DEBT REPORT -- 2021 EDITION I January 2021 DEBT Report 2021 About the Report This is the first of the series of Debt Reports for 2021 to be published online, at regular intervals, over the course of the year. Their aim is to provide users with analyses of evolving trends and develop- ment related to external debt and public debt in individual countries and regional groups, with primary emphasis on low- and middle-income countries, and to keep users abreast of debt-related issues and initiatives. The reports: • Complement the summary overview of borrowing trends in 120 low- and middle-income coun- tries information presented in International Debt Statistics (IDS 2021), published in October 2020 with regional and country specific analyses on the composition and characteristics of external debt stocks and flows. The analyses will be underpinned by the detailed loan-by-loan data on stocks, transactions (commitments, disbursements and debt service payments) and loan terms captured by the World Bank Debtor Reporting System (DRS); • Draw from the high-frequency, Quarterly External Debt Statistics (QEDS) and quarterly Public Debt Statistics (PSDS) databases to provide users with syntheses of emergent trends in exter- nal and public debt, including borrowing patterns and current debt levels in both high-income countries and low- and middle-income countries; • Provide users with information briefs on current issues and ongoing initiatives aimed at improv- ing external and public debt measurement and monitoring, filling data gaps, and enhancing the coverage and harmonization of international datasets and related data dissemination. Debt Report 2021 Edition I presents a summary analysis of the composition of external debt stocks and flows from a regional perspective and draws out the main messages of the regional and country specific data available to users at: https://data.worldbank.org/products/ids. 1 Regional Overview 2019 The headline number masked sharp di- Financial flows to low- and middle-in- vergence in the volume and trend of financial come countries fell for the second consecutive flows at the regional level and individual coun- year in 2019. Aggregate net financial flows, debt tries. As with prior years, China dominated the and equity combined, totaled $0.9 billion in 2019, volume and direction of aggregate financial flows 15 percent lower than the comparable figure for to low- and middle-income countries and was the 2018. Measured relative to borrower countries’ single largest recipient recording a combined debt GNI aggregate financial flows were equivalent to and equity inflows of $320 million. This was equiv- 2.9 percent, a marked decrease from 3.5 percent alent to 36 percent of net financial flows to all low- in 2018 and well short of the 6.9 percent recorded and middle-income countries in 2019 but down in 2010. The downturn in net financial flows was from the 49 percent share of the comparable in- the result of a 28 percent drop in net debt inflows flows that China received in 2018. At the regional (gross disbursements of new loan financing minus level, excluding China, countries in Latin American principal payments), which fell to $383 billion from and the Caribbean accounted for the largest share $531 billion in 2018. The contraction in net debt of 2019 aggregate financial flows, $173 billion (19 inflows contrasted with equity inflows, which re- percent), followed by countries in South Asia, $119 mained stable. FDI inflows, long considered the billion (13 percent). Equity inflows surpassed debt most resilient and least volatile component of fi- inflows in all regions except Sub-Saharan Africa and nancial flows, totaled $471 billion, down margin- Middle East and North Africa where debt inflows ac- ally from the 2018 level, whereas portfolio equity counted for 73 percent and 51 percent, respectively inflows rose 24 percent to $48 billion. of total inflows. Figure 1: Net Financial Flows by Regional Figure 2: Change in External Debt Stock by Distribution, 2019 Regional Distribution, 2018-2019 US$ (billion) US$ (billion) 180 Sub-Saharan 160 Africa 2019 140 Debt South Asia 120 Equity 2018 100 Middle East 80 and North Africa 60 Latin America 40 &Caribbean 20 Europe and 0 Central Asia China East Asia Europe Latin Middle South Sub- East Asia and and and America & East and Asia Saharan Pacific excl. China Pacific Central Caribbean North Africa China excl. Asia Africa China 0 500 1000 1500 2000 Sources: World Bank Debtor Reporting System, International Monetary Sources: World Bank Debtor Reporting System, International Fund, and United Nations Conference on Trade and Development. Monetary Fund, and Bank for International Settlements. Total external debt stocks of low- and debt stocks was driven by China which accounted middle-income countries rose 5.4 percent in for 26 percent of the combined