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Here is a link to the LIC DSF Policy

Here is a link to the LIC DSF Guidance Note

Glossary of Selected Economic Terms


Above the line operation

Any accounting operation that is added or deducted before the final sum is reached; in terms of debt, macro operations and calculations that don't look into the underlying characteristics of the portfolio.

Accrual basis

An accounting method that records transactions when the ownership of a good or of an asset changes hand, or when the provision of a service and factor of production takes place, regardless of when payment is made or received. See also Cash Basis.

Actual Output

All goods and services produced by enterprises and made available to other enterprises and consumers. Output is calculated as the sum of total sales and net changes in inventories. Several different types of output can be distinguished: (I) products that are sold; (ii) products that are bartered; (iii) products that are destined for own-account uses; and (iv) products that are added to inventories.

Adjustment Fatigue, Debt

A point or situation at which fiscal policy stops responding to debt, which can lead to dangerous or explosive debt paths; a maximum primary surplus under which debt can be considered sustainable.


Reimbursement of the principal of a debt. Amortization is distinguished from interest, which is a charge for the use of borrowed money. Amortization and interest are recorded in the BOP at the time they are due.

Appreciation, Nominal

An increase in the value of the domestic currency due to a shift in market conditions, as a result of which more units of foreign currency are required to obtain one unit of domestic currency (or, vice-versa, one unit of the domestic currency purchases more units of foreign currency). In case of nominal appreciation, the nominal exchange rate, defined as the amount of foreign currency needed to obtain one unit of domestic currency, increases.

Appreciation, Real

An increase in the real exchange rate, due to changes in domestic prices, foreign prices, or the nominal exchange rate. As a result of a real appreciation, the price of domestic goods increases relative to the price of foreign goods, once both are expressed in the same currency.


A payment "falls into arrears" if it is not made when due. Arrears constitute a stock of outstanding debt.


Economic assets are resources over which ownership rights are enforced and from which future economic benefits may flow to the owner.

Assets, External

Assets owned by residents and from which they can derive future economic benefits from non-residents.

Assets, Financial

Financial assets consist of claims and the gold bullion component of monetary gold.

Automatic Stabilizers

Government spending, tax policies and/or welfare spending that act to dampen fluctuations in real GDP.

Automatic Stabilizers, General

A feature of an economic system that automatically cools an overheated economy or slows the fall of an economy in recession. For example, unemployment benefits partly maintain the purchasing power of the private sector when the economy is in recession.


Balance of Payments(BOP)

A statement that summarizes the transactions between the residents of an economy and nonresidents during a specific period, usually a year. Transactions recorded in the BOP include the exchange of goods, provision of services and factor of production, donations and transfers, exchange of assets, incurrence and extinction of liabilities. The BOP is recorded on accrual basis.

Balance Sheet

A summary of the stock of assets and liabilities of an economic unit on a given date.

Bank-Sovereign Interdependence

The two-way link between the fate of bank and government balance sheets; damage to the balance sheets of either group can have a detrimental impact on the other.

Banking Crisis

A financial crisis that affects banking activity; a banking crisis may often include a run on banks, panic, a large number of defaults and potentially a government intervention to rescue banks.

Below-the-Line Operation

A transaction that occurs after main transactions have been accounted; examples include the sale or purchase of financial assets or one-off factors affecting the debt stock.


Any security issued by the government or a private entity that promises the holder a fixed interest payment at regular intervals and the amount of principal at maturity.

Bond Yield

The amount of return realized on a bond.

Budget Balance
See Fiscal Balance.


A debt instrument whose entire face value is paid at once on the maturity date.


Calendar Year (CY)

A cyclical year from the beginning of January to the end of December.


Wealth in the form of money or other assets owned by a person or entity, typically available to fund specific investment projects.

Capital Account

The capital account in the international accounts shows (a) capital transfers receivable and payable between residents and nonresidents and (b) the acquisition and disposal of non-produced, nonfinancial assets between residents and nonresidents.

Capital Account Balance

The balance on the capital account, that is capital account credit entries minus capital account debit entries.

Capital Expenditures (Government)

Purchases of land, intangible assets, government stocks, and nonmilitary equipment that will be used for more than one year. Capital expenditures are sometimes recorded in a separate capital account.

Capital Inflows

Also known as foreign direct investment; the movement of money into a country for the purpose of investment, trade or business production.

Capital Market

Financial markets for the buying and selling of long-term debt or equity-backed securities.

Capital Outflows

The movement of money out of a country for the purpose of investment, trade or business production abroad.

Cash Basis

An accounting method that records transactions when payment is made or received. See also Accrual Basis.


The tendency for one variable to change as a result of changes in another variable.

CDS Spreads

An amount charged by the seller of the CDS to insure against a credit event; higher spreads are an indicator of higher risk of default.

Central Bank

The central bank is the national financial institution (or institutions) that exercises the control over key aspects of the financial system and carries out such activities as issuing the currency, managing international reserves, transacting with the IMF, and providing credit to Other Depository Corporations.

Claim, Financial

A claim is a financial instrument that gives rise to an economic asset that has a counterpart liability.

Closed Economy

An economy that is self-sufficient; one that does not rely on trade, and hence has no imports nor exports.

Commercial/Private Loan

A loan offered by domestic and international banks at market rates; such loans are typically more expensive than bonds but usually carry a lower cost of carry.


The ability of an agent or country to produce or sell compared to others.

Concessional Loan

A loan offered by multilateral and bilateral official creditors usually at a very low cost for the borrower; the grant element of a concessional loan is around 35%.


A condition of a loan in which the total future payment of the loan is cheaper than what you borrow in present value terms; a loan is typically considered to be concessional if its grant element is equal to or larger than 35%.

Confidence Bands

A band which represents the uncertainty of a function based on limited knowledge of future variables.

Consistency Checks

Cells in Excel templates that allow the user to see if he/she made any errors in assumptions, data; should be close to zero or else some large bias may be unaccounted for.

Consumption, Government

Government final consumption expenditure. Expenditures incurred by the government for the final use of goods and services and the collective use of services. Because the consumption of government services cannot be allocated among those who benefit from them, it is attributed to the government.

Contingent Liabilities

Government financial interventions which arise out of explicit and implicit guarantees to various public and private entities; more generally, a financial obligation that may be incurred by an entity, depending on the outcome of a future (usually negative) event.

Contractionary Monetary Policy

Seeking to contract the money supply, typically by selling short-term government bonds in order to raise short-term market interest rates.


The relationship between changes in two variables.


Any aspect of economic policy that could dampen economic or financial fluctuations; countercyclical policies tend to work against the central tendencies in the economy and serve to cool down the economy during upswings and stimulate the economy during downturns; more generally, any variable that is negatively correlated with the overall state of the economy is said to be countercyclical.

CPIA: Country Policy and Institutional Assessment (CPIA) Index

An index rating given to country's based on a set of criteria in 4 main clusters: economic management, structural policies, policies for social inclusion and equity and public sector management and institutions.

