Mexico debt dynamics accelerate, but are not worrying

2015 ◽  
Keyword(s):  
Public Sector ◽  
Public Debt ◽  
External Debt ◽  
Fiscal Deficits ◽  
Content Type ◽  
Debt Accumulation ◽  
Credit Line ◽  
Debt Dynamics ◽  
Global Liquidity ◽  
The Government

Subject The outlook for public debt in Mexico. Significance Total public sector debt stood at 505.9 billion dollars in May, with external debt accounting for around one third of that amount, according to the most recent Finance Ministry figures. Fiscal deficits have pushed up indebtedness in recent years, but falling costs have provided a counterweight to the debt accumulation. Impacts Only an external shock will significantly diminish Mexico's creditworthiness. Public debt should reach 50-55% of GDP when the government absorbs Pemex's pension commitments. In the case of a global liquidity crunch, Mexico could activate its IMF credit line, allowing it to borrow up to 72 billion dollars.

The macroeconomic effects of fiscal consolidation policies in Greece

2017 ◽  
Vol 9 (1) ◽  
pp. 34-49 ◽  
Author(s):  
Stephanos Papadamou ◽  
Trifon Tzivinikos
Keyword(s):  
Fiscal Policy ◽  
Public Debt ◽  
Wage Policy ◽  
Government Consumption ◽  
Content Type ◽  
Indirect Taxes ◽  
Debt Dynamics ◽  
Policy Shocks ◽  
The Government ◽  
A Minor

Purpose This paper aims to investigate the effects of contractionary fiscal policy shocks on major Greek macroeconomic variables within a structural vector autoregression framework while accounting for debt dynamics. Design/methodology/approach The sign restriction approach is applied to identify a linear combination of government spending and government revenue shock simultaneously while accounting for debt dynamics. Additionally, output and unemployment responses to fiscal shocks under different scenarios concerning the amalgamation of austerity measures are considered. Findings The results indicate that a contractionary consumption policy shock, namely, a 1 per cent decrease in government consumption and a 1 per cent increase in indirect taxes, is preferred, as it produces a minor decrease in output and substantially decreases public debt, while a contractionary wage policy shock is suitable only when the government aims to sharply reduce public debt, as the consequences for the economy are harsh. A contractionary investment policy shock is not recommended, as it triggers a rise in unemployment and a fall in output, while the effect on the public debt is minor. Practical implications Policymakers should focus their efforts on reducing unproductive government consumption on the expenditure side. Concerning revenues, the reinforcement of tax administration is recommended to ensure that indirect taxes will be collected. Originality/value This paper contributes to the existing literature by providing a disaggregated analysis of the effects of fiscal policy actions in Greece by implementing several fiscal policy scenarios and accounting for the level of public debt. All scenarios are in the vein of the economic adjustment programs guidelines.

Threat of a downgrade hangs over Mexico

2016 ◽  
Keyword(s):  
Monetary Policy ◽  
Content Type ◽  
Borrowing Costs ◽  
Sovereign Credit ◽  
Credit Line ◽  
Mexican Government ◽  
Global Liquidity ◽  
The Government ◽  
Us Monetary Policy

Subject Mexico credit outlook downgrades. Significance On August 23, ratings agency Standard & Poor's (S&P) lowered the sovereign credit outlook of the Mexican government to negative from stable. The same day, the credit outlooks of state-owned enterprises Pemex (oil) and CFE (electricity) were also moved to negative. Moody's modified its outlook on Mexico's debt to negative in March. Impacts A rating downgrade would represent both a financial and a political blow for the government. The 'normalisation' of US monetary policy should moderately increase borrowing costs for emerging sovereigns, including Mexico. In the unlikely case of a global liquidity crunch, Mexico may activate its IMF credit line, borrowing up to 88 billion dollars immediately.

Oman and Bahrain are the most vulnerable Gulf states

2020 ◽  
Keyword(s):  
Public Sector ◽  
Public Debt ◽  
Medium Term ◽  
Fiscal Deficits ◽  
Content Type ◽  
Gulf States ◽  
Remittance Flows ◽  
Debt Levels

Significance Oman and Bahrain, already struggling with rising public debt levels and high fiscal deficits, are in the most exposed medium-term position. Impacts Governments will seek to avoid cutting expenditure on public-sector salaries. Private businesses will lay off many of their expatriate workers. Gulf economic contractions will significantly reduce global remittance flows.

Pressures on embattled Zambian government will grow

2019 ◽  
Keyword(s):  
World Bank ◽  
Public Debt ◽  
External Debt ◽  
The United States ◽  
Bank Loans ◽  
Content Type ◽  
The Public ◽  
Currency Depreciation ◽  
Debt Burden ◽  
The Government

Subject Zambian debt crises. Significance Both the IMF and World Bank have cut their growth projections for Zambia, compounding concerns about currency depreciation, inflation and escalating external debt. Amid public anger at worsening corruption, the government and President Edgar Lungu are struggling to contain mounting dissent. Impacts Lusaka’s ties to China, and criticism from the United States, could undermine future access to concessional IMF and World Bank loans. An opposition alliance will struggle to stay united and withstand authoritarian pressures from the government in advance of the 2021 polls. Growth will be slower than expected this year and next, and currency depreciation will continue to exacerbate the public debt burden.