end-2019 external 2019 to $8.1 trillion, a rate of accumulation al- debt stock of low- and middle-income countries. most identical to that of 2018 but close to half China’s long-term external debt stock rose 23 per- the 10.5 percent rise in external debt stock re- cent in 2019 to $900 billion while short-term debt corded in 2017. The increase in debt stocks in fell by a little over 1 percent to $1.2 trillion. Exclud- 2019 resulted from net debt inflows of $383 billion ing China, the external debt stock of low- and mid- and valuation changes in year-on-year exchange dle-income countries rose on average 4.7 percent rates in relation to the U.S. dollar (around half the in 2019 but with wide divergence at the regional external debt of low- and middle-income countries level. Countries in Sub-Saharan Africa recorded is denominated in currencies other than the U.S. the fastest accumulation in external debt stocks dollar). Long-term external debt grew at the fastest in 2019, on average 9.7 percent, followed by those pace, rising 7 percent to $5.8 trillion, equivalent to in the South Asia region, 7.6 percent. Conversely, 71 percent of total external debt stock. Short-term in Latin America and Caribbean countries the pace debt rose marginally, (1.5 percent). In common of external debt accumulation slowed to 2.3 per- with debt flows, the accumulation in 2019 external cent. 2 East Asia and Pacific Net financial flows totaled $418 billion in 2019, a decline of 34 percent from the prior year reflecting the sharp, 39 percent, contraction in debt and equity flows to China. Net financial flows to other countries fell on average 12 percent in 2019. The volume and trend of net aggregate inflows which was not enough to offset the 33 per- financial flows was determined by China which cent fall in net debt inflows. Net debt inflows to- accounted for 77 percent of the combined debt taled $43 billion, of which 54 percent was account- and equity inflows to countries in the region ed for by Indonesia and a further 24 percent by in 2019. Aggregate financial flows to China fell 39 Vietnam. The rise in equity inflows was driven by a percent in 2019 to $320 billion from $522 billion record level of FDI inflows to Indonesia, $25 billion, in 2018 after a 29 percent reduction in net equi- up 24 percent over the prior year, with strong in- ty inflows and a steeper, 48 percent reduction, in vestment in manufacturing, mining, and financial net debt flows. The underlying factors that drove services. Among the small economies, Cambodia the level and composition of financial inflows to received record high FDI inflows of $3.7 billion in China are discussed in the overview section of IDS 2019, led by increases in manufacturing and ser- 2020. Excluding China, net financial flows to other vices by predominantly Asian investors. FDI in countries in the region fell, on average, 12 percent Thailand fell 60 percent to $5.3 billion and 14 per- in 2019 with a 17 percent increase in net equity cent in Vietnam to $12 billion. Figure 3: Net Debt and Equity Inflows excl. China, 2010-2019 US$ (billion) 160 140 120 100 80 60 40 20 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Net equity inflows Net debt inflows Sources: World Bank Debtor Reporting System and International Monetary Fund. 3 Net debt inflows to the region fell The region is home to fifteen of the 45 percent in 2019 to $187 billion due to a 30 world’s poorer countries eligible for the Debt percent drop in long-term debt inflows and a Service Suspension Initiative (DSSI) including $13 billion outflow of short-term debt. Driving several small Pacific island states with a com- these outcomes was a 48 percent fall in debt flows bined external public debt stock of $44 billion to China where a sharp 81 percent rise in long- at end-2019. On average 56 percent of the end- term debt inflows to $158 billion was offset by the 2019 debt stock was owed to bilateral creditors, sharp contraction in short-term debt flows. Net 27 percent to multilateral creditors and the re- debt inflows to other countries in the region fell maining 16 percent to private creditors includ- less than those to China, 33 percent but with the ing bondholders, commercial banks and other pattern of flows reversed: long-term debt inflows private entities. The volume and composition of fell 38 percent to $42 billion whereas short-term debt stocks at the individual country level was di- debt flows were positive with an inflow of $0.8 bil- vergent. Myanmar was the largest debtor in the lion as compared to an outflow of $4.2 billion in group, with an end-2019 external debt stock of 2018. The downturn in long-term debt inflows was $11.0 billion, followed by Lao PDR of $10.4 billion, principally due to the drop in those from commer- Mongolia $8.4 billion and Cambodia of $7.7 bil- cial banks and other private entities. They