Country Report

IMF publications that document economic and financial developments and trends in member countries; each report, prepared by a staff team after discussions with officials of the country, is published at the option of the member.


A descriptive statistic that provides a measure of how much two random variables change together.

Credit entry (+)

An entry in the BOP that reflects a reduction in physical and financial assets. Includes a reduction in the stock of goods in an economy (exports) or a reduction in the stock of a residents' foreign financial assets (repatriation of capital). It also reflects an increase in foreign financial liabilities (debt resulting from foreign borrowing) and transfers received.

Credit-Default Swap (CDS)

A financial swap agreement that the seller of the CDS will compensate the buyer in the event of a loan default or other credit event.


A party that has a claim on the services of a second party; a person or institution to whom money is owed; one that extends credit or lends to another party.

Creditor Base

The size, composition and residence of a country's creditor pool.

Cross-Sectional Data

Cross-sectional data, or a cross section of a study population, in statistics and econometrics is a type of one-dimensional data set. Cross-sectional data refers to data collected by observing many subjects (such as individuals, firms or countries/regions) at the same point of time, or without regard to differences in time. Analysis of cross-sectional data usually consists of comparing the differences among the subjects.

Currency Composition

The share of assets or liabilities held in various currencies.

Currency Crisis

Also known as a Balance of Payments crisis; a sudden devaluation of a currency which often ends in a speculative attack (precipitous acquisition) of the currency in the foreign exchange market; a currency crisis is usually accompanied by sharp depreciation, a large increase in interest rates, and/or a large fall in reserves.

Currency in Circulation

Currency that is in the hands of the public, or currency outside banks. It is measured by subtracting cash held by Other Depository Corporations from the amount of currency that has been issued by the central bank.

Current Account

The portion of the BOP that records transactions in goods, services, return accrued or payable for providing or using factors of productions, and current transfers.

Current Account Balance (CAB)

The balance on the current account of the BOP, that is the difference between the credit and the debit entries of the current account. If the balance is positive, the current account is in surplus-that is, credit entries exceed debit entries. If the balance is negative, the current account is in deficit. 


Debit Entry (-)

An entry in the BOP that reflects an increase in physical and financial assets. Includes an increase in the stock of goods in an economy (imports), an increase in holdings of foreign financial assets (capital outflow), or a reduction in foreign financial liabilities (amortization of foreign debt), or transfers made.


Financial claims that require payment(s) of interest and/or principal by the debtor to the creditor at a date in the future.

Debt Distress

An explicit assessment of a country’s risk of external debt distress. The rating is based on an analysis of PPG external debt in the external DSA.

Debt Dynamics

The interaction of macroeconomic and macro-fiscal variables that have an impact on debt.

Debt Financing Profile

The characteristics of a country's debt, including debt maturity, currency composition and creditor base.

Debt Forgiveness

Debt forgiveness is the voluntary cancellation of all or part of a debt obligation within a contractual agreement between a creditor and a debtor.

Debt Limit

A debt level beyond which government loses control of debt dynamics and debt is on an explosive path.

Debt Momentum

The idea that the higher the debt-to-GDP ratio gets, the less likely it is to run sufficiently large primary surpluses to service such debt in the future; a cycle of debt-deficit-debt.

Debt Overhang

A situation in which the sovereign's debt stock exceeds its capacity to repay it; a debt burden that is so large that an entity cannot borrow to help service it; a condition in which the expected tax burden of debt is so high that it dissuades current investment/consumption and hence serves as a drag on economic activity.

Debt Portfolio

A combination of debt instruments into a group classified based on their risk and return.

Debt Profile

The characteristics (i.e. size, maturity, risk, yield, currency composition, etc) of a country's debt portfolio.

Debt Re-fixing

The action of setting a new interest rate on debt after principal payments have ended on the old debt.

Debt Restructuring

Also known as debt reorganization; an arrangement involving both the creditor and the debtor (and sometimes third parties) that alter the terms established for servicing existing debt.

Debt Service

Payments on debt (interest + amortization) that fall due during the current period.

Debt Service Schedule

Maturity and payment frequency of one's debt.

Debt Sustainability (Academic Definition)

See intertemporal solvency; the expected present value of future primary balances covers the existing stock of debt; debt is sustainable if the intertemporal solvency condition is satisfied.

Debt Sustainability (Economic Policy Definition)

The condition under which a country (or its government) does not, in the future, need to default or renegotiate or restructure its debt, or make implausibly large policy adjustments that imply scarifying its development goals.

Debt Sustainability (Pragmatic Definition)

Debt is sustainable if projected debt ratios are stable or decline, while also being sufficiently low as to avoid default.

Debt Sustainability Analysis (DSA)

An analysis of a country's capacity to finance its policy objectives and service the ensuing debt without unduly large adjustments, which could otherwise compromise its stability.

Debt Sustainability Analysis for Low-Income Countries

Debt sustainability analysis for low income countries (LICs).

Debt Sustainability Framework (DSF)

The framework within which all DSAs are produced to ensure comparability across DSAs produced for different countries.

Debt Sustainability Framework for Low Income Countries (LIC DSF).

It is a tool developed jointly by IMF and World Bank staff to conduct public and external debt sustainability analysis in LICs. It is to help guide the borrowing decisions of LICs, provide guidance for creditors’ lending and grant allocation decisions, and improve World Bank and IMF assessments and policy advice.

Debt-Burden Indicators

Various ratios of debt stock or debt service to measures of repayment capacity

Debt-Stabilizing Adjusted Balance (for External Debt)

The adjusted surplus needed to keep debt-to-GDP constant; equal to automatic debt


Debt-Stabilizing Primary Balance (for Public Debt)

The primary surplus needed to keep debt-to-GDP constant; equal to debt dynamics; proportional to the gap between the real interest rate and real growth rate (closed economy).

Debt-to-GDP Ratio

The ratio of a country's gross public debt to its gross domestic product.


A party that owes a debt to a second party; a person or institution that owes money; one that borrows from another party.


A party is unwilling or unable to pay their debt obligations; a government is unable to pay its creditors.

Default Risk

The chance that a party defaults; creditors or investors usually require a premium on return to account for the debtor's level of default risk.

Depreciation, Nominal

A decrease in the value of the domestic currency due to a shift in market conditions, as a result of which fewer units of foreign currency are required to obtain one unit of domestic currency (or, vice-versa, one unit of the domestic currency purchases less units of foreign currency). In case of nominal depreciation, the nominal exchange rate, defined as the amount of foreign currency needed to obtain one unit of domestic currency, decreases.

Depreciation, Real

A decrease in the real exchange rate, due to changes in domestic prices, foreign prices, or the nominal exchange rate. As a result of a real depreciation, the price of domestic goods decreases relative to the price of foreign goods, once both are expressed in the same currency.


A reduction in the value of a currency, with respect to goods, services or monetary units with which that currency can be exchanged.


The issuance of new debt; gross lending.


To reduce the value of by the interest rate, so as to account for the time value of money.

Discretionary Expenditure

Government expenditure that may be changed from year to year at the discretion of policy-makers.

