بدهی های عمومی داخلی در کشورهای کم درآمد: روند و ساختار

This paper introduces a new dataset on the stock and structure of domestic debt in 36 Low-Income Countries over the period 1971–2011. We characterize the recent trends regarding LICs domestic public debt and explore the relevance of different arguments put forward on the benefits and costs of government borrowing in local public debt markets. The main stylized fact emerging from the data is the increase in domestic government debt since 1996. We also observe that poor countries have been able to increase the share of long-term instruments over time and that the maturity lengthening went together with a decrease in borrowing costs. However, the concentration of the investor base, mainly dominated by commercial banks and the Central Bank, may crowd out lending to the private sector.

Analyses on government borrowing and debt management in Low-Income Countries (LICs) have traditionally focused on external debt. This scarcity of studies is partly due to the lack of a comprehensive database on domestic public debt and the historical prominence of external borrowing compared to domestic borrowing. Until recently, in fact, foreign liabilities have been the largest component of the public debt in LICs, the target of debt relief initiatives such as Heavily Indebted Poor Countries (HIPC) and Multilateral Debt Relief Initiative (MDRI), and the main concern of the joint Fund/Bank Debt Sustainability Framework for LICs (LIC DSF). In recent years, however, LICs made substantial efforts to develop their local public debt markets and relied heavily on domestic sources to finance budget deficits during the global crisis, sparking the attention of International Financial Institutions (IFIs) and the academic community. Because of the constraints indicated above, the existing literature on government borrowing in LICs is relative scant and inconclusive with regard to the benefits and cost of domestic liabilities relative to foreign liabilities. Only few studies assess empirically the rationale (if any) for LIC governments to gradually shift their financing strategies toward domestic sources and away from external sources. At any rate, domestic financing is plenty of advantages. The literature on public debt management in Emerging Markets (EMs) has shown that, in general, market depth has increased, maturities have lengthened and the investor base has broadened (Mehrotra et al., 2012). As a result, domestic debt may bring some prominent benefits: the lower exposure of the public debt portfolio to currency risk if and when the domestic debt is denominated in local currency (Hausmann et al., 2006 and Bacchiocchi and Missale, 2012); a lower vulnerability to capital flow reversals (Calvo, 2005); the possibility to undertake countercyclical monetary policy to mitigate the effect of external shocks (Mehrotra et al., 2012); and the improved institutional infrastructure underlying the organization and functioning of local financial markets (Arnone and Presbitero, 2010). In general, long-term domestic currency-denominated debt reduces maturity and currency mismatches and hence tends to be safer. However, the literature also stresses that domestic borrowing brings benefits only in the presence of a sound institutional and macroeconomic framework, and only if the debt structure features certain characteristics (Abbas and Christensen, 2010, Arnone and Presbitero, 2010, Hausmann et al., 2006, Panizza, 2008 and Presbitero, 2012b). Many developing countries are, in fact, unable to issue long-term government securities at a reasonable cost, so they are more vulnerable to rollover and interest rate risks. Moreover, domestic currency-denominated debt could substitute inflation risk for currency mismatch. The nature of the credit base may also raise vulnerabilities. Previous studies underlie the importance of a diverse investor base for lowering the cost of government debt and the volatility of market yield, and stress that a lenders’ profile strongly biased toward commercial banks might worsen crowding out effects and reduce the efficiency of the banking system. Yet another aspect of the debt structure that influences vulnerability is the type of instruments issued. According to Abbas and Christensen (2010), many of the benefits of domestic debt market – saving assets, collateral function, benchmark yield curve for private lending – apply to securitized domestic debt and not to liabilities issued in captive markets or accumulated due to poor public financial management (such as arrears). The cost–benefit analysis of financial instruments available to the government, as described above, is largely discussed with regards to EMs, while the lack of data on domestic public debt in LICs – especially the financial terms applied to domestic liabilities – has prevented extending the analysis to poorer countries along similar lines. In particular, it hindered the possibility of discussing the rationale for LICs government to increase domestic borrowing relative to external indebtedness. Against this backdrop, the main objective of this paper is to fill the void in the literature by constructing a brand new database on domestic public debt in LICs. While the existing datasets mainly provide information on the stock of domestic debt and interest payments, at best, our dataset also includes detailed information on maturity, currency composition, creditor base, and type of instruments. The up-to-date information on domestic debt stock and structure is comparable across LICs. Based on our dataset, this paper characterizes the recent trends regarding LIC domestic public debt and explores the relevance of different arguments put forward on the benefits and costs of government borrowing in local public debt markets. The main stylized fact that emerges from the data is the increase in domestic government debt during the period 1996–2011 and its larger burden with respect to external public debt, at least since the mid-2000s. Short-term financing is mainly instrumented through marketable and non-marketable securities held by the banking system. Central Bank advances to the Treasury, which are typically rolled over, constitute a relevant source of long-term financing. The breakdown into HIPCs and non-HIPCs highlights significant differences in the evolution and structure of domestic debt between the two groups, with HIPCs relying more on Central Bank advances and non-HIPCs making progress in issuing securities and lengthening maturities. The paper is structured as follow. Section 2 revises the existing literature and databases on domestic public debt in LICs. Section 3 describes our dataset and Section 4 presents some stylized facts on the evolution and structure of domestic public debt. Section 5 concludes