con- lion. Over 70 and 80 percent, respectively, of the tracted sharply to $7 billion, less than a quarter of end-2019 debt stock of Cambodia and Myanmar the comparable figure in 2018 largely on account was owed to bilateral creditors whereas Papua of the collapse in inflows to non-guaranteed pri- New Guinea owed the largest share to multilat- vate sector entities in Thailand which fell to around eral creditors, 45 percent, and Mongolia owed 43 $60 million from $17.4 billion in 2018. In contrast percent to private creditors. Regarding the cred- inflows from bondholders rose 4 percent to $31 itor composition China accounted for nearly 58 billion spurred by a record $23 billion in new issu- percent of bilateral debt stocks followed by Japan ance by public sector entities in Indonesia. Long with 20 percent. The Asian Development Bank was term inflows from official creditors to the region the largest multilateral creditor accounting for 52 excluding China fell 39 percent to $3.6 billion, driv- percent multilateral debt stocks, including the en down by a contraction in inflows from bilateral IMF, followed by the World Bank, 35 percent. creditors while the official creditors’ share of long- term debt inflows remained moderate, 8 percent. Figure 4: Creditor Composition of Net Debt Figure 5: DSSI-eligible Countries-Composition Inflows excl. China, 2010-2019 of External Public Debt Stock, end-2019 US$ (billion) US$ (billion) 12 Official creditors Bilateral creditors 60 Bondholders Multilateral Creditors 10 Commercial banks and other private Private creditors 50 Short-term 8 40 6 30 4 20 2 10 0 0 -10 -20 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: World Bank Debtor Reporting System. Source: World Bank Debtor Reporting System. 4 Europe and Central Asia Net financial flows rose to $93 billion in 2019, a marked turnaround from the $19 billion outflow recorded in 2018. The rebound was driven by inflows to Russia but was mirrored in an increase in debt and equity inflows to several other countries in the region in 2019. Net debt flows to the region totaled Figure 6: Net Debt Inflows by Creditor Type $30 billion in 2019, a marked contrast to the excl. Russia, 2010-2019 $57 billion outflow recorded in 2018. The out- US$ (billion) come was driven by Russia which accounted for 80 47 percent of the 2019 net debt inflows to the re- Official creditors gion and saw debt flows swing from an outflow 60 Private creditors of $64 billion in 2018 to an inflow of $14 billion Short-term in 2019 with short-term debt flows of $9.4 billion 40 accounting for two-thirds of the total. The main driver of the turnaround in Russia’s long-term 20 debt flows was a threefold increase in new bond issuance by public and private sector entities and 0 marked slowdown in outflows to commercial (20) banks which declined to $32 billion from their 2018 level of $56 billion. Debt flows to Turkey, the (40) region’s second largest borrower, continued their downward trajectory with the net outflow widen- (60) ing to $3.7 billion from $2.8 billion in 2018. A re- 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 bound in short-term debt inflows to $6.6 billion in 2019, compared to the prior year outflow of $3.4 Source: World Bank Debtor Reporting System. billion, was not enough to offset long-term debt outflows of $10.3 billion, largely the consequence Countries in the region, other than the of the sharp rise in outflows to commercial banks two largest borrowers Russia and Turkey, saw from non-guaranteed private sector borrowers. debt inflows double in 2019 to $19.5 billion on These widened to $12.8 billion in 2019 from $3.0 the back of a renewed short-term debt inflows billion in 2018. Long-term flows to public sector and rebound in long-term debt flows. Short-term borrowers fell 14 percent to $4.4 billion notwith- inflows totaled $4.1 billion, a marked turnaround standing $11.6 billion in new bond issuance. from the 2018 outflow of $0.4 billion driven in large 5 part by $0.5 billion to Uzbekistan, $1.2 billion to ties. As a result, private sector entities absorbed Ukraine and $0.7 billion to Belarus from outflows 64 percent of long-term debt inflows, up from 28 of $0.1 billion, $2.1 billion and $0.2 billion, respec- percent in 2018. Long-term debt inflows to public tively, in 2018. Net long-term debt inflows rose 51 sector entities totaled $6.2 billion in 2019 of which percent in 2019 to $17.3 billion driven by a surge in Uzbekistan accounted for 38 percent. It recorded inflows to non-guaranteed private sector entities a 25 percent increase in inflows to public sector several countries including Belarus, Bosnia Her- entities in 2019 to $2.4 billion of which over 95 zegovina, Serbia and Uzbekistan, primarily inter- percent was from official lenders including $0.8 company lending facilitated by commercial banks billion from