Present value of external debt (% of GNI)
Definition: Present value of debt is the sum of short-term external debt plus the discounted sum of total debt service payments due on public, publicly guaranteed, and private nonguaranteed long-term external debt over the life of existing loans. The GNI denominator is a three-year average.
Description: The map below shows how Present value of external debt (% of GNI) varies by country. The shade of the country corresponds to the magnitude of the indicator. The darker the shade, the higher the value. The country with the highest value in the world is Bhutan, with a value of 68.16. The country with the lowest value in the world is Turkmenistan, with a value of 0.55.
Source: World Bank, International Debt Statistics.
Development Relevance: External debt is that part of the total debt in a country that is owed to creditors outside the country. The debtors can be the government, corporations or private households. The debt includes money owed to private commercial banks, other governments, or international financial institutions. External indebtedness affects a country's creditworthiness and investor perceptions. Nonreporting countries might have outstanding debt with the World Bank, other international financial institutions, or private creditors. Total debt service is contrasted with countries' ability to obtain foreign exchange through exports of goods, services, primary income, and workers' remittances. Debt ratios are used to assess the sustainability of a country's debt service obligations, but no absolute rules determine what values are too high. Empirical analysis of developing countries' experience and debt service performance shows that debt service difficulties become increasingly likely when the present value of debt reaches 200 percent of exports. Still, what constitutes a sustainable debt burden varies by country. Countries with fast-growing economies and exports are likely to be able to sustain higher debt levels. Various indicators determine a sustainable level of external debt, including: a) debt to GDP ratio b) foreign debt to exports ratio c) government debt to current fiscal revenue ratio d) share of foreign debt e) short-term debt f) concessional debt in the total debt stock
Limitations and Exceptions: The present value of external debt provides a measure of future debt service obligations. It is calculated by discounting the debt service (interest plus amortization) due on long-term external debt over the life of existing loans. The discount rate on long-term debt depends on the currency of repayment and is based on commercial interest reference rates established by the Organisation for Economic Co-operation and Development (OECD). Loans from the International Bank for Reconstruction and Development (IBRD), and from the International Development Association (IDA), and obligations to the IMF are discounted using a special drawing rights reference rate. When the discount rate is greater than the loan interest rate, the present value is less than the nominal sum of future debt service obligations. The World Bank's Debtor Reporting System (DRS) encourages debtor countries to voluntarily provide information on their short-term external obligations. By its nature, short-term external debt is difficult to monitor: loan-by-loan registration is normally impractical, and monitoring systems typically rely on information requested periodically by the central bank from the banking sector. The World Bank regards the debtor country as the authoritative source of information on its short-term debt. Where such information is not available from the debtor country, data are derived from BIS data on international bank lending based on time remaining to original maturity. The data are reported based on residual maturity, but an estimate of short-term external liabilities by original maturity can be derived by deducting from claims due in one year those that have a maturity of between one and two years. However, BIS data include liabilities reported only by banks within the BIS reporting area. The results should thus be interpreted with caution. Because short-term debt poses an immediate burden and is particularly important for monitoring vulnerability, it is compared with total debt and foreign exchange reserves, which are instrumental in providing coverage for such obligations. A country's external debt burden, both debt outstanding and debt service, affects its creditworthiness and vulnerability. While data related to public and publicly guaranteed debt are reported to the DRS on a loan-by-loan basis, aggregate data on long-term private nonguaranteed debt are reported annually and are reported by the country or estimated by World Bank staff for countries where this type of external debt is known to be significant. Estimates are based on national data from the World Bank's Quarterly External Debt Statistics.
Statistical Concept and Methodology: Data on external debt are gathered through the World Bank's Debtor Reporting System (DRS). Long term debt data are compiled using the countries report on public and publicly guaranteed borrowing on a loan-by-loan basis and private non guaranteed borrowing on an aggregate basis. These data are supplemented by information from major multilateral banks and official lending agencies in major creditor countries. Short-term debt data are gathered from the Quarterly External Debt Statistics (QEDS) database, jointly developed by the World Bank and the IMF and from creditors through the reporting systems of the Bank for International Settlements. Debt data are reported in the currency of repayment and compiled and published in U.S. dollars. End-of-period exchange rates are used for the compilation of stock figures (amount of debt outstanding), and projected debt service and annual average exchange rates are used for the flows. Exchange rates are taken from the IMF's International Financial Statistics. Debt repayable in multiple currencies, goods, or services and debt with a provision for maintenance of the value of the currency of repayment are shown at book value.