CHAPTER 3: GAPS AND LIMITATIONS
3.2 Gaps within current frameworks
3.2.1 External Debt65
As has been described earlier in the previous chapter, external debt data are collected through the frameworks of four IFIs:
(i) the IMF, according to Balance of Payments (BPM5) framework;
(ii) the World Bank, in its collection framework for the external debt of developing and transition countries;
(iii) the OECD, in its collection framework for the external debt of developing and transition countries; and
(iv) the BIS, from its locational and consolidated external debt collections for cross-border debt held by banks.
65 Defined in the Manual External Debt: Definition, Statistical Coverage and Methodology, BIS/IMF/OECD/World Bank, 1988. This publication is to be revised and produced by the Inter-Agency Task Force on Finance Statistics, comprising the OECD, the BIS, the World Bank, the ECB, Eurostat and the IMF. Work is expected to commence on this project later in 1999.
Availability of key data series
Users identified a number of key data series within the area of external debt. The table below summarises the extent to which the various frameworks meet these data requirements66:
Disaggregated by: IMF World Bank OECD BIS (cons)
Foreign currency / domestic currency N N N N
Public sector / private sector debtor Y Y N Y
Remaining maturity N N N Y
Future debt interest servicing N Y N N
Country allocation of debt N N N Y
Creditor side information N Y Y Data for bank
holdings only
Reporting frequency Annual Annual Annual Quarterly67
Timeliness 3 months
(encouraged)
15 months 12 months 5 months68
The IMF framework applies to the external debt of all countries, whilst the OECD, World Bank and BIS data frameworks relate to external debt of developing and transition countries69. The BIS are intending to expand their coverage to include the external debt of the industrialised countries, although their data relate only to holdings by banks. The BIS’s coverage of the external debt of developing and transitional countries is thus incomplete if countries have high levels of debt owed to non-banks.
66 The table does not include all key debt data series that are available. For instance, the World Bank and OECD provide data on disbursements, repayments, net flows on debt, and interest payments; the World Bank and OECD provide data on an original maturity basis; and the World Bank provides data on scheduled principal repayments for the coming 10 years.
67 It is expected that most countries will report on a quarterly basis by end-1999 at the latest.
68 All countries plan to reduce their reporting lags to three months by September 1999 at the latest.
69 Further information on the debt classification systems and methodologies used by IFIs, and how to reconcile differences in the stocks and flows of external debt produced by IFIs, are contained in Debt Stocks, Debt Flows and the Balance of Payments, BIS/IMF/OECD/World Bank, 1994.
Timeliness is an issue that extends across all frameworks and it should be noted that users at the Workshop considered that the current BIS debt data (which have a five-month lag) are not timely.
Gaps within individual frameworks
The parts below expand upon the gaps within the individual frameworks.
(i) IMF70
A measure of external debt of the economy is available through the International Investment Position (IIP). As discussed in chapter 2, the annual production of the IIP with a release lag of six months will become prescribed in the SDDS after 2001. The IIP framework requires information to be disseminated by instrument (such as bonds and money market instruments) and by sector (monetary authorities and banks, general government, and other). In addition to country sources, IIP data are published in the IMF’s Balance of Payments Statistics Yearbook, which is usually published around eleven/twelve months after the end of the year.
The SDDS has a requirement for central government debt to be disseminated quarterly, with a one-quarter lag, classified by maturity (preferably residual). Where feasible, it is recommended that a breakdown of debt by its foreign and domestic components according to residence71 is provided or, if this is not feasible, a breakdown by currency, debt instrument or debt holder.
The SNA/BPM5 and SDDS frameworks do not require a split between domestic and foreign currency debt, nor is information required on the remaining maturity of debt72 or future debt interest servicing. Indeed, the SNA93/BPM5 frameworks recommend maturity information be on the basis of original maturity. There is also no requirement for additional information on the non-resident creditors, either by country or sector,
70 Of course many countries may publish more comprehensive, frequent or timely information than requirements specified in the SDDS.