Several Low-Income Countries are now taking advantage of lower debt burdens, thanks to the debt relief programs of the late 1990s and early 2000s. Since then, they started relying on a growing basis on internal financing. The change in the composition of financing sources, related also to decreasing foreign aid and increasing foreign direct investment and remittances, could have several implications for debt sustainability and for the scaling-up of public investment and poverty-reduction expenditures. In theory, domestic debt could bring several benefits to LICs, but it could also crowd out private investment and thus hinder the growth process. However, the existing empirical evidence on the balance of costs and benefits of domestic borrowing in LICs is quite scant. One of the main limitations that institutions and researchers face when dealing with the macroeconomic effects of government financing in LICs is poor data quality. In particular, data on domestic debt in LICs have been so far quite heterogeneous in terms of definitions and coverage. This paper introduces a new dataset on the stock and structure of domestic debt in 40 LICs over the period 1971–2011. With respect to the existing datasets, this one puts together information on domestic debt in a way that ensures comparability across countries (definition of domestic debt, level of public sector, liabilities included) and it recollects up-to-date information on domestic debt composition (instruments, maturity structure and investor base). In particular, we have been able to build two balanced panels covering the period 1996–2011: one with data on domestic debt stock series for 21 countries, and the other including data also on domestic debt structure for 15 countries. In this way, we have been able to analyze the evolution of internal financing in poor countries in the last fifteen years with a certain granularity, as not has been done so far. The descriptive analysis of the stock and structure of domestic public debt in LICs highlights some interesting patterns and identifies marked differences in the evolution and composition of government liabilities across countries, especially between HIPCs and non-HIPCs. First, domestic debt increased from 12.3 percent of GDP in 1996 to 16.2 percent of GDP in 2011, almost reaching the size of external debt. However, we do not find evidence that LICs uniformly substituted domestic debt for external debt. Second, the debt burden on domestic debt is higher that on external debt but it has decreased over time, consistently with lower borrowing costs due to financial deepening. Third, we find that LICs have been able to increase the share of long-term instruments over time. Maturity lengthening went together with a reduction in borrowing costs. This correlation is at odds with the common perception that LICs are unable to issue long-term liabilities at a reasonable interest rate, and it suggests that some LICs are reaping the benefits of developing domestic financial markets. Fourth, there is evidence of an increase in the share of securities in government debt, especially for non-HIPCs. However, Central Bank advances, still important for many HIPCs, increased in response to the global financial crisis. Finally, a source of concern is the concentrated investor base, mainly dominated by commercial banks and the Central Bank, which may crowd out lending to the private sector and undermine financial stability. Our preliminary descriptive analysis provides some useful insights on the macroeconomic effects of domestic borrowing in LICs. However, we believe that further research is required and our dataset could provide a useful source to better inspect the tradeoffs that governments in poor countries have to face when choosing how to finance public spending. One natural way to exploit this dataset is to see how the size of domestic debt is correlated with the characteristic of the economy (e.g., financial development, institutional framework, access to international capital markets) and how the increase in domestic debt affects public debt sustainability in LICs. Ongoing research work at the World Bank addresses these issues. Second, we think that a relevant issue to explore is the extent to which increasing domestic debt affects bank lending to the private sector and possible crowds out investment. At the aggregate level, better data could help to identify the correlations between capital flows to developing countries, pointing out possible sources of vulnerability.