Mopani deal will exacerbate Zambia's debt crisis

2021 ◽  
Keyword(s):  
Monetary Policy ◽  
Public Sector ◽  
Central Bank ◽  
Public Debt ◽  
Debt Crisis ◽  
Strategic Partner ◽  
Debt Sustainability ◽  
Content Type ◽  
Resource Nationalism ◽  
The Government

Significance This boosts President Edgar Lungu's re-election prospects in August, but ZCCM-IH will struggle to find a 'strategic partner' to replace Glencore. Mounting public debt will undermine efforts to convince the IMF that the government has a path to debt sustainability, depriving Zambia of access to concessional lending and stalling negotiations with bondholders. Impacts Resource nationalism will play well on the Copperbelt, improving the ruling party’s prospects in a region key to securing a poll victory. With little chance of an IMF deal, Lungu will likely make further pre-poll gestures, such as salary increases for public-sector workers. Monetary policy is also likely to suffer, with the central bank under pressure to fund the government's reckless borrowing.

Exogenous risks loom over Indonesia’s foreign debt

2016 ◽  
Keyword(s):  
Public Sector ◽  
Private Sector ◽  
Public Debt ◽  
Foreign Debt ◽  
Commodity Prices ◽  
Household Debt ◽  
Fiscal Deficit ◽  
Content Type ◽  
Private And Public ◽  
The Government

Subject Outlook for Indonesia's foreign debt distress. Significance Indonesia’s total foreign debt reached 325.3 billion dollars by end-September, up 7.8% from the same period last year, according to Bank Indonesia data. This debt is spread almost equally between the private and public sector: 163.1 billion dollars and 162.2 billion dollars respectively. However, while private sector debt is falling, public debt is rising. Impacts Private miners are unlikely to invest heavily in smelters unless they are certain of an uptick in commodity prices. Raising the legal fiscal deficit limit beyond 3% of GDP will be politically difficult for the government. Household debt is unlikely to rise substantially in 2017.

Debt overhang threatens Kenya’s infrastructure plans

2019 ◽  
Keyword(s):  
Exchange Rate ◽  
Public Debt ◽  
External Debt ◽  
Development Projects ◽  
Foreign Reserves ◽  
Fiscal Deficits ◽  
Content Type ◽  
Debt Overhang ◽  
Alternative Approaches ◽  
Central Bank Governor

Subject Kenya's debt difficulties. Significance Central Bank Governor Patrick Njoroge recently called for reorganising Kenya’s public debt and exploring alternative approaches to fund fiscal deficits. Increased infrastructure spending over recent years has contributed to a steep rise in debt, causing recurrent spending to increase faster than the development budget this debt is supposed to finance. Impacts Rising commercial external debt will put increasing pressure on the country’s exchange rate and foreign reserves. Institutional weaknesses may threaten the current appeal to restrict overdependence on debt. Corruption scandals may slow or even stall some development projects.

Income inequality and the composition of public debt

2015 ◽  
Vol 42 (5) ◽  
pp. 821-837 ◽  
Author(s):  
Nisreen Salti
Keyword(s):  
Panel Data ◽  
Income Inequality ◽  
Public Debt ◽  
External Debt ◽  
Political Conflict ◽  
Tax Base ◽  
Content Type ◽  
Domestic Debt ◽  
Cross Country ◽  
The Government

Purpose – The purpose of this paper is to examine the redistributive effect of domestic public debt: lenders to the government lie on the higher end of the income distribution, but the burden of debt financing falls on the entire tax base, to the extent that taxes are used to service debt. Because domestic debt is typically held by domestic lenders, this involves a redistribution of resources. Design/methodology/approach – The author uses cross-country panel data on debt composition, and run regressions of income inequality, as measured by the Gini coefficient, using various specifications, controlling for a variety of macroeconomic, fiscal and political variables. Findings – The author finds that the composition of public debt is consistently a significant determinant of income inequality: the domestic share of public debt is regressive and significant across all specifications, even controlling for total and external debt servicing, political conflict, corruption and a variety of government spending variables. Research limitations/implications – The data span 18 years (1990-2007) which means that long-run effects are hard to track. While the author has a good mix in the sample of observations from low-, middle- and high-income countries, the author is constrained in the choice of countries by the availability of data on inequality and on the composition of public debt. Originality/value – This is the first paper to examine the composition of public debt in terms of domestic and external debt, and any bearing it may have on income inequality. The finding is also new for both the public debt and income inequality literatures: cross-country panel data are consistent with the belief that domestic debt redistributes resources from the entire tax base to wealthy holders of government debt in a way that external debt does not.