Domestic Currency-Denominated Debt

Debt denominated in local/home currency.

Doom Loop

A cycle of fiscal consolidation leading to lower growth, which leads to higher deficits.

Double-Entry Accounting

A system of maintaining accounts that records every transaction as both a credit (+) and a debit (-). Because the credit and debit entries cancel each other out, the sum of the two sides of an account using double-entry bookkeeping is equal to zero.


Early Warning Model

Econometric estimates that identify the level of debt burden indicators which best predict the occurrences of a crisis; an EWM minimizes the sum of type I errors (false alarms) and type II errors (missed crises).

Economic Bubble

A market phenomenon characterized by surges in asset prices to levels significantly above the fundamental value of that asset; bubbles are often difficult to assess in real time because there is disagreement over the current value of the asset.

Economic Contagion

A situation where a shock in one economy or region spreads to, or is felt by, another country or region.

Economic Cycle

Economy-wide fluctuations in production, trade and general economic activity over a period of time.

Economic Shock

An unexpected or unpredictable event that affects an economy, either positively or negatively.

Economic Spillover

An externality of economic activity (positive or negative) which affects those not directly involved.


A measurement of how responsive an economic variable is to a change in another.

Emerging Market Bond Index-Global (EMBI-Global)

A benchmark index for measuring the total return performance of international government bonds issued by emerging market countries that are considered sovereign and that meet specific liquidity or structural requirements.

Emerging Markets

The capital markets of developing countries that have liberalized their financial systems to promote capital flows with nonresidents and are broadly accessible to foreign investors.


A variable is said to be endogenous when there is a correlation between the variable and the error term.


Any security representing an ownership interest.

Error Term

The error (or disturbance) of an observed value or equation is the deviation of the observed value from the (unobservable) true function value.

Exceptional Access

The IMF may lend amounts above normal access limits (600% of the country’s quota) on a case-by-case basis in exceptional circumstances provided that the country satisfies a predetermined set of exceptional access criteria.


The provision of something of economic value in return for a corresponding item of economic value. Also known as two-sided transaction.

Exchange Rate Regime

The way an authority manages its currency in relation to other currencies and the foreign exchange market.

Exchange Rate Risk

The risk of an investment or instrument changing in value due to changes in exchange rates.

Exchange Rate Valuation

Fluctuations in the value of foreign-currency denominated assets due to movements in the exchange rates.

Exchange Rate, Bilateral

The exchange rate (nominal or real) between the currencies of two countries (see also Exchange rate, nominal)

Exchange Rate, End-of-Period

The exchange rate observed on the last day of a period.

Exchange Rate, Fixed

An exchange rate that is fixed, in terms of another currency or of a basket of currencies and guaranteed by the central bank.

Exchange Rate, Flexible

An exchange rate that is determined in the currency exchange market (also called a floating exchange rate).

Exchange Rate, Nominal

The price of one currency in terms of another. By common convention, the amount of domestic currency that will purchase one unit of foreign currency; in other words, the price of foreign currency in terms of domestic currency. It may also be defined as the inverse: the amount of foreign currency that will buy one unit of domestic currency.

Exchange Rate, Period Average

The simple average of observed exchange rates during a given period (for example, the average for all business days during a month).

Exchange Rate, Real

The price of a basket of goods in one country relative to the price of the same basket in another country, with both prices expressed in the same currency using the nominal exchange rate.

Exchange Rate, Real Effective

An index of the price of a basket of goods in one country relative to the price of the same basket in that country's major trading partners. The prices of these baskets should be expressed in the same currency using the nominal exchange rate with each trading partner. The price of each trading partner's basket is weighted by its share in imports, exports, or total foreign trade.

Exogenous Shock

An economic shock that is external to the variables being considered.

Expansionary Monetary Policy

Seeking to expand the money supply, typically by buying short-term government bonds in order to lower short-term market interest rates.

Explicit Liability

A contingent liability which is recognized by law or contract, including state guarantees for non-sovereign borrowing, state guarantees for loans and private investments, trade and exchange rate guarantees, and state insurance schemes.

Explosive Path of Debt

A debt burden indicator ratio that is sufficiently high and trending upwards over time.

Extended Fund Facility (EFF)

When a country faces serious medium-term balance of payments problems because of structural weaknesses that require time to address, the IMF can assist with the adjustment process under an Extended Fund Facility (EFF). Compared to assistance provided under the Stand-by Arrangement, assistance under an extended arrangement features longer program engagement—to help countries implement medium-term structural reforms—and a longer repayment period. The EFF was established to provide assistance to countries: (i) experiencing serious payments imbalances because of structural impediments; or (ii) characterized by slow growth and an inherently weak balance of payments position. The EFF provides assistance in support of comprehensive programs that include policies of the scope and character required to correct structural imbalances over an extended period.

External Debt

Debt liabilities owed by residents to nonresidents.

External Debt Crisis

Payment arrears on a substantial fraction of foreign currency-denominated debt owed to creditors.

External Debt Sustainability

The condition under which a country (public OR private sector) does not, in the future, need to default or renegotiate or restructure its external debt, or make implausibly large policy adjustments.

External DSA

A DSA that can comprise both private external debt and publicly guaranteed external debt.

External Financing Constraint

The BOP accounting identity: current account plus capital account equals financial account.

External Financing Requirements

Defined as short-term debt, plus the amortization of medium and long-term debt, minus the current account balance.

External Risk Rating

One output of the LIC DSF; a measure of the macroeconomic risk of debt distress; a country is ranked as low, medium, high or in debt distress by examining the debt burden indicators of PPG external debt and their indicators.

External Sector

All nonresidents who engage in economic transactions with the residents of an economy.


False Alarm (Type I Error)

A situation in which an early warning indicator predicts a crisis when no crisis would have occurred.

Fan Chart

A chart that shows the possible evolution of a particular indicator over time, taking into account the variability of that indicator's underlying variables.

Fan Chart Tool (MAC DSA)

A tool that presents the possible evolution of the debt-to-GDP ratio over the medium term, presenting a probabilistic view of uncertainty around the baseline.

Fear of Floating

The reluctance to allow a floating exchange rate to adjust freely; coined by Kenneth Rogoff.

Financial Account

The portion of the BOP that records transactions in assets and liabilities. The financial account records transactions in direct investments, portfolio investments, financial derivatives and employee stock options, other investments, and reserves.

Financial Account Balance

The balance on the financial account, that is net acquisition of assets minus net incurrence of liabilities.

Financial Crisis

A broad term associated with a situation in which a significant number of financial assets suddenly lose a large part of their nominal value; financial crises may also include stock market crashes, the bursting of other financial bubbles, currency crises, and/or sovereign defaults.

Financial instrument

Financial instruments consist of financial contracts made between institutional units.

Financial Liberalization

A reduction in the regulation of capital flows by a country or its government.

Financial Market

A market in which people and entities can trade financial securities, commodities and other items of value.

Financial Repression

Measures by which governments may channel funds to themselves as a form of debt reduction; examples include directed lending to the government, caps on interest rates and capital restrictions.

