Global Development Finance 2005: Analysis & Statistical Appendix Mobilizing Finance and Managing Vulnerability (Global Development Finance) (World Bank) (v. 1)

190 Pages·2005·2.06 MB·English

by  World Bank Group

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Mobilizing Finance and Managing Vulnerability
2005
I : A N A L Y S I S A N D S T A T I S T I C A L A P P E N D I X

Global
Development
Finance
Mobilizing Finance and Managing Vulnerability
I: Analysis and Statistical Appendix

Global
Development
Finance
Mobilizing Finance and Managing Vulnerability
2005
I : A N A L Y S I S A N D S T A T I S T I C A L A P P E N D I X
T H E W O R L D B A N K
© 2005 The International Bank for Reconstruction and Development / The World Bank
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Cover photo: CORBIS
Cover design: Naylor Design
ISBN-10: 0-8213-5984-3
ISBN-13: 978-0-8213-5984-6
eISBN-10: 0-8213-6213-5
eISBN-13: 978-0-8213-6213-6
ISSN: 1020-5454
The cutoff date for data used in this report was March 18, 2005. Dollars are current U.S. dollars unless
otherwise specified.
Table of Contents
Foreword ix
Acknowledgments xi
Selected Abbreviations xiii
Overview and Policy Messages: Mobilizing Finance and Managing Vulnerability 1
Capital flows to developing countries continued to recover, but at a slower pace 2
The world economy is slowing 3
Growing global imbalances pose risks for emerging market economies 4
The complexity of developing-country debt poses new challenges 5
Meeting poor countries’ financing needs requires recognition of the countries’
special challenges 8
Chapter 1 Financial Flows to Developing Countries: Recent Trends and Near-Term Prospects 13
Capital flows to developing countries 13
Capital flows from the private sector 15
Capital flows from the official sector 22
Annex: Recent trends in workers’ remittances to developing countries 28
Notes 29
References 29
Chapter 2 Global Outlook and the Developing Countries 33
Global growth 34
Global imbalances, currencies, and inflation 38
World trade 40
Commodity markets 43
Risks and policy priorities for the global economy 44
Notes 47
References 48
Chapter 3 Global Imbalances and Emerging Market Economies 51
The mixed effect of exchange-rate fluctuations 52
Global monetary tightening: higher interest rates 52
Potential volatility in emerging-market spreads 54
Capital flows and reserve accumulation 56
Promoting stability in global capital flows 61
Notes 63
References 63
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Chapter 4 Complex Challenges in Developing-Country Debt 67
The change since the 1990s 68
External debt trends in emerging markets 72
The rise of domestic debt markets 76
Balancing external and domestically financed debt 81
No room for complacency, despite improvements 85
Notes 85
References 86
Chapter 5 Meeting the Financing Needs of Poor Countries 89
The external financing environment in poor countries 90
Other developing countries as a source of finance for poor countries 99
Meeting the Monterrey challenge—an agenda for donors and recipients 102
Sound economic and pro-poor policies in recipient countries 109
Notes 110
References 111
Statistical Appendix 115
Tables
1.1 Net capital flows to developing countries, 1996–2004 14
1.2 Regional composition of net FDI inflows to developing countries, 2002–4 16
1.3 Regional composition of net portfolio flows to developing countries, 2002–4 19
1.4 Net official development assistance (ODA) from principal donor
countries, 1990–2003 23
1.5 Net bilateral ODA and special purpose grants, 1990–2003 24
1.6 Projected increases in ODA from DAC donors, 2003–6 26
1A.1 Workers’ remittances to developing countries, 1990–2004 28
1A.2 Developing countries with highest remittance flows, 2001 and 2003 29
2.1 The global outlook in summary 35
3.1 Current account balances in developing countries, 2000–4 57
3.2 Ratios of foreign-exchange reserves to imports and external
short-term debt in emerging market economies, 2004 59
3.3 Reserve carrying costs in emerging markets 60
4.1 Selected indicators of the burden of external debt, 1997–2002/3 69
4.2 Corporate and financial sector comparison for Asian crisis countries, 1998 and 2003 71
4.3 External indebtedness of top 20 debtors, 1997 and 2003 74
5.1 Net capital flows to poor countries, 1990–2004 90
Figures
1.1 Financial flows to developing countries, 1990–2004 14
1.2 Financial flows to developing countries as a percentage of GDP, 1990–2004 15
1.3 Current account balance of developing countries, 1976–2004 15