71 The IMF publishes data on government accounts in its Government Finance Statistics Yearbook .
72 Remaining maturity of external debt is a supplementary item in the BPM5 framework, paragraph 337.
partly due to the considerable practical difficulties involved in collecting this information.
(ii) OECD
OECD external debt data are published annually with a publication lag of one year73. These data are available by country with debt disaggregated into long and short-term debt on an original maturity basis. The publication lag undermines the relevance of the information on short-term debt.
The OECD data has an extensive creditor breakdown. The creditor analysis for long term debt separates loans from OECD countries (including a subdivision between official government finance— including trade credit— and finance provided by the financial markets— including both bank loans and bond holdings), multilateral organisations and non-OECD countries. As OECD data are comprised of information from a variety of sources, coverage of external debt is likely to be broader than external debt from other international sources74.
In comparison with the identified user requirements, OECD data does not distinguish between debt issued by the public and private sectors, there is no remaining maturity or debt interest servicing information, nor is there a distinction between domestic currency and foreign currency debt.
(iii) World Bank
World Bank external debt data from debtor sources are published annually in Global Development Finance, with a publication lag of 13 months, recently reduced from 15 months. Data are available by country and are presented in considerable detail.
Debtor side detail separates public and publicly guaranteed debt from private non-guaranteed debt. Creditor side information for public sector debt includes a
73 External Debt Statistics, OECD, 1998 Edition.
74 For example, the BIS/OECD semi-annual survey on consolidated statistics only covers bank and trade creditors’ claims; and the World Bank Debtor Reporting System collects public sector debt only for most of the reporting countries. See OECD publication, External Debt Statistics, page 35.
distinction between multilateral and bilateral finance. Within both public and private sector categories, bond issues are separately identified from loans. World Bank data provide comprehensive information on flows associated with the debt (both past and future projections), and include a currency analysis and the average original maturity of new issues in the previous year. The inclusion of publicly guaranteed debt with that of the public sector meets the user requirement for data to be allocated by ultimate debtor. However, separate identification of publicly guaranteed debt would increase the comparability of data across the different frameworks, and more timely release of the external debt data would improve the relevance of short-term debt information. We recommend that the World Bank consider these ideas.
Debt issued in six major international currencies (Euro75, Sterling, Swiss Franc, US Dollar and the Yen) are separately identified, along with and a residual item, ‘All other currencies’. Domestic currency debt is not included.
(iv) BIS
From end-1999 onwards, it is hoped that the BIS consolidated statistics can be published on a quarterly frequency with a four-month lag76, whilst the BIS locational statistics will be published on a quarterly basis, with a five-month lag. These data cover lending by banks in the form of loans and securities and are currently available in the publications The BIS Consolidated International Banking Statistics77 and the quarterly review: International Banking and Financial Market Developments78. The shorter publication lag of this information relative to that for other sources of debt data means that it is more timely, and that the short-term debt classification is more relevant. As noted in the previous chapter, BIS consolidated statistics provide information on a remaining maturity basis, but there is no information on future debt interest servicing.
75 The 1998 and previous editions include debt issued in Deutsche marks and French francs, but future publications will presumably include all Euro currency issues.
76 Data are published on a semi-annual frequency with a 5-month lag.
77 Formerly The Maturity, Sectoral and Nationality Distribution of International Banking Statistics.
78 Also available from the web-site: http://www.bis.org
However, BIS statistics provide only partial coverage of debt. Data do not include non-bank positions79 and only a limited number of countries report to the BIS80. Non-bank financial institutions that could hold significant volumes of non-resident securities might include securities dealers, pension funds and insurance companies.
The G22 report on Transparency and Accountability has recommended an investigation into the possibility of increasing BIS-type banking data coverage to non-bank institutions. As a first step, reporting non-banks could consolidate figures for all their non-bank subsidiaries. If these non-bank institutions were added to the BIS statistics, it is possible that frequent and more complete indicators of external debt data would become available.