Financing Mix

A combination of one's financial instruments based on their underlying characteristics.

Fiscal Accounts

Set of statistics that summarizes the activities and financial condition of the public sector, both at a point in time (stocks) and over a period of time (flows).

Fiscal Adjustment

A reduction in the government primary budget deficit that can result from a reduction in government expenditures, an increase in government revenues, or both simultaneously.

Fiscal Austerity

A government stance to target a more balanced budget and/or reduce debt and deficits.

Fiscal Balance

The sovereign's assets less its liabilities in a given period of time, usually 1 year; a negative fiscal balance indicates a budget deficit, a positive fiscal balance, a surplus.

Fiscal Consolidation

A government policy aimed at reducing government deficits and debt accumulation.

Fiscal Dominance

Inability to conduct contractionary monetary policy, because it would jeopardize government debt dynamics.

Fiscal Multiplier

The ratio of a change in GDP to the change in government spending that it causes; a multiplier greater than 1 implies that government spending/cuts will have larger impact on GDP than just the original money spent/cut.

Fiscal Profligacy

Reckless or excessive spending by the government.

Fiscal Year (FY)

A 12-month period used for calculating financial statements in organizations.

Fisher Equation

An equation that estimates the relationship between nominal and real interest rates under inflation.

Fixed Rate Instrument

A financial instrument, the interest rate of which does not change over time.

Fixed-Effects Model

In econometrics and statistics, a fixed effects model is a statistical model that represents the observed quantities in terms of explanatory variables that are treated as if the quantities were non-random. This is in contrast to random effects models and mixed models in which either all or some of the explanatory variables are treated as if they arise from random causes.

Flow Budget Constraint

A budget constraint made up of all economic flows related to government activity from one period to the next; can be used to determine the stock of government debt.


Formally, the difference between the value of a stock between the end and the beginning of a period. A flow can be explained by transactions, valuation changes, and other changes in volumes. Commonly, flows and transactions are used interchangeably.

Forecast Error

The difference between the actual or real and the predicted or forecast value of a time series or any other phenomenon of interest; negative forecast errors indicate overly optimistic projections.


Predicting the path of economic variables into the future.

Foreign Currency Deposits

Banking system deposits denominated in foreign currency and owned by residents.

Foreign Currency-Denominated Debt

Debt denominated in currency from abroad.

Foreign Direct Investment (FDI)

Investment of capital by foreigners into one's country; can be to finance domestic projects or foreign projects in domestic country.

Foreign Exchange Reserves

Reserve money denominated in foreign currency held by a country's monetary authority.

Front-Loaded Adjustment

A type of fiscal adjustment designed to quickly raise the primary balance to a "targeted" level.


GDP, Real (in Constant Prices)

Gross Domestic Product of the current year valued at the prices of a base year. This measure reflects the changes in volume from one period to another.

GDP, Nominal (in Current Prices)

Gross Domestic Product of the current year valued at this year's prices. This measure reflects the changes in prices and volume from one period to another.

GDP Deflator

An implicit or explicit price index of total domestic production. It reflects the changes in prices from one period to another. When combined with GDP in constant prices it yields GDP in current prices.

GDP Growth Rate

The percent change in an economy's value added from one period to the next (usually 1 year).

General Equilibrium

A condition of economic equilibrium which accounts for the quantities and prices of all markets (factors are allowed to change and not held constant).

Government Debt

Also known as public debt, sovereign debt, or national debt; the debt owed by a central government.

Government Expenditure

Total government payments and expenses.

Grace Period

For a loan, the period of time in which no principal payment is due.

Grant Element

Measures the degree of concessionality of a loan; defined as the difference between the loan's nominal value (face value) and the sum of the discounted future debt-service payments to be made by the borrower (present value), expressed as a percentage of the loan's face value.

Grants Government

Noncompulsory current or capital transfers received by a government unit from either another government unit or an international organization.

Gross Debt

All liabilities held in debt instruments, such as bonds or loans.

Gross Domestic Product (GDP)

The market value of all final goods and services produced within a country in a given period.  The GDP is determined using data for production, expenditures, or income and is presented in current or constant prices.

Gross Financing Needs (GFN)

The financial needs required to rollover maturing debt; defined as the fiscal deficit, plus any other transactions that require financing, plus amortization.

Gross Fixed Capital Formation

The value of producers' acquisition less disposal of fixed assets. Gross fixed capital formation includes major improvements to existing fixed assets but excludes expenditures for small tools and military equipment.

Gross National Disposable Income (GNDI)

It equals GNI plus current net transfers from abroad. GNDI measures the money available in the country for final consumption and gross savings.

Gross National Income (GNI)

The sum of GDP and net foreign income generated by production activities abroad. GNI was GNP in pre-1993 versions of the SNA.

Gross National Investment

The total value of gross fixed capital formation, change in inventories and acquisitions less disposals of valuables.

Gross National Saving

The difference between GNDI and final consumption.


Hidden Deficits

Increases in public debt that cannot be explained by headline fiscal balances; historically, the bulk of hidden deficits has been comprised of implicit contingent liabilities.

High-Powered Money
See Monetary Base.


In statistics, a histogram is a graphical representation of the distribution of data. It is an estimate of the probability distribution of a continuous variable and was first introduced by Karl Pearson. A histogram is a representation of tabulated frequencies, shown as adjacent rectangles, erected over discrete intervals (bins), with an area proportional to the frequency of the observations in the interval. The height of a rectangle is also equal to the frequency density of the interval, i.e., the frequency divided by the width of the interval. The total area of the histogram is equal to the number of data.


Identified Financing Needs

The funds needed to finance trade deficits and other current account outflows.

Identified Net Debt-Creating Flows

The combination of the current account deficit (excluding net interest income), net FDI inflows, and endogenous debt dynamics.

Implicit Liability

A contingent liability which is NOT recognized by law or contract but is assumed due to public and interest-group pressures; these include the assumption of defaults on nonguaranteed debt, financial system bailout, corporate sector bailout, clean-up of liabilities of entities being privatized or implicit insurance for disaster relief.

Implied Interest Rate

The interest rate implied in a debt agreement.

Imported Inflation

Domestic inflation due to an increase in import prices.

Indicative Benchmarks

Benchmarks derived from the signal approach that best predict the occurrence of a crisis.

Indicative Threshold

A threshold above which severe economic distress is probable.


A sustained increase in the general price level. The rate of inflation is the percentage change in the price level in a given period (usually one year).

Inflation Rate

The rate of inflation is the percentage change in the price level in a given period (usually one year).

Initiative for Heavily Indebted Poor Countries (HIPC)

The HIPC Initiative was launched in 1996 by the IMF and World Bank, with the aim of ensuring that no poor country faces a debt burden it cannot manage. Since then, the international financial community, including multilateral organizations and governments have worked together to reduce to sustainable levels the external debt burdens of the most heavily indebted poor countries.

Interest Expenditure

The portion of government expenditure required to pay interest on its current debt obligations.