the World Bank. but including some bond issuance by private enti- Figure 7: Net Debt Flows to Public and Private Entities in Select ECA Countries, 2018-2019 US$ (billion) 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 -1.5 Belarus Bosnia Bulgaria Kazakhstan Serbia Ukraine Uzbekistan Herzegovina 2018 Public and Publicly Guaranteed 2019 Public and Publicly Guaranteed 2018 Private non-guaranteed 2019 Private non-guaranteed Source: World Bank Debtor Reporting System. The region recorded the largest rise in 14 percent contraction in inflows to Turkey, trig- FDI inflows in 2019 of all low- and middle-in- gered by greater economic uncertainty, weaker come countries. FDI inflows increased by 50 economic growth and the country’s exposure to percent to $67 billion, propelled by a rebound global economic conditions which weighted on in- in FDI inflows to Russia. They rose nearly three- vestor sentiment. fold to $29 billion from $10 billion in 2018 with Figure 8: Foreign Direct Investment in Select reinvested earnings topping $20 billion and new Countries, 2018-2019 investment turning positive, after large-scale dis- investment in 2018. Other countries in the region US$ (billion) Russia saw FDI inflows rise on average 10 percent led by a resurgence in inflows to Kazakhstan which rose Turkey 153 percent to $6.7 billion from Chinese, Rus- Kazakhstan sian and US investors. Mining of metals attract- ed the largest volume of investment followed by Ukraine projects in the manufacturing sector. FDI inflows Serbia 2019 to Uzbekistan more than tripled to $2.1 billion in Uzbekistan 2018 response to measures aimed at economic liber- alization which attracted Asian and European in- Azerbaijan vestors into a range of projects including chemical Bulgaria production, uranium exploration and the textile industry. Some of these inflows also related to a Other countries large ongoing project by the Russia’s Lukoil. FDI 0 5 10 15 20 25 30 increases across the region served to offset the Source: International Monetary Fund. 6 Latin America and Caribbean Net financial flows fell 38 percent in 2019 to $173 billion, their lowest level in a decade, measured in re- lation to GNI. Equity inflows held up, rising on average 8 percent, but were insufficient to offset the 72 percent downturn in net debt inflows. Aggregate net financial inflows to the cline in net financial flows in 2019 to $27 billion region fell 38 percent in 2019 on account of the with a 38 percent fall in net debt inflows and a 36 fall in net debt inflow to $45 billion, the low- percent fall in net equity inflows to $11.6 billion. est level of the decade and significantly below the $161 billion recorded in 2018. In contrast Figure 9: Net Debt and Equity Inflows to net equity flows rose 8 percent underpinned by Select Countries, 2018-2019 foreign direct investment inflows which remained US$ (billion) stable in most countries and increased, on aver- 90 age, 9 percent in 2019 from the prior year level, Net Equity Net Debt offsetting a $1.3 billion widening in portfolio eq- 80 uity outflows. The big three, Argentina, Brazil and 70 Mexico accounted for 85 percent of net financial 60 flows to the region in 2019 and drove the overall volume and direction of flows. The contraction in 50 net debt inflows to Argentina and Brazil to $9.8 bil- 40 lion in 2019 from $123 billion in 2018 was the ma- 30 jor factor in the regional downturn and only mar- ginally offset by the 47 percent rise in comparable 20 debt inflows to Mexico to $20 billion. Equity flows 10 fared better with the combined inflows to Brazil 0 and Mexico rising on average 13 percent in 2019 2018 2019 2018 2019 to $70 billion and $34 billion respectively. Those to Argentina Brazil Mexico Other LAC countries Argentina rose by 35 percent to $12 billion. Other countries in the region recorded a 36 percent de- Sources: World Bank Debtor Reporting System and International Monetary Fund. 7 The precipitous fall in long-term debt Net inflows from bondholders fell 63 flows in 2019 was triggered by a contraction percent in 2019 to $16 billion as a result of a in those from private creditors to both pub- downturn in new issuance and a sharp rise lic and private sector entities. Net long-term in repayment on maturing bonds. Bond issu- inflows from private creditors fell 83 percent in ance by public and private sector borrowers fell 2019 to $14 billion driven by an 86 percent fall in to $82 billion in 2019, a 13 percent decline from those to public sector entities, largely bondhold- the comparable figure for 2018. New issuance ers and a corresponding 78 percent fall in those to by public sector borrowers fell 20 percent from non-guaranteed private sector entities, primarily the prior year level due in large part to the steep commercial banks and other private entities. The contraction in issuance by Argentinian borrowers $42 billion reduction in net inflows from bond- to $7 billion, from $44 billion in 2018. This was holders to Argentina from $31 billion in 2018 to partially offset by a $12.4 billion increase in issu- an outflow of $11 billion in 2019, and the $26 bil- ance by public sector borrowers in Mexico and lion outflow from Brazil’s private sector entities $4.0 billion by those in Brazil. In contrast, new is- to commercial banks were key elements of this suance by private sector borrowers in the region, outcome. Other countries in the region, excluding $23 billion was 9 percent higher than the level at- Argentina and Brazil, saw net inflows from private tained in 2018 largely on account of $12 billion in creditors rise 83 percent in 2019 to $28 billion of bonds issued by private sector entities in Mexico, which Mexico accounted for $18 billion. Net in- up sharply from the comparable figure of $6.9 flows to the region from official creditors totaled billion in 2018. Repayments on maturing bonds $18 billion in 2019, close to half the comparable were an important element of the downturn in net figure for 2018 with $24 billion in net inflows from flows. Principal repayments on maturing bonds is- multilateral creditors offset by an outflow of $6 sued by public sector borrowers rose 77 percent billion to bilateral creditors. Inflows from multi- in 2019, reducing net inflows to $13 billion ($48 lateral creditors included disbursements of $16.2 billion in 2018). In contrast principal payments on billion to Argentina from the IMF in the context of maturing bonds issued by private sector entities the bailout package agreed in 2018. Net inflows to fell 20 percent resulting in a net inflow of $2.9 bil- other countries in the region, $7.5 billion, were 9 lion as compared to an outflow of $4.2 billion in percent below the prior year level but those from 2019. the World Bank rose 25 percent to $2.2 billion. Figure 10: Composition of Long-term Net Debt Figure 11: Bonds by Borrower Type - Gross Inflows, 2017-2019 and Net Flow, 2018-2019 US$ (billion) US$ (billion) 140 PNG bonds net flow 120 2019 100 PNG bonds principal 2018 payment 80 60 PNG bonds disbursement 40 PPG bonds net flow 20 0 PPG bonds principal payment -20 2017 2018 2019 Bilateral creditors Multilateral creditors PPG bonds disbursement Bonds Commercial banks Total long-term debt -20 0 20 40 60 80 Source: World Bank Debtor Reporting System. Source: World Bank Debtor Reporting System. 8 Middle East and North Africa Net financial flows fell to $36 billion in 2019 their lowest level since 2015 and 16 percent below the com- parable flows in 2018. This downturn was the outcome of a 46 percent contraction in net long-term debt flows driven by sharp fall in flows from private creditors. Aggregate net financial inflows to the confidence. A significant share of these flows went region fell 16 percent in 2019 to $36 billion, into the oil and gas sector, but telecommunica- their lowest level since 2015 due to a sharp, 23 tions and consumer goods also attracted invest- percent contraction in net debt inflows and a ment. more moderate, 8 percent downturn in net eq- uity flows. The downturn in net debt flows was Figure 12: Debt and Equity Inflows, 2010-2019 driven by a 46 percent contraction in long-term US$ (billion) debt inflows which fell to $15.6 billion, from $28.7 billion in 2018, and more than offset short-term 35 Long-term debt debt inflows. The fall in long-term debt inflows 30 Short-term debt was driven by the sharp reduction in inflows from Equity 25 private creditors which fell to $6.9 billion, less than one-third the 2018 level. In contrast net inflows 20 from official creditors rose 43 percent to $8.7 bil- 15 lion on account of a jump in inflows from multilat- eral creditors. FDI was down 13 percent in 2019, 10 reflecting a slowdown in investment across the 5 region. FDI inflows to Morocco fell to $1.4 billion, 0 half the 2018 level, declined by 18 percent in Tu- nisia, to $817 million, in tandem with slower eco- -5 nomic growth, and fell 16 percent in Lebanon to -10 $2.2 billion with investors deterred by the ongoing 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 macroeconomic crisis. Egypt remained a bright spot with FDI inflows rising 11 percent to $9 billion Sources: World Bank Debtor Reporting System and in response to economic reforms that improved International Monetary Fund. macroeconomic stability and bolstered investor 9 The 46 percent drop in long-term debt These offset the 2019 record level in new bond is- inflows in 2019 was driven by the collapse in suance of $7.9 billion and $4 billion disbursement flows from private creditors to Lebanon and, to of the final tranche of the $12 billion IMF 2016 Ex- a lesser extent, Egypt. The economic and finan- tended Fund Facility for Egypt package. Net long- cial crises in Lebanon led to a sharp