Joint IFI release
The BIS and OECD produced a joint publication called Statistics on External Indebtedness81, which was replaced in March 1999 by the joint publication of a new series of quarterly releases of statistics on external debt by the BIS, IMF, OECD and the World Bank82. The former publication covers the trade credit data of the OECD and the banking data of the BIS. The new publication will include data from creditor, market, and also debtor sources, with particular emphasis placed on debt due within a year. However, there remain differences between the series in their coverage, frequency and the time lag before publication, and the data do not yet provide a completely comprehensive and consistent measure of total external debt in each country. Nevertheless, they bring together for the first time the best international comparative data currently available on external debt’83. We support this cooperation between international organisations and their response to requests for dissemination of more timely external debt indicators.
79 Some countries might consolidate some non-bank affiliates of banking groups in their consolidated figures.
80 BIS consolidated statistics are currently compiled from banks in 18 countries and a further 17 countries have been invited to participate.
81 See the website: www.bis.org/publ
82 These data cover external debt for 176 developing and transition countries. See the website:
www.oecd.org/dac/debt.
83 Sourced from notice on Regular Publications: Joint BIS-IMF-OECD-World Bank statistics on external debt, see website: http://www.bis.org/publ
There are at least six sets of internationally comparable estimates of external debt84. The number of alternative measures creates uncertainty in the mind of users about the most appropriate source. While there are good reasons for the development of these different estimates85, (reflecting both different user interests and different sources of data) we recommend that the various international agencies consider whether further rationalisation and harmonisation is possible. It should be remembered that the credibility of data could be compromised if users do not fully comprehend the reasons for the differences in the numbers.
3.2.2 Foreign currency reserves
As discussed in Chapter 2, considerable international efforts are being made to meet user requirements for enhanced data on international reserves, and potential drains on these reserves. Also, the IMF, in close collaboration with other international financial institutions, is developing guidelines for the compilation of data on international reserves and related items.
3.2.3 Sectoral information
The SNA provides a framework for the compilation of data by institutional sector for the domestic economy. The rest of the world sector is separately identified.
Traditionally interest has focussed on the rest of the world sector in total. However, financial markets are highly internationalised and the growth in cross-border activity has led to an interest in the type of non-resident active in domestic instruments, and with domestic institutions, for a risk analysis purpose86. For instance, from the comments of participants at the Workshop, it was evident that users would like more information about countries’ exposure to highly leveraged institutions (HLIs),
84 Figures produced by individual countries according to the IMF framework, two BIS publications, OECD, World Bank, and one joint publication.
85 The joint BIS/ IMF/OECD/World Bank publication, Debt stocks, Debt flows and the Balance of Payments, 1994, explains the differences in compilation methods between these sources.
86 For instance, see Kaminsky and Reinhart, On Crises, Contagion and Confusion a paper presented to the CCBS Academic Workshop, ‘Lessons for central bankers from recent financial crises’, 19-23, 1999. See also the IMF Survey, 10 May 1999, page 156.
particularly the bank sector87. There is no framework for the publication of this non-resident sector information, although the published BIS banking data are compiled by aggregating such data from reporting countries. Some individual creditor countries do publish this type of information on the external positions of their banks.88
The use of non-resident counterpart information is also of value when data are not directly available on the non-resident institutions. For example, hedge funds are usually based in offshore centres where there are few data requirements: counterpart information, if it were available, would be a useful source of information on their activities. We therefore support the recommendation of the G22 Working Group report on Transparency and Accountability89 that a working party is set up to
‘examine the modalities of compiling and publishing data on the international exposures of investment banks, hedge funds and other institutional investors’90.
3.2.4 Securities Data
The BIS and OECD collect and publish information on debt issues. Both have extensive databases. The BIS publish information allocated by type of debt instrument, type of issuer, country of residence and nationality of issuer, and currency of issue. Also, the World Bank requires countries to report data on public and publicly guaranteed debt securities with over one year’s original maturity, while the SNA93 flow of funds data framework covers overall classification, flows, stocks and valuation for securities.