Interest Payment

A payment made on a loan each period, separate from amortization. Interest payments are periodic payments associated to borrowing, conceptually reflecting the cost for using someone else's financial assets.

Interest Rate

The annual return on a fixed-priced financial asset expressed as a percentage of the price of the asset.

Interest Rate Risk

The vulnerability of funding costs to higher interest rates, for example, when variable rates are reset and/or fixed rate debt needs to be refinanced; also the risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between two rates, in the shape of the yield curve or in any other interest rate relationship.

Interest Rate Swap

An agreement between two parties (known as counterparties) where one stream of future interest payments is exchanged for another based on a specified principal amount. Interest rate swaps often exchange a fixed payment for a floating payment that is linked to an interest rate (most often the LIBOR). A company will typically use interest rate swaps to limit or manage exposure to fluctuations in interest rates, or to obtain a marginally lower interest rate than it would have been able to get without the swap.

Interest Rate, Implicit Average

The ratio between interest payments and the average stock of debt between the beginning and the end of the period.

International Bond

A bond issued by international and domestic institutional investors; the price of such loans is market determined and such loans usually have high transaction costs.

International Investment Position (IIP)

A statement that summarizes the value and composition of the stock of assets that residents of the economy hold on nonresidents, and of the liabilities the residents hold towards nonresidents, at a certain point in time.

International Reserves
see Reserve Assets.

Interquartile Range

The range of data that falls between the 25th and 75th percentile for a sample or distribution.

Intertemporal Budget Constraint

A budget constraint equivalent to the stock of debt in N periods derived through recursive substitution.

Intertemporal Correlation

A situation in which the correlation between two or more variables changes over time.

Intertemporal Solvency

Initial debt plus the present discounted value of future streams of primary expenditure should be equal to the present discounted value of future steams of income.


A sale of debt or equity instruments in the primary market.


Law of Motion (External Debt) s<
An expression/equation which captures what happens to external debt over time. See Debt Dynamics.

Law of Motion (Public Debt) s
An expression/equation which captures what happens to external debt over time. See Debt Dynamics.

Legacy Debt

Debt issued in the past for which a sovereign must make payments; this legacy debt conditions future decisions a sovereign may make.

Liabilities, External

Financial claims of non-residents to residents.


The counterpart of a financial claim. A liability generates an obligation to current or future transfers of economic benefits.


The ability of a country/body to meet its short-term financial obligations; an entity is liquid if its assets and available financing are sufficient to meet or roll-over its maturing liabilities.

Loan-to-Deposit Ratio (LTD)

Calculated as total bank loans divided by total bank deposits for the current year; a commonly used ratio for assessing a bank's liquidity; a high LTD ratio indicates the potential for liquidity problems in the future.


Macro-Fiscal Risk

Macroeconomic variables that have potential to negatively impact the fiscal balance and thus, government debt.

Macroeconomic Accounts

The four main sectors of the economy which include the Real Sector, the External Sector, the Fiscal/Government Sector and the Monetary Sector.

Macroeconomic Framework

The most-likely economic scenario for IMF-surveillance countries based on current and projected government policies; the programmed macroeconomic adjustment program for IMF-program countries.

Market Risk

The risk of an instrument or security having to do with macroeconomic/market factors; this type of risk be alleviated by diversification in a portfolio.

Market-Access Country (MAC)

A country with significant access to international capital markets on a durable and sustainable basis; in practice, all advanced economies and most emerging markets.

Marketable Debt

Debt that can be sold on the secondary market; includes T-bills, T-bonds, Inflation-indexed instruments and international bonds.


The period of time for which a financial instrument remains outstanding; a finite time period at the end of which the financial instrument will no longer exist and the principal is repaid with interest.

Maturity Structure

The frequency, timing and size of payments related to financial instruments.

Maturity, Implied Average

The ratio between the stock of debt at the beginning of the period and the repayments of debt during the period.


The arithmetic average of a series of numbers.


The middle value of a series of numbers; the numerical value separating the higher half of a data sample, a population, or distribution, from the lower half.

Medium and Long-Term Debt (MLT Debt)

Outstanding debt with a maturity of more than 1 year.

Medium-Term Debt Strategy (MTDS)

The IMF-World Bank framework to design the characteristics of the sovereign debt portfolio taking into account a medium/long-term objective; also a framework to examine the costs and risks associated with possible borrowing strategies to cover a financing need.

Memorandum Item

An additional item or analysis to be included with the main analysis.

Missed Crisis (Type II Error)

A situation in which an early warning indicator misses a crisis and a crisis ultimately does occur.

Monetary Base

The main financial liabilities of the central bank, consisting of currency issued by the central bank and held by the public and by banks, and the reserves of the banks held in deposit with the central bank.

Monetary Easing

An unconventional monetary policy by central banks to buy a specified amount of financial assets from commercial banks and other private institutions over time.

Monetary Policy

The actions of a central bank, currency board or other regulatory committee that determine the rate of growth of the money supply, which in turn affects interest rates. Monetary policy is maintained through actions such as increasing the interest rate, or through changing the amount of money banks need to keep in the vault (bank reserves) or targeting the monetary base.

Monetary Tightening

An unconventional monetary policy by central banks to sell a specified amount of financial assets from commercial banks and other private institutions over time.


The coining of currency or printing of banknotes by central banks.

MTDS Analytical Tool

An Excel template that assists with quantitative analysis of costs and risks of borrowing strategies.

Multilateral Debt Relief Initiative (MDRI)

The MDRI was launched in 2005 to help them advance toward the United Nations’ Millennium Development Goals. It provides for 100 percent relief on eligible debt from three multilateral institutions (IMF, IDA, and the African Development Fund) to a group of low-income countries. In 2007, the Inter-American Development Bank (IaDB) also decided to provide additional (“beyond HIPC”) debt relief to the five HIPCs in the Western Hemisphere.


Narrow Money (M1)

A stock of wealth that includes currency in circulation and all the deposits of the private sector and nonfinancial public enterprises that can be used to make payments (transferable). Narrow money is considered a liability of the Depository Corporations Survey.


The process of taking a private industry or private assets into public ownership by a national government or state.

Net Acquisition of Nonfinancial Assets

Equals the acquisition minus disposal of nonfinancial assets minus the consumption of fixed capital. The main categories of nonfinancial assets are: fixed assets, inventories, valuables, and non-produced assets.

Net Debt

Gross debt minus all financial assets corresponding to debt instruments.

Net Financial Worth

Also referred to as Net Financial Wealth Position, equal to the total stock of financial assets minus liabilities.

Net Interest Income

Interest received, less interest paid.

Net Lending

Government loans, and equity participation in enterprises that is undertaken in support of public policy. The amount is net of reimbursement of previous loans and sales of government shares in the equity of an enterprise and classified above the line. Any similar transactions undertaken for purposes of liquidity management are classified with financing. Net lending can benefit public and private enterprises, households, other levels of government, and international organizations. Included here are any interest payments the government makes to guarantee the debt of others.

Net Lending/Borrowing

Equal to revenue minus expenses and net acquisition of nonfinancial assets. The balance is generally referred to as the budget surplus or deficit of the given level of government. Also equal to the net acquisition of financial assets minus the net incurrence of liabilities.