contraction in term debt flows to Jordan fell to $0.8 billion, a little debt flows from private creditors. Those to public over half the prior year level, largely on account of sector borrowers fell to $0.3 billion, one-tenth the a $0.6 billion outflow to bondholders. In contrast 2018 level and comparable flows to non-guaran- Morocco saw long-term debt inflows surge in 2019, teed private sector borrowers turned negative re- rising nearly tenfold to $3.8 billion due to the first cording an outflow of $5.4 billion from an inflow international bond issuance in five years (a €1 bil- of $5.7 billion in 2018. Long-term debt inflows to lion 12-year offering with a coupon of 1.5 percent), Egypt, the region’s largest borrower, fell 15 percent $1.3 billion in net inflows to public sector borrow- to $14.6 billion but its share of the region’s total ers from commercial banks and a $1.2 billion net long-term debt inflows rose to 94 percent from 60 inflow from multilateral creditors led by ramped percent in 2018 largely on account of outcomes in up lending from the World Bank. Long-term debt Lebanon. Driving the downturn was a 42 percent inflows to Tunisia rose 75 percent in 2019 to $1.8 reduction in disbursements from bilateral creditors billion propelled by a net inflow of $0.9 billion from and sharp drop in those from commercial banks to bilateral creditors and $0.4 billion from commercial $1.3 billion from the 2018 all-high of $6.3 billion. banks to non-guaranteed private sector borrowers. Figure 13: Net Long-term Debt Inflows, Figure 14: Debt Ratios for Select Countries, 2010-2019 2015 and 2019 US$ (billion) Percent 20 400 2015 Debt-to-Exports 2017 2018 2019 350 2019 Debt-to-Exports 15 2015 Debt-to-GNI 300 2019 Debt-to-GNI 10 250 200 5 150 0 100 50 -5 0 -10 Egypt Jordan Lebanon Morocco Tunisia All Egypt Jordan Lebanon Morocco Tunisia countries Sources: World Bank Debtor Reporting System and Source: World Bank Debtor Reporting System. International Monetary Fund. External debt ratios are on a rising tra- also climbed sharply over the same period from an jectory for most countries in the region. His- average of 17 percent to an estimated 28 percent at torically, the ratio of external debt-to-GNI and to end-2019. The averages also reflect Algeria’s very exports for countries in the Middle East and North low external debt-to-export and debt-to-GNI ratios, Africa was low on account of robust export earn- around 13.9 percent and 3.3 percent, respectively, ings and the relatively high share of equity in net fi- at end-2019 masking elevated debt burdens in oth- nancial flows. In recent years however, a rapid rise er countries in the region. Lebanon’s end-2019 ex- in debt creating flows has eroded equity’s share. In ternal debt-to-export ratio was 352 percent, Egypt’s 2019 equity inflows accounted for 48 percent of ag- reached 210 percent and for Jordan and Tunisia it gregate net financial flows as compared to an aver- was 192 percent. Lebanon and Tunisia recorded age of 80 percent in 2010-2012. This coupled with the highest external debt-to-GNI ratio at end-2019, the downturn in global oil prices and contraction 145 percent and 101 percent, respectively. The in other export earnings, has led to an appreciable comparable ratio for Egypt was moderate, 39 per- rise in the average external debt-to-export ratio. It cent at end-2019 but on a rapidly rising trajectory, doubled between 2010-2019 from 58 percent to up from 15 percent at end-2015. 116 percent. The external debt-to-GNI ratio has 10 South Asia The 74 percent increase in net financial flows to $119 billion in 2019 was driven by the steep rise in debt and equity inflows to India. Net financial inflows to other countries in the region rose, on average, only 3 percent. Net financial flows to India more than tors. India also benefitted from a surge in portfolio doubled in 2019 to $97 billion overshadowing equity inflows to $14 billion, from an outflow of $4 the marginal, 3 percent increase to those to billion in 2018 driven by attractive valuations and other South Asian countries and was propelled improvements in market access raising total net by debt and equity inflows. Net debt inflows to equity inflows to India by 63 percent in 2019. India rose more than threefold to $40 billion. Half of these were long-term inflows from commercial Figure 15: Net Debt and Equity Inflows, banks to non-guaranteed private sector entities, 2010-2019 largely intercompany lending in response to relax- US$ (billion) ation of investment barriers including in the retail 70 and insurance sector. Additionally, a surge in new 60 bond issuance by public and private sector enti- 50 ties pushed the net inflow by bondholders to $13 40 billion, compared to an $8 billion outflow in 2018. 