying foreign currency again. Gold and foreign currency reserves are increasing, implying appreciation of the ruble.

Second, China s foreign assets are denominated almost exclusively in US dollars, while its foreign liabilities are denominated mostly in renminbi. As a result, whenever the US dollar declines, China s net international investment position (the difference between its external financial assets and liabilities) deteriorates and so does its investment income balance.

The purchase and sale of foreign currency or gold as a financial asset

This distinction between foreign and domestic debt is particularly important in the context of the euro crisis, because eurozone countries cannot devalue to increase exports if this is required to service foreign debt. And the evidence confirms that the euro crisis is not really about sovereign debt, but about foreign debt.

But foreign currency speculators and international investors are not looking forward to either of these scenarios. They continue to hold very large positions in dollar denominated assets, which they would not do if they thought the US faced a choice between a cheap dollar and a deep depression.

Ironically, today s pain stems from one of the great successes that emerging economies have achieved the reduction of foreign currency funding in favor of local currency debt. As emerging market central banks leaned against heavy capital inflows in order to mitigate exchange rate appreciation, their currencies became less volatile.

As foreign firms exporting to China accepted payment in renminbi, the currency piled up in their bank accounts in Hong Kong. That led to the next step Foreign firms wishing to invest in China were allowed to tap those deposits by issuing renminbi denominated bonds, and eligible offshore financial institutions were permitted to invest renminbi funds in China s interbank bond market.

In neither scenario does it make sense to hold huge amounts of dollar denominated assets today. Therefore, foreign speculators should, any day now, dump their dollar denominated assets onto the market, and so bring about the dollar decline that they so fear.

For example, WIPO's budget is denominated in Swiss francs and UNIDO's regular budget is denominated in euros.

foreign debt and, in particular, on the implementation of the

When capital flows out of the country as is happening now in some emerging markets it may be helpful if the central bank allows the currency to depreciate in an effort to boost exports and reduce imports. But if the country s borrowers have a lot of dollar denominated debt, depreciation can be ruinous.

The Territory's foreign debt stood at 50 million, while the domestic debt was estimated at 40 million.5

Third, while pesification removes balance sheet losses from domestic foreign currency debts, external contractual obligations cannot be redenominated unilaterally. Thus, the exit from the dollar peg requires a restructuring of external debt, both sovereign and corporate.

Countries that have outstanding debt in dollars or other foreign currencies are especially vulnerable. If their export revenues were to plunge relative to their debt service obligations, the result could be crises reminiscent of Latin America s in 1982 or the Asian and Russian currency crises of 1997 1998.

Will the bailout work? We have national debt, Detroit, currency valuations, healthcare, all these issues facing us.

Governments may be able to mobilize funding through debt swaps, where donors exchange debt for local currency investment in environmental protection, such as waste water treatment.

Foreign currency became scarce and a liquidity problem developed, leading the Government to liberalize foreign investment limits and ease access of domestic non financial firms to foreign credit.

I. The reception, brokerage, and investment of third parties' funds in Brazilian or foreign currency

If China is serious about elevating the SDR to reserve currency status, it should take steps to create a liquid market in SDR claims. It could issue its own SDR denominated bonds.