Debt service ratio

A public debt crisis in Japan (as the combination of recession, deflation, and high deficits drove up the debt GDP ratio).

Region Debt export ratio

Starting from 1999, the first year of recession, fiscal deficits rose substantially, alongside the public debt to GDP ratio.

Although Mexico s traditional debt indicators appeared sustainable, with moderate ratios of debt service, debt stock to exports and interest payments to exports (a ratio similar to the debt service ratio), the ratio of short term debt to reserves amounted to 131 per cent in 1997 (the ratio was much higher in 1996).

Although the government s stimulus policies have increased the national debt, the debt GDP ratio remains relatively low, at roughly 37 . Public debt in Japan, by contrast, exceeds 220 of GDP.

36. Africa s external debt burden is the highest among developing countries in terms of the ratio of external debt to GDP and its debt service ratio.

The debt indicators show what would be expected to be a sustainable debt position.1 The debt service ratio measured 13 per cent, the debt stock to exports ratio 114 per cent, the debt stock to GNP ratio 31 per cent, and short term debt to foreign exchange reserves ratio 53 per cent as noted, however, those figures obscure diverse trends at the country level.

Third, though China s public debt GDP ratio is officially still under 20 , since the onset of the global financial crisis in 2008, its fiscal position has deteriorated. If the government s contingent liabilities are included, China s debt GDP ratio may be closer to 50 .

1 It is generally recognized that a ratio of debt to exports exceeding 200 per cent and a ratio of debt service to exports exceeding 20 per cent would signal serious debt problems.

This sharp devaluation increased further the cost of debt servicing and the debt to GDP ratio.

In 1996, when Japan s public debt GDP ratio reached 80 , many Japanese economists and officials worried about a looming crisis. Almost two decades later, the ratio has surpassed 200 and still no crisis has erupted.

As a result of greatly expanded GDP in 2004, the public debt to GDP ratio declined slightly, to 180 per cent, but is still very high.

Indeed, according to the OECD, by the end of this year, America s national debt GDP ratio will climb to 108.6 . Public debt in the eurozone stands at 99.1 of GDP, led by France, where the ratio is expected to reach 105.5 , and the United Kingdom, where it will reach 104.2 .

External public debt

Public sector debt

However, because of improved economic performance in the debtor countries, the overall ratio of debt to exports and the ratio of external debt to gross domestic product had declined to their lowest levels since the onset of the debt crisis.

The net domestic public debt to GDP ratio stood at a high 63 per cent at the end of 1996 (52 per cent at the end of 1995).

The Government of Jordan continued its efforts to restructure the public debt stock, gradually replacing external by domestic sources with the external debt to GDP ratio declining from 76.4 per cent to 69.7 per cent during 2003 2004.

Latin American debt indicators generally indicated a sustainable debt position for the region as a whole, with a debt service ratio of 12 per cent, debt stock to exports and to GNP ratios of 103 per cent and 43 per cent respectively, and a short term debt to reserves ratio of 71 per cent.

To do the same thing with bank debt could pull hitherto sound economies into the abyss, because bank s balance sheets are much larger than the volume of government debt. In Spain, the public debt to GDP ratio is 69 , but the debt of the Spanish banking system totals 305 of GDP, or about 3.3 trillion about as much as the combined public debt of all five crisis stricken eurozone countries.

2.2 Contractual public debt

Bilateral public sector debt

Multilateral public sector debt

The ratio of short term debt to reserves indicated no short term liquidity difficulty.

Three factors had been taken into account debt service to export ratio (in the range of 20 25 per cent), the ratio of the current value of debt to export (200 250 per cent) and vulnerability.

Creating viable institutions for managing public debt in a democracy is difficult. The mechanisms currently on offer are treaty based, constitutional, and statutory debt ceilings, pegged as a ratio of GDP, or, as in the US, established in nominal terms.

As a group, those countries debt burden remains severe, with a debt stock to export ratio of well over 300 per cent (far above the 200 per cent threshold used to indicate a debt overhang) and a debt stock to GNP ratio of 127 per cent in 1996 after several years of improvement.

In addition, given that local government debt comprises 27 of China s 2010 GDP, while central government debt and policy loans stand at 20 and 6 of GDP, respectively, the total public debt to GDP ratio is approximately 53 lower than Germany s. So, while China should not be complacent about local government debt, panic is unwarranted.

Servicing of external public debt

a Excludes official public debt.

40. In considering this element of the scale, the Committee had before it information obtained from the World Bank on debt stock, principal repayments, the ratio of debt to national income and the ratio of debt service to export earnings for a number of Member States.

Target ranges for sustainable debt levels have initially been defined by the Bretton Woods institutions as 200 to 250 per cent for the debt to exports ratio expressed in present value terms, and as 20 to 25 per cent for the debt service to exports ratio.

For Argentina, the ratio of interest payments to exports was 21 per cent and the ratio of external debt to exports 313 per cent in 1997.

Instead of dropping to 110 as planned, the public debt to GDP ratio has increased to 170 . Annual per capita real income contracted 4.8 , on average, over the last six years.

When considering today s concern about Japan s high public debt to GDP ratio, now at 202 on a gross basis, one needs to reflect that the ratio would most likely be profoundly lower if Japan had in the past financed more of its deficit spending with trills instead of conventional debt, and issued them to investors around the world. A lower debt burden would certainly help Japan deal with its economic slowdown.

The ECLAC region's debt to export ratio is higher than that of any other developing region.

In 2004 the ratio of debt servicing to exports was 10.0 per cent (see figure below).

By 1995, SSA had the highest debt to exports ratio of any developing region (table 2).

It is estimated that the debt export ratio in net present value terms is high (187 per cent), suggesting that Haiti's debt is unsustainable.

Although Greece s public debt amounts to about 175 of GDP, low interest rates which are fixed for a large proportion of it and long maturities mean that it may be more manageable than it seems. Greece s ratio of public debt service to GDP is similar to that of Portugal, or even Italy.

Even with the latest deal, Greece s debt ratio remains at 120 of last year s GDP. With a projected drop in GDP of 7 this year and a sustained deficit, the debt ratio would exceed 130 before stabilizing at 120 in 2020.

Third, while ECB policies keep borrowing costs lower, private and public debt in the periphery countries, as a share of GDP, is high and still rising, because the denominator of the debt ratio nominal GDP is barely increasing. Thus, debt sustainability will remain an issue for these economies over the medium term.

European leaders seem to be moving in this direction. The required cut is large eliminating half of Greece s public debt obligation would leave it at nearly 80 of GDP, a ratio higher than Spain s.

C. Public debt in the ESCWA region