30 Net debt flows to other countries in the region fell, 20 on average, 3 percent driven by a 43 percent drop 10 in long-term debt inflows to Pakistan and rise in 0 principal repayments to bondholders and bilateral -10 creditors. In contrast net debt inflows to Sri Lanka rose 53 percent on account of the $4.4 billion sov- -20 ereign bond issues in 2019. FDI inflows remained -30 resilient, rising 11 percent boosted by a 10 percent 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 increase in inflows to India to $43 billion, direct- South Asia (excl. India) net equity inflow ed largely at the technology and communication India net equity inflow industry. FDI inflows to Bangladesh also rose 5 South Asia (excl. India) net debt inflow percent to $1.3 billion, mostly into the garment in- India net debt inflow dustry, and inflows to Pakistan rebounded to $2 Source: World Bank Debtor Reporting System. billion with investment in energy, textiles and the financial sector led by British and Chinese inves- 11 South Asian countries other than India, ing Bangladesh (66 percent) and Nepal (87 percent). owed, on average, 83 percent of long-term ex- In contrast, Bhutan owed 74 percent of its external ternal public debt to bilateral and multilater- public debt to bilateral creditors. Three countries, al official creditors at end-2019. Their external Maldives, Pakistan, classified as a blend IBRD-IDA public debt stock of $162 billion at end-2019 com- borrower creditworthy for some market-based fi- prised of $73 billion (45 percent) owed to multilat- nancing, and Sri Lanka, an IBRD borrower, have eral creditors, $62 billion (38 percent) to bilateral issued bonds in international capital markets. Pri- creditors and $27 billion (17 percent) to private vate creditors accounted for 35 percent of Maldives creditors (bondholders, commercial banks and external public debt stock, 13 percent for Pakistan other private entities). At the country level, the and 48 percent for Sri Lanka. The World Bank was composition of external debt stocks varied. In four the single largest creditor $38 billion at end-2019, countries (Afghanistan, Bangladesh, Nepal and Pa- equivalent to 23 percent of long-term public debt kistan) multilateral creditors accounted for over 53 stock, followed by China, $33 billion, and the Asian percent of end-2019 external public debt, includ- Development Bank, $30 billion. Figure 16: Share of External Public Debt Stock by Creditor Composition, end-2019 Percent 100 90 80 70 60 50 40 30 20 10 0 Afghanistan Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka Bilateral creditors Multilateral creditors incl. IMF Private creditors Source: World Bank Debtor Reporting System. Across the region there is a significant considerably for other countries from 56 percent in divergence in debt burdens. On average the Bangladesh to an average of 12.5 percent for Paki- ratio of external debt to GNI and to exports re- stan and Sri Lanka. mained moderate, an average of 20 percent and 117 percent, respectively at end-2019. But India’s Figure 17: External Debt Indicators, end-2019 economy dwarfs that of other countries in the re- Percent gion and its GNI and export earnings, 22 percent Sri Lanka and 98 percent respectively in relation to end-2019 external debt stock were the key determinant of Pakistan these ratios. Bhutan had both the highest debt- Maldives to-export and debt-to GNI ratio at end-2019, 330 percent and 117 percent, respectively. Debt in rela- India tion to exports (285 percent) and GNI (69 percent) Bhutan was also elevated in Sri Lanka. Pakistan’s external debt-to-export ratio was 324 percent compared to Bangladesh 126 percent for Bangladesh and 72 percent for the South Asia excl. India Maldives. The external debt-to-GNI ratio of Bangla- desh remained low, 18 percent, and moderate, 37 South Asia percent, for Pakistan but rose to 53 percent in the Maldives, double the 2015 level. The regional aver- 0 200 400 age for the ratio of international reserves to exter- Reserves to Debt Debt-to-Exports Debt-to-GNI nal debt, 64 percent at end-2019, was also heavily weighted by India which had reserves equivalent to Sources: World Bank Debtor Reporting System and International Monetary Fund. 77 percent of external debt stock. This ratio varied 12 Sub-Saharan Africa The increase in financial flows to the region in 2019 by 11 percent was dragged down by an outflow of portfolio equity from South Africa. These offset FDI inflows which rose on average 23 percent and net debt inflows which were up 35 percent over the prior year level. Net financial flows to the region in 2019 sector, and were up 71 percent in Côte d’Ivoire to were a mixed bag; a 35 percent rise in net debt $1 billion, in tandem with the country’s sustained inflows offset by a 24 percent fall in equity in- economic growth, while those to South Africa were flows. South Africa, the region’s largest debtor, up 8 percent to $1.5 billion. drove these