To our knowledge, there are no international frameworks or recommendations for countries to collect and publish their own information on the details of gross new issues of debt securities and equity. There are however numerous commercial
87 In January 1999, the BCBS released a report on Sound Practices for Banks’ Interactions with Highly Leveraged Institutions, which largely recommends that banks should improve their risk management practices (notably effective counterparty credit risk management) in regards to interactions with HLIs.
88 For example, the Bank of England publishes this information in its monthly publication, Bank of England, Monetary and Financial Statistics.
89 Representatives of the following economies contributed to the Working Group: Argentina, Australia, Brazil, Canada, France, Germany, Hong Kong SAR (Co-chair), Japan, Malaysia, Thailand, the United Kingdom (Co-chair) and the United States.
90 Summary of Reports on the International Financial Architecture , October 1998, page 7.
databases available on security issuances, yields etc91. Indeed the BIS rely on information from these sources. Nonetheless, from a user perspective information on gross new issues, gross redemptions, yields, turnover etc. would be of value. We encourage national authorities to consider compiling and publishing such data, involving commercial organisations as appropriate. Almost certainly data on individual securities would need to be stored— an approach some countries have already successfully implemented. If the data are aggregated and published with a time lag, we do not necessarily see a conflict with commercial information.
Given the international nature of the markets, there is clearly scope for co-operation and this point was made by a number of experienced compilers at the Workshop. The development of some international guidelines for disclosure would be welcome.
3.2.5 Derivatives, Repos and Collateralisation
An IMF framework exists for the measurement of all derivative activity (Heath 1998), although so far few countries have implemented this framework. The conceptual approach to the measurement of repo activity is covered in SNA/BPM5, although due to different reporting practices in their local markets, many countries are questioning this conceptual approach. The BIS also collects information on derivative positions on a consolidated basis through its derivative market surveys92. Users are interested in the ability of derivatives to change the market risk exposure of an institution vis-à-vis individual economies and markets (Garber 1998)93. This is not captured in existing frameworks. As mentioned elsewhere, the most appropriate form of measurement of repo activity is also being re-examined. These issues are discussed further in Chapter 5.
91 A source of information on available security databases is provided in the Co-ordinated Portfolio Investment Survey (Survey Guide), IMF, August 1996, Appendix VII.
92 Regular OTC Derivative Market Statistics , BIS, semi-annual.
93 Peter Garber, Derivatives in international capital flows, NBER, 1998, Working Paper 6623.
3.2.6 Asset Statistics
The current SNA/BPM5 framework recommends disaggregation of assets according to instrument type94, but the recommended allocation does not necessarily enable users to fully assess the liquidity or associated risk of the instruments. One of the user demands is for currency risk information, which can be obtained from the currency of contracts. But this information is not required under the SNA/BPM5 frameworks.
3.2.7 Indicators of data quality
The SDDS requires data compilers to provide information that allows market participants to judge the quality of the disseminated data. To assist users in assessing data quality, the SDDS requires the dissemination of documentation on statistical methodology; and the dissemination of component detail, reconciliation with related data, and statistical frameworks that enable cross-checks and checks of reasonableness. Also, the SDDS calls for a statement on a country’s policy towards the revision of previously published data.
However, there remains an issue as to whether further information is required to enable users to assess the accuracy of the data. We recommend that the additional types of information could include work being undertaken to develop standard error estimates. For instance, in Australia, the Australian Bureau of Statistics provides relative standard errors for some published series.
3.2.8 Other information requirements
Users request transparency about financial market regulations. To some extent this information demand falls outside the scope of the project, but it is worth noting that at the international level considerable work is being undertaken to establish codes of conduct. These include work on Fiscal Transparency (IMF), Corporate Governance (Basle Committee, EBCD, OECD and the World Bank), as well as codes and
94 “[It is recommended to] distinguish monetary gold and SDR, currency and deposits, securities other than shares, loans, shares and other equity, insurance technical reserves and other accounts
receivable/payable”, SNA93, para 13.21.
standards of financial market supervision. A list was published in the October 1998 IMF World Economic Outlook (pages 16-17).