Bank competition, government intervention and SME debt financing

2017 ◽  
Vol 7 (4) ◽  
pp. 478-492 ◽  
Author(s):  
Jianhua Du ◽  
Chao Bian ◽  
Christopher Gan
Keyword(s):  
Government Intervention ◽  
Generalized Method Of Moments ◽  
External Debt ◽  
Ordinary Least Squares ◽  
Debt Financing ◽  
Bank Loans ◽  
Bank Competition ◽  
Firm Level ◽  
Content Type ◽  
The Government

Purpose The purpose of this paper is to examine the effects of the government intervention and bank competition on small and medium enterprise (SME) external debt financing in Chinese capital market. Design/methodology/approach This study uses ordinary least squares with standard errors clustered at the firm level. In addition, the authors use the dynamic system generalized method of moments to address the possible endogeneity issue in the regressions. Findings Using a sample of 908 firms from 2000 to 2010, the authors found that SMEs are more likely to access bank loans only in regions with higher level of government intervention than median government intervention. Further, the result shows that the government is motivated to help SMEs to obtain more external debt in regions where the level of bank competition is lower than the median bank competition index. Last, the authors found evidence that firms with politically connected CEOs are likely to access bank loans. Research limitations/implications This paper highlights that government intervention enables the SMEs to secure more bank loans. Second, the authors’ results imply that the government is motivated to help SMEs to obtain more external debt in regions with low level of bank competition. Originality/value This study contributes to the current literature by revealing that government intervention is the driving force alleviating SMEs’ constraints in accessing external financing. Second, this study finds the evidence to supports the argument that government has a strong motive to help SMEs to secure long-term credits for political purpose (Fan et al., 2012), when the level of bank competition is low (Berger and Udell, 2006).

Is public debt hindering economic growth of the Philippines?

2015 ◽  
Vol 42 (3) ◽  
pp. 202-221 ◽  
Author(s):  
Naeem Akram
Keyword(s):  
Economic Growth ◽  
Public Debt ◽  
Positive Relationship ◽  
External Debt ◽  
The Philippines ◽  
Crowding Out ◽  
Content Type ◽  
Debt Overhang ◽  
Real Gdp ◽  
Domestic Debt

Purpose – Over the years most of the developing countries have failed to collect enough revenues to finance their budgets. As a result, they have to face the problem of twin deficits and to rely on external and domestic debt to finance their developmental activities. The positive effects of public debt relate to the fact that in resource-starved economies debt financing (if done properly) leads to higher growth and adds to their capacity to service and repay external and internal debt. The negative effects work through two main channels – i.e., “Debt Overhang” and “Crowding Out” effects. The purpose of this paper is to examine the consequences of public debt for economic growth and investment for the Philippines. Design/methodology/approach – The present study examines the consequences of public debt for economic growth and investment for the Philippines during the period 1975-2010, by using autoregressive distributed lag technique. Findings – The results reveal that in the Philippines, public external debt has negative and significant relationship with economic growth and investment confirming the existence of “Debt Overhang effect”. But due to insignificant relationships of debt servicing with investment and economic growth, the existence of the crowding out hypothesis could not be confirmed. The domestic debt has a negative relationship with investment and positive relationship with economic growth. Research limitations/implications – First and foremost implication of the study is that heavy reliance on external debt must be discouraged. Therefore, in order to accelerate economic growth, developing countries must adopt those policies that are likely to result in reducing their debt burden, and it must not be allowed to reach unsustainable level. In the case of domestic debt, the present study finds that investment is negatively affected by domestic debt due to the crowding out effect; yet real GDP has a positive relationship with domestic debt. Thus, if policy makers want to use domestic debt as a tool to stimulate real GDP then it must keep an eye on the consequences of domestic debt on the investment. Practical implications – First and foremost implication of the study is that heavy reliance on external debt must be discouraged. Therefore, in order to accelerate economic growth, the Philippines must adopt those policies that are likely to result in reducing their debt burden, and external debt it must not be allowed to reach unsustainable level. In the case of domestic debt, the present study finds that investment is negatively affected by domestic debt due to the crowding out effect; yet real GDP has a positive relationship with domestic debt. Thus, if policy makers want to use domestic debt as a tool to stimulate real GDP then it must keep an eye on the consequences of domestic debt for on the investment. Social implications – It also follows from the estimation results that population growth rate is harmful for the economic growth. So in order to stimulate the growth performance, it must adopt effective population control policies. Similarly, since openness and investment are growth enhancing so there is need for the trade and investment supportive policies. Originality/value – From the review of literature on the issue, it can be broadly summarized that most of the studies are on the relationship of external debt and economic growth, neglecting domestic debt entirely or mentioning it in the passing. Second, most of these studies have been conducted by using panel data. However, as the different countries vary in socio-economic conditions so it is better to conduct the country specific study. The present study is an attempt to fill these gaps in the existing literature.

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