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decline in net medium- and long-term bank financing and the reversal of short-term debt, which turned negative (−$1 billion from an $8 billion inflow in 2008). Net equity flows to the region rose by almost 80 percent in 2009 because of an important turnaround in portfolio equity flows to India. Foreign investors repatriated $16 billion in 2008 but came back to the Indian stock market in 2009 as fears about the effect of the global economic crisis subsided with net inflows of $21 billion. India has also become one of the foremost recipients of FDI among developing countries—the third largest after China and Russia. Like those countries, India saw FDI fall in 2009, but by a moderate 19 percent. FDI to Pakistan fell by more than half, to $2.4 billion, as investors retreated because of concerns about the deteriorating economic and security situation and the stalled privatization program. Portfolio equity flows to Pakistan also dwindled to almost nothing in 2009, from $1.3 billion in 2007, because of similar concerns. Countries in the region are relatively poor and rely in large measure on official sources of financing, including official aid. Afghanistan, the second-highest aid recipient of all developing countries, received 4 percent of global aid flows in 2008, and this trend is likely to be repeated in 2009. Bangladesh, India, and Pakistan are also among the top 10 aid recipients. Debt-related flows from official creditors rose by 10 percent in 2009. Pakistan was the largest recipient and received almost 50 percent of disbursements to the region in 2009 from multilateral creditors, including $3.3 billion in purchases from IMF. These purchases were made under the $7.6 billion IMF program, approved in November 2008 and increased by a further $3.2billion in July 2009. Disbursements in 2009 from the World Bank (IBRD and IDA combined) were $4 billion, almost identical to those of the Asian Development Bank to the region in 2009. The overall fall in debt-related flows from private creditors was driven in large part by the contraction in short-term (trade-related) debt to India. Additionally, disbursements of mediumterm financing by banks fell by about 10 percent from their 2008 level, which, coupled with the continued rise in principal repayments, led to a 17 percent decline in net inflow in 2009 compared to 2008. Bond issuance by public sector borrowers,
notably India, also dropped off sharply in 2009, but Sri Lanka issued $500 million in development bonds; aimed at the Sri Lankan Diaspora, these bonds were oversubscribed. Bond issuance by corporate borrowers, again largely in India, rose to $2.5 billion, five times the 2008 level. Debt indicators are lower than those of Europe and Central Asia and Latin America and the Caribbean. Debt outstanding at the end of 2009 as a percentage of exports was 104.4 percent and the debt service to export ratio was 6.8 percent. But there are important differences between countries: the debt-to-export ratio ranged from 86.6 percent in India to 235.2 percent in Pakistan. Similarly, reserves as a percentage of the stock of external debt were 119.8 percent in India at the end of 2009 compared to 25.3 percent in Pakistan. Reliance on multilateral creditors is high: the share of outstanding debt owed to multilateral creditors (including the IMF) was 30 percent at the end of 2009.
Sub-Saharan Africa Net capital flows to Sub-Saharan Africa rose 16 percent in 2009, driven by a resurgence in portfolio equity inflows, a more than 100 percent increase in the net debt inflows from official creditors, and a 130 percent rise in net medium-term bank financing. Measured in terms of GNI, net capital flows were 5.2 percent in 2009, higher than in any other region (table 13). FDI in the region, directed mainly to the minerals and metals sector, constituted two-thirds of net capital flows (excluding grants) between 2001 and 2009. It declined in 2009, driven by falling investment flows to South Africa, the region’s largest recipient of FDI since 2001. But overall the fall was much less than expected because reduced FDI from high-income countries was offset by strong South-South FDI, and excluding South Africa, FDI inflows declined only 1 percent in 2009. FDI to Nigeria, which received the highest share of all FDI to the region in 2009, rose by almost 20 percent (mostly given to the hydrocarbon sector), and FDI to countries in the region classified as HIPCs fell only marginally. Portfolio equity flows to South Africa rebounded to $9.4 billion, buoyed by improved economic prospects and the sale of Vodacom. They also turned positive in Nigeria ($0.5 billion). Many countries in the region remain on the margins of international capital markets and
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