D E V E L O P M E N T
F I N A N C E
2 0 1 2
burden measured against both GNI and export earnings, despite the sharp increase in debt outstanding in 2010. Countries in Europe and Central Asia are, on average, the most heavily indebted of all developing countries and were the ones severely impacted by the global economic crisis. This is reflected in the marked deterioration in the ratio of external debt to GNI and to export earnings in 2009: both ratios improved in 2010 to 43 percent and 122 percent, respectively, despite a moderate, 5 percent, increase in the stock of outstanding debt, but remained well above their 2008 level. The ratio of debt to exports for the top 10 borrowing countries combined is broadly the same as that for other developing countries, but they have a much lower debt burden measured in relation to GNI, an average of 18.4 percent in 2010 compared to an average of 27.9 percent for other developing countries (table 8). Developing countries have seen a marked and almost continuous improvement in the sustainability of their external debt, measured by the ratio of external debt service to export earnings over the past decade. This held true in 2010, despite the 12 percent increase in developing countries’ external debt obligations and parallel shift in the maturity composition and rise in short term debt, as a share of total outstanding external debt, to 25 percent, from 21 percent in 2009. The average debt service to export ratio for all developing countries com-
bined was 9.8 percent, compared to 10.8 percent in 2009. The average debt service to export ratio for middle income countries in 2010 (10 percent) was below half its level in 2000 (21 percent). Even more striking is the improvement in low-income countries: their average debt service to export ratio has been reduced to 4.8 percent in 2010, from 17.2 percent in 1995 (figure 8). In part this is a consequence of increased exported earnings but also a direct outcome of debt restructuring and outright debt relief from official and private creditors in the context of the HIPC and MDRI (box 1).
Trends in Equity Flows 2010
N
et equity inflows (direct investment and portfolio investment combined) in developing countries totaled $635 billion in 2010, up 25 percent from their level in 2009 and approaching their record level of $667 billion in 2007 (figure 9). Foreign direct investment at $506 billion remained the single largest component of capital flows to developing countries. However, it rose far less rapidly than debt related inflows, and its share of total net capital flows to developing countries fell from 59 percent in 2009 to 45 percent in 2010.
Figure 8. Debt Service to Exports Ratio, 1995–10 percent
Table 8. Debt Indicators for Developing Country Regions
25
percent 20 Debt Outstanding/GNI
Debt Outstanding/Exports
Country group
2008
2009
2010
2008
2009
2010
East Asia and the Pacific
12.9
13.1
13.5
30.6
39.7
37.0
Europe and Central Asia
37.3
47.7
43.0
97.2 140.6 121.6
Latin America and the Caribbean
21.2
23.3
21.7
84.5 109.4 102.1
15
10
94.3
Sub-Saharan Africa
21.2
22.4
20.0
48.8
66.1
54.0
Top ten borrowers
18.6
19.5
18.4
59.6
76.5
67.9
Other developing countries
27.1
29.7
27.9
58.8
77.8
70.0
Sources: World Bank Debtor Reporting System and International Monetary Fund.
10
0
20 10
42.5
20 09
43.0
84.3 107.7
20 08
34.9
19.2
20 07
14.1
20.7
20 06
15.2
21.0
20 05
14.9
South Asia
5
20 00
Middle East and North Africa
19 95
G L O B A L
Low-income countries Middle-income countries Sources: World Bank Debtor Reporting System and International Monetary Fund.