1.4 Financial flows to developing countries from the private sector, 1990–2004 16
1.5 Net equity flows to developing countries, 1990–2006 16
1.6 Share of net FDI inflows to low-income and least developed
countries, 1990–2004 17
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TA B L E O F C O N T E N T S
1.7 FDI outflows from developing countries, 1990–2004 17
1.8 Equity price indexes, 2003–4 19
1.9 Net private debt flows to developing countries, 1990–2004 20
1.10 Gross private flows to developing countries, 1990–2004 20
1.11 Emerging-market bond spreads, 1997–2004 21
1.12 Official debt flows and foreign aid grants, 1990–2004 22
1.13 ODA as a percentage of GDP in recipient countries, 1990–2003 23
1.14 ODA as a percentage of GNI in DAC donor countries, 1990–2006 25
1.15 Percentage of ODA disbursed to Sub-Saharan Africa, 1990–2003 26
1.16 ODA and grants from nongovernmental organizations, 1990–2003 26
2.1 Developing-country and world growth, 1980–2007 34
2.2 Slowing industrial production, September 2003–May 2005 36
2.3 Regional growth projections, 2003–7 36
2.4 Estimated global imbalances in current accounts, 2004 38
2.5 Financing the U.S. current account: net flows by asset type, 2000, 2002, and 2004 38
2.6 Appreciation of developing-country currencies against the dollar between
January 2002 and February 2005 39
2.7 Interest rates and the weakening dollar, 1995–2005 39
2.8 Very low real interest rates in the United States, 1997–2005 40
2.9 Rising consumer inflation, 2000–4 40
2.10 Slower trade growth, 2003–5 41
2.11 World semiconductor sales and East Asian technology exports, 1997–2005 41
2.12 Real effective revaluations of developing-country exchange rates, 2002–5 42
2.13 Commodity prices, 2000–4 43
2.14 Developing-country demand and commodity prices, 2003 and 2004 43
2.15 Metals—lower stocks mean higher prices, 1995–2005 44
2.16 Terms-of-trade gains to developing countries from commodity price changes, 2001–4 44
2.17 Effects of higher interest rates on GDP growth, 2005–7 46
2.18 The dollar in historical perspective, 1970–2004 46
3.1 Impact of dollar depreciation on debt service ratios, 2002–4 52
3.2 Short-term policy rates in developed countries, 2002–4 53
3.3 Short-term policy rates in major emerging markets, 2002–4 53
3.4 Movement of real federal fund rates, 1991–2004 53
3.5 U.S. Treasury implied forward rates 54
3.6 Estimated additional debt service burden due to increase of one percentage
point in U.S. interest rates 54
3.7 Change in sovereign bond spreads following increase of 200 basis points
in U.S. interest rates, by degree of indebtedness of country 57
3.8 World current account surpluses as shares of U.S. current account deficit, 2004 57
3.9 Capital flows, current account balances, and reserve accumulations
in developing countries, 1980–2004 57
3.10 Global foreign-exchange reserve accumulation, 1999–2004 58
3.11 Foreign-exchange reserves in developing countries, 1999–2004 58
3.12 Foreign official assets in the United States, 1980–2003 60
4.1 Composition of developing countries’ external debt, 1990–2003 69
4.2 Developing countries’ total public sector debt, 1990–2003 70
4.3 Burden of public debt: external vs. domestic, 1990–2002 70
4.4 Credit quality of emerging markets, 1997–2004 71
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G L O B A L D E V E L O P M E N T F I N A N C E 2 0 0 5
4.5 Change in net private debt flows (long-term plus short-term) of crisis
countries and others, 1994–2003 72
4.6 Total external debt of developing countries, 1990–2003 74
4.7 Composition of outstanding external debt of developing countries, 1970–2003 74
4.8 Substitution of bond financing for bank credit, 1990–2002 75
4.9 Volatility in acquisition of new debt, 1994–2003 75
4.10 Bank credit to developing countries, 1970–2003 76
4.11 Composition of outstanding market-sourced debt in the developing world, 1970–2003 76
4.12 Public debt stocks in emerging markets, 1997 and 2002 77
4.13 Stock of outstanding domestic bonds, by sector, 1993–2002 77
4.14 Share of domestic debt in total public debt in selected Asian countries, 1990–2003 79
4.15 Stock of domestic bonds outstanding in emerging markets, by region, 1993–2002 79
4.16 Share of domestic debt in total public debt in selected Latin
American countries, 1990–2003 80
4.17 Distribution of volatility in risk premium for selected developing countries 83
4.18 Average credit quality, by region, 1999–2004 84
5.1 Shift from aid toward FDI in poor countries, 1990–2003 91
5.2 ODA to poor countries relative to total ODA, 1990–2003 91
5.