Private Sector Non-Guaranteed Debt
For many years the prevailing myth was that the external debt of the private sector in low- and middle-income countries was either so small as to be inconsequential or, that, in any event, it was market determined and therefore presumed to be allocated efficiently. This notion was dispelled by the rapid changes of the late 1980s and early 1990s when barriers to international capital movements were removed without a commensurate strengthening of financial systems and regulatory frameworks, rendering economies highly vulnerable to the fallout from excessive or inappropriate borrowing by private banks and corporations. The Asian financial crisis of 1997 and its knock-on effect in countries like Russia and, subsequently, the global financial crisis of 2008 threw into stark reality the strong linkage between private sector external borrowing and the wider macro-economy. This underscores the importance of strengthening debt management, including compilation of comprehensive and timely external debt statistics, including those related to private sector debt.
To date there is no single comprehensive international data series on the external debt of low- and middle-income countries’ private sector debt but, since the start of the millennium, there has been an appreciable improvement in the coverage and quality of reporting, a process in which the World Bank’s Development Data Group (DECDG) has been instrumental. IBRD and IDA borrowers, who must provide detailed loan-by-loan reporting information on public and publicly guaranteed debt as a condition of borrowing, have been encouraged to provide aggregate annual reports on private non-guaranteed debt where such debt is deemed to be significant. Of the 123 low- and middle-income countries currently reporting to the DRS, 39 included 2015 data on the external debt of their private sector, more than double the 17 countries that provided a comparable report in 2000 (Figure 1). For the 42 of the countries that do not report on private non-guaranteed, debt information gaps are plugged in with estimates drawn from information reported to the Quarterly External Debt Statistics (QEDS) and the IMF Special Data Dissemination Standard (SDDS), or available on ministry of finance and central bank websites. The annual publication International Debt Statistics (IDS) provides important information on overall trends and composition of private non-guaranteed external debt.