outcomes. Debt inflows rose to $4 billion from an outflow of 0.9 billion the previous Figure 18: Net Debt and Equity Inflows, year largely on account of the $5 billion sovereign 2010-2019 Eurobond issue in September 2019, the largest US$ (billion) offering to date with a $2 billion 10-year tranche 60 and $3 billion 30-year tranche with a coupon of 5.75 percent. But it was a different story in regard 50 to equity where heightened risk perceptions and more attractive options elsewhere led investors to 40 retreat from the South African market resulting in a $4.3 billion outflow of portfolio equity as com- 30 pared to the $2.9 billion inflow recorded in 2018. Net debt flows to other countries in the region rose 20 20 percent to $41 billion from $34 billion in 2018 propelled by a 44 percent rise in net inflows from 10 multilateral creditors led by those from the World Bank which rose over 52 percent to $9 billion. FDI 0 inflows to the region were up 21 percent in 2019 to 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 $23 billion with much of the increase attributable Net debt inflows to a slowdown in divestment in Angola’s oil sector. Net debt inflows excl. South Africa FDI inflows to the country remained negative in Net equity inflows 2019 (−$4.7 billion) but less so than in 2018 (−$7.1 Net equity inflows excl. South Africa billion). FDI inflows to Nigeria rose 81 percent to Source: World Bank Debtor Reporting System. $3.3 billion, with some diversification from the oil 13 The external borrowing patterns of cent in 2019 largely on account of bond issuance in many countries in the region has changed sig- international capital markets led by countries like nificantly over the past decade with increased Cote d’Ivoire, Ghana and Senegal but also reflecting reliance on non-traditional bilateral creditors renewed lending from commercial banks often fa- and private creditors. This evolution in the cred- cilitated by guarantees from bilateral export cred- itor composition of debt flows is particularly strong it agencies or multilateral institutions. The rise in with respect to the 33 poorest countries in the re- lending by private creditors has come largely at the gion classified as IDA-only. New debt inflows, i.e. expense of lending from official bilateral creditors disbursements from long term loan commitments, whose share of long-term disbursements fell from to these countries totaled $31.8 billion in 2019, 15 27 percent to 15 percent over the same period. percent higher than the prior year and over two Loan disbursements from IDA were $5.5 billion in and a half times the level at the start of the de- 2019, double the 2010 level, and IDA remained the cade. Over this period private creditors’ share of single largest creditor. disbursements increased from 9 percent to 32 per- Figure 19: Disbursements to IDA-only Countries Figure 20: External Debt-to-GNI for Select by Creditor Composition, 2010 and 2015-2019 Countries, 2010 and 2019 Percent Percent 100 Sub-Saharan Africa 90 80 Zambia 70 60 Rwanda 50 Angola 40 30 Senegal 20 2019 10 South Africa 2010 0 2010 2015 2016 2017 2018 2019 Liberia Private creditors Uganda Other multilateral creditors incl. IMF IDA 0 20 40 60 80 100 120 Bilateral creditors Sources: World Bank Debtor Reporting System and Source: World Bank Debtor Reporting System. International Monetary Fund. The rise in external debt outpaced eco- cant increases in the ratio at the individual country nomic growth in many Sub-Saharan African level in both absolute and percentage terms. In countries over the past decade and borrowing Zambia the ratio of total external debt-to-GNI rose terms hardened. From 2010-2019 the GNI of from 22 percent at end 2010 to 119 percent at end countries in the region rose on average 3.1 percent 2019, in Rwanda it tripled from 20 percent to 62 per annum, measured in U.S. dollar terms, while percent and in Uganda it rose fourfold from 11 external stocks increased, on average, 9 percent percent to 41 percent over this period. The ratio of per annum in the same period. The terms of new external debt-to-export earnings followed a similar long-term external loan commitments to public trajectory. It averaged 152 percent at end 2019, sector borrowers also hardened reducing the aver- up from 137 percent in 2018 and over double the age grant element to 13 percent in 2019 compared comparable ratio at the start of the decade. The to 28 percent in 2010. The combined ratio of exter- average ratio masks the fact that in over 30 per- nal debt-to-GNI averaged 38 percent at end 2019, cent of countries, including many that benefitted a marginal change from the prior year, but a rise from HIPC and MDRI, the end 2019 external debt- of 62 percent over the comparable ratio of 23 per- to-export ratio was close to, or above, 250 percent. cent in 2010 and the average masks some signifi- 14