Net Operating Balance

The balance of transactions affecting net worth. Equal to Revenue minus Expense.

Net Worth

Also referred to as Net Wealth Position, equals the stock of assets minus liabilities.

Noise-to-Signal Ratio

The number of bad signals (false alarms + missed crises) out of the total number of signals sent.

Non-Debt Financing

Change in equity, minus change in external assets; financing that is not related to debt service; for example, arrears, debt relief, etc.

Non-Explosive Path for Debt

Debt or debt burden indicators are stable or declining over time.

Non-Market Risk

The risk of an instrument or security not having to do with macroeconomic/market factors; this type of risk is based on the individual characteristics of a company or country and thus cannot be alleviated by diversification in a portfolio.

Non-Marketable Debt

Debt that cannot be sold on the secondary market; includes official sector lands, commercial bank loans, retail debt and others.


Economic agents (enterprises, individuals, non-profit organization, the government, etc.) that are not resident of the economy. See also, residents, rest of the world, and external sector.

Nonbank Borrowing

Government borrowing from the public, usually through the sale of bonds or treasury bills.

Nonfinancial Public Corporations

All resident nonfinancial corporations controlled by general government units.

Normal Access

Borrowing under the EFF is subject to the normal limit of up to 200 percent of a country’s IMF quota annually and a cumulative limit over the life of the program of 600 percent of quota, net of scheduled repayments.

Normal Distribution

A commonly occurring, continuous probability distribution; a function that tells the probability that an observation in some context will fall between any two real numbers with most of the sample clustered around the mean.

Normative Analysis

Economic analysis based on prescriptive, value-based statements about the world (how the world should be).


One-Sided Transaction
see Transfer.

Open Economy

An economy that trades with the rest of the world; can export and import.

Open Market Operations (OMOs)

The buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system. Purchases inject money into the banking system and stimulate growth while sales of securities do the opposite.

Ordinary Least Squares (OLS) Regression

In statistics, ordinary least squares (OLS) or linear least squares is a method for estimating the unknown parameters in a linear regression model. This method minimizes the sum of squared vertical distances between the observed responses in the dataset and the responses predicted by the linear approximation.

Original Sin

The inability of emerging markets to issue debt (borrow abroad) in their own currency; coined by Eichengreen and Hausmann.

Other Flows, Flow Budget Constraint

A residual category which includes unofficial sources of government spending (which add to debt) and non-debt sources of financing (which eliminate debt).


An observation point that is very distant from other observations.

Output Gap

The difference between the level of actual output and potential output, usually expressed as a percentage of the level of potential output:

Output gap=(Actual output-Potential output)/Potential output *100

Overall Balance

The sum of the current and capital account balances and net errors and omissions, minus the financial account balance. If the overall balance is positive, the BOP is in surplus - that is, receipts in respect of all transactions covered exceed payments, and foreign reserves increase. If the balance is negative, the BOP is in deficit, and foreign reserves fall.

Overall Balance, Fiscal

Net lending/borrowing adjusted through the rearrangement of transactions in assets and liabilities that are deemed to be for public policy purposes. In particular, all proceeds under privatization (including fixed asset sales) would be deducted (treated as financial items) as well as subsidies given in the form of loans (treated as expense).  

Overall Risk of Debt Distress

An assessment of debt distress also taking into account risks that are not captured by the external risk rating (i.e. public domestic debt, private external debt).


Panel Charts

Charts with multiple panels that convey the outputs of the LIC DSF.

Panel Data

In statistics and econometrics, the term panel data refers to multi-dimensional data frequently involving measurements over time. Panel data contain observations of multiple phenomena obtained over multiple time periods for the same firms or individuals.

Partial Equilibrium

A condition of economic equilibrium which takes into consideration only a part of the market to attain equilibrium, with other parts of the market remaining fixed.

Pass-Through Mechanism

A transmission from the exchange rate to the inflation rate.


An investment fund to which both a worker and his/her employer contribute, which makes regular payment to the worker when the person reaches retirement age.

Ponzi Scheme

A situation in which initial debt is serviced by relying on new investors, rather than being serviced out of future surpluses.


A combination of financial instruments into a group classified based on their risk and return.

Positive Analysis

Economic analysis based on descriptive, factual statements about the world (how the world is).

Potential Output

The level of output that can be produced if all of the factors of production are employed at their "natural rates".

Poverty Reduction Growth Trust (PRGT)

Trust fund for the IMF's concessional financing. There are three concessional facilities - the Extended Credit Facility (ECF) to provide flexible medium-term support; the Standby Credit Facility (SCF) for addressing short-term and precautionary needs; and the Rapid Credit Facility (RCF) to provide emergency support.

PPG External Debt

Long-term external obligations of public debtors and external obligations of private debtors that are guaranteed for repayment by a public entity.

Primary Balance

Total non-interest revenue minus total non-interest expense and net acquisition of nonfinancial assets; also equal to net lending/borrowing plus net interest expense minus net interest revenue.

Primary Expenditure

Non-interest government expenditure.

Primary Market

The market in which a security is first sold (issued).


Non-interest payments on debt.

Private Sector Credit

Total lending provided by the private sector to the government.


Transferring ownership of a business, enterprise, agency or public service from the public sector to the private sector.

Probability Approach

An approach to determining the path of a country's debt based on numerous possibilities of a country's macro-fiscal variables, each with different weights, based on breaches of indicative thresholds in baseline and/or stress test scenarios.

Procyclical Economic Policy

Any aspect of economic policy that could magnify economic or financial fluctuations; more generally, any variable that is positively correlated with the overall state of the economy is said to be procyclical.

Program Country

A country with an IMF-adjustment program.

Projection Bias

A tendency to project some variable incorrectly (either higher or lower) systematically over a period of time.

Projection Horizon

The length or amount of years forecasted.

Public Corporations

All resident corporations controlled by general government units. They often are dedicated to productive activities that operate much like private enterprises, although maximizing profits may not be their main objective. They hire input factors such as labor, land, and capital to produce goods and services, and in some cases, they compete directly with private firms. Examples of public corporations are the national rail company, the national airline, the public electric utility, and the public water supply company. Also included in this definition are publicly owned financial institutions (in particular, the central bank), which are classified as financial public corporations.

Public Debt

The total financial obligations incurred by all governmental bodies of a nation; total obligations by a country's public sector

Public Debt Management

The process of establishing and implementing a strategy for managing debt to achieve the government's financing, risk, cost objectives and other goals, such as developing the domestic debt market.

Public DSA

Also called the fiscal DSA; a DSA that covers total debt of the public sector, to both external and domestic creditors.

Public Sector 

The public sector includes both general government and the public corporations.

Public-Private Partnerships (PPPs)

A government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies. 


Quantity Theory of Money

An economic theory which proposes a positive relationship between changes in the money supply and the long-term price of goods. It states that increasing the amount of money in the economy will eventually lead to an equal percentage rise in the prices of products and services.


Quasi-money cannot be used as a direct means of payment but in practice can be readily converted into money with little delay or financial penalty. Quasi-money includes savings, time, and foreign currency deposits.


Ratings Agency

A company that assesses the creditworthiness of both debt securities and their issuers; examples include Standard and Poor's, Moody's and Fitch.

Reaction Function Line, Debt

A line that measures average fiscal behavior (the average change in the primary balance) to changes in the level of the debt ratio; the slop of this line is equivalent to gamma, the strength of the fiscal response.

Reaction Function, Debt

A system of inputs and outputs that captures the systematic response of the primary balance to certain variables, such as the output gap and level of debt; a reaction function takes an positive approach and is thus an empirical description of average patterns in fiscal policy choices.

Real GDP

Gross Domestic Product of the current year valued at the prices of a base year. This measure reflects the changes in volume from one period to another. See also GDP (in constant prices).

Real Interest Rate

The annual return, corrected for inflation, on a financial asset (such as a bond), expressed as a percentage of the price of the asset.


The process of changing a company's capital structure or providing the company with needed capital to make the entity more stable.


A period of temporary economic decline during which economic activity, trade and industrial activity fall; formally, a fall in GDP for two successive quarters.


In bonds, the act of an issuer repurchasing a bond at or before maturity. Redemption is made at the face value of the bond unless it occurs before maturity, in which case the bond is bought back at a premium to compensate for lost interest.

Redemption Profile

A graphical representation of when a debt, interest or arrears is to be paid and thus the debt instrument issued is redeemed.

Reduced Form

In statistics, and particularly in econometrics, the reduced form of a system of equations is the result of solving the system for the endogenous variables. This gives the latter as a function of the exogenous variables, if any.

Reduced Form Errors

Error terms that are correlated with one another.

Refinancing Risk

The possibility that a borrower cannot refinance by borrowing to repay existing debt.


A transfer of money by a foreign worker to an individual in his or her home country.

Repayment Capacity

A measure of a body's ability to service its existing obligations (debt) through its income.

Repurchase Agreement (Repo)

The sale of securities together with an agreement for the seller to buy back the securities at a later date; The repurchase price should be greater than the original sale price, the difference effectively representing interest, sometimes called the repo rate.

Required Reserves

Mandatory Reserves in compliance with Regulatory Requirements regarding the amount of funds that banks must hold in reserve against deposits made by their customers.

Rescue (Bailout) Package

Commitment of loans or funds by a government or international organization, usually in a large amount, to assist a country or entity in getting through a financial crisis.

Reserve Assets

Reserve assets are those external assets that are readily available to and controlled by monetary authorities for meeting balance of payments financing needs, for intervention in exchange markets to affect the currency exchange rate, and for other related purposes (such as maintaining confidence in the currency and the economy and serving as a basis for foreign borrowing). These include Reserve assets consist of monetary gold, SDR holdings, reserve position in the IMF, currency and deposits, securities (including debt and equity securities), financial derivatives, and other claims (loans and other financial instruments).


Economic agents (enterprises, individuals, non-profit organization, the government, etc.) for whom the economy constitutes the center of predominant economic interest. An enterprise is a resident if it engages in production or owns land or buildings. An individual is a resident, regardless of citizenship, if he or she has resided in the country for a year or more. All agencies of the government are residents, even embassies located abroad.


The residual of an observed value or equation is the difference between the observed value and the estimated function value.

Residual (Debt Dynamics)

A residual variable included in the debt dynamics equation to ensure that the identity holds in practice; the residual should ideally be small.

Rest of the World Sector

All nonresident units that enter into transactions with residents or have claims on residents See also External Sector.


A large cut in expenses.


The premium received for holding a security that is risky.

Revenue (Government)

An increase in net worth resulting from a transaction. The main categories of revenues are: taxes, social contributions, grants, and other revenue.

Risk Premia, Debt

The idea that the interest rate on debt will rise with debt as investors require higher returns to hold riskier debt; a major source of uncertainty regarding the trajectory of debt.

Risk Premium

The minimum amount of money by which the expected return on a risky asset must exceed the known return on a risk-free asset, or the expected return on a less risky asset, in order to induce the holding of the risky asset rather than the risk-free asset.

Rollover Rate

The ratio between gross disbursement of debt and gross amortization.


The extension or transfer of debt from one period to the next.

Rollover Risk

A risk associated with the refinancing of debt; commonly faced by countries and entities when their debt is about to mature and needs to be rolled over into new debt.



Disposable income that is not spent on the consumption of goods or services.

Savings Deposits

Interest-bearing bank accounts from which funds can be withdrawn at any time without penalty. Checks cannot be written on savings deposits.

Secondary Market

The market in which a security is then re-sold.


The difference between the value of money and the cost to produce it - in other words, the economic cost of producing a currency within a given economy or country.

Semi-Concessional Loan

A loan offered by multilateral and bilateral official creditors usually at a discount to market financing; such loans have indirect costs, such as exchange rate risks and purchase conditions.

Short-Term Debt

Outstanding debt with a maturity of less than 1 year. ST debt

Signal Approach Methodology

See Early Warning Models.

Skewed Distribution

A distribution of values in which there are many large, extreme values from the median or mean.

Snowball Effect

The speed at which the debt-to-GDP ratio would grow (or fall) if the primary balance was zero; equivalent to the automatic debt dynamics in a closed economy.

Social Security

A social welfare and insurance program for individuals over a certain age in many countries.


The ability of a country/body to meet its long-term financial obligations; to be solvent means to be able to service current debt by the present discounted value of all expected primary balances.

Solvency Condition (External Debt)

Assuming transversality (no Ponzi scheme), a condition under which outstanding initial debt should be covered by the present value of future adjusted balances.

Solvency Condition (Public Debt)

Assuming transversality (no Ponzi scheme), a condition under which outstanding initial debt should be covered by the present value of future primary balances.

Sovereign Debt
See Government Debt.

Sovereign Debt Crisis

A government default, restructuring of the sovereign debt, or the belief that such measures could occur.

Stable Debt Dynamics

The condition under which debt converges to a sustainable level; occurs when real GDP growth is greater than the real interest rate.

Stable Equilibrium, Debt

An intersection of the fiscal reaction function line and the demarcation line such that debt reverts to some initial level after an economic shock; because the slope of the reaction function (strength of fiscal response) is steeper than the slope of the demarcation line, debt always converge to the initial level.

Stand-by Arrangement/Agreement (SBA)

In an economic crisis, countries often need financing to help them overcome their balance of payments problems. Since its creation in June 1952, the IMF’s Stand-By Arrangement (SBA) has been used time and again by member countries, it is the IMF’s workhorse lending instrument for emerging and advanced market countries. Rates are non-concessional, although they are almost always lower than what countries would pay to raise financing from private markets. 

Standard Deviation

A descriptive statistic that shows how much variation or dispersion from the average exists; the square root of variance.

State-Owned Enterprise (SOE)

A legal entity created by the government in order to conduct commercial activities on the government's behalf; an SOE can be either wholly or partially government-owned.

Stationary Process

In mathematics, a stationary process is a stochastic process whose joint probability distribution does not change when shifted in time. Consequently, parameters such as the mean and variance, if they are present, also do not change over time and do not follow any trends.


The reduction or expansion of Net Domestic Assets by the central bank intended to offset an equivalent inflow or outflow, respectively, of foreign assets, and so stabilize the total money supply.

Stochastic Simulation

A simulation of variables is said to be stochastic when it involves a variable or set of variables that are random; as random variables can change with a certain probability, running a large number of stochastic simulations can help to map uncertainty surrounding any variable of interest.

Stochastic System

A system of variables whose state is non-deterministic (uncertain) so that the subsequent state of the system must be determined probabilistically.

Stock-Flow Adjustment, Government

Changes that help to reconcile changes in debt with deficits.


Holdings of physical and financial assets and liabilities at a point in time. Stocks are reflected in a balance sheet. Transactions during a period change the size of a stock.

Stress Test

An analysis conducted under unfavorable economic scenarios which is designed to determine whether an entity can withstand various adverse economic developments.

Strong Fiscal Response

The average incremental increase of the primary balance to an increase in debt is greater than the real interest rate minus the real growth rate of GDP.

Structural Fiscal Balance

Equal to the fiscal balance adjusted by the effects of the economic cycle on revenue and expenses as well as for one-off transactions. That is, it is the balance that would result if output were at its long-term level.

Structural Innovations

The tendency for reduced form error terms to be correlated across equations.

Structural Net Operating Balance

Net operating balance adjusted by the effects of the economic cycle.


Current payments made by the government to enterprises. Subsidies are distributed on the basis of production levels, quotas, or the value of the goods or services produced, sold, or imported. Subsidies are not payable to final consumers.
See also Transfers.

Sudden Stop

A sudden slowdown in private capital inflows into an economy; usually accompanied by a sharp reversal from current account deficits into smaller deficits or small surpluses.


The IMF oversees the international monetary system and monitors the economic and financial policies of its 189 member countries. This activity is known as surveillance. As part of this process, which takes place both at the global level and in individual countries, the IMF highlights possible risks to stability and advises on needed policy adjustments. In this way, it helps the international monetary system serve its essential purpose of facilitating the exchange of goods, services, and capital among countries, thereby sustaining sound economic growth.

Symmetric Fan Chart

A fan chart centered around the baseline in which upside and downside risks are equivalent.


Tail Risk

Tail risk is the area of a distribution that is more than 3 standard deviations from the distribution's mean; in finance, tail risk is the risk of an asset or portfolio moving 3 standard deviations below its current price.


A compulsory contribution exacted by the government to pay for public goods. The major categories are taxes on income, profits and capital gains; on payroll and workforce; on property; on goods and services; on international trade and transactions; and other taxes.

Technical Memorandum of Understanding (TMU)

A document that sets out understandings between the country authorities and the IMF regarding an IMF program.

Time deposits

Bank savings deposits with scheduled maturity dates. If funds are withdrawn prior to maturity dates, some interest is lost as a penalty.

Time Series Data

A time series is a sequence of data points for the same variable, measured typically at successive points in time spaced at uniform time intervals.

Too Big to Fail

The idea that certain financial institutions are so large and so interconnected that their failure would be disastrous to the economy, and they therefore must be supported by government when they face difficulty.

Total Public Debt

The gross debt of a country's entire public sector (government and public corporations).


A transaction is an interaction between two economic agents that occurs by mutual agreement or through the operation of the law and involves an exchange of value or a transfer.


Transactions in which a good, service, or asset is provided without receiving anything in return. Transfers may be in cash or in kind; public or private; domestic or external; and current or capital. Also known as one-sided transaction.

Transfers, Current

Current transfers consist of all transfers that are not capital transfers. Current transfers directly affect the level of disposable income and influence the consumption of goods or services. That is, current transfers reduce the income and consumption possibilities of the donor and increase the income and consumption possibilities of the recipient.

Transfers, Capital

Capital transfers are transfers in which the ownership of an asset (other than cash or inventories) changes from one party to another; or that oblige one or both parties to acquire or dispose of an asset (other than cash or inventories--for example, because of a court order, or because of an international agreement); or where a liability is forgiven by the creditor. Cash transfers involving disposals of noncash assets (other than inventories) or acquisition of noncash assets (other than inventories) are also capital transfers. A capital transfer results in a commensurate change in the stocks of assets of one or both parties to the transaction without affecting the saving of either party.

Transversality (No Ponzi Scheme) Condition

A condition which prohibits the sovereign from issuing more and more debt without ever repaying principal and interest on the previously accumulated stocks.

Treasury Bill (T-bill)

A debt instrument issued by a country's treasury and bought/sold by domestic and international investors, including banks, pension funds, insurance agencies and mutual funds); the price of such debt is market determined.

Treasury Bond (T-bond)

A debt instrument issued by a country's treasury and bought/sold by domestic and international investors, including banks, pension funds, insurance agencies and mutual funds); the price of such debt is market determined and these bonds are usually riskier than T-bills and thus require a risk premium.

Two-Sided Transaction
See Exchange.


Unemployment Benefits

Social welfare payments paid by the government to those unemployed.

Unstable Equilibrium, Debt

An intersection of the fiscal reaction function line and the demarcation line such that debt explodes away from its some initial level after an economic shock; because the slope of the reaction function (strength of fiscal response) is flatter than the slope of the demarcation line, a shock leads to ever increasing or ever decreasing debt.


Valuation effects

Fluctuations in the value of assets or liabilities due to fluctuations in the exchange rate.

Variable Rate

A financial instrument, the interest rate of which may change over time.


A descriptive statistic that measures how far a set of numbers is spread out.

Variance-Covariance Matrix

A NxN table that generalizes the notion of variance between N variables across time.

Vector Autoregression (VAR) Model

A linear dynamic econometric model linking a set of economic variables without underlying theory; in such a model all the variables of interest are explained by their own history (lags) and the history of all other variables; mainly used for forecasting and tracing responses to policy decisions.


The ratio of GDP to the stock of money in circulation. Velocity is not always constant over time; changes in velocity are related to changes in the cost of holding money, usually represented by the interest rate or the inflation rate. Typically, velocity increases when inflation accelerates, and decreases during periods of stabilization.


The risk that the liquidity or solvency conditions are violated and the borrower enters a crisis.


Weak Fiscal Response

The average incremental increase of the primary balance to an increase in debt is less than the real interest rate minus the real growth rate of GDP; sufficient for solvency but cannot rule out explosive debt paths.



The return on a financial instrument.

Yield Curve

Also known as the term structure of interest rates; A plot of yields to maturity of a series of bonds against their term maturity.

Yield spread

The difference between yields on differing instruments; the spread can be measured between debt instruments of different maturities, credit ratings and risk.


Zero Coupon Bond

A debt security that doesn't pay interest (a coupon) but is traded at a deep discount, rendering profit at maturity when the bond is redeemed for its full face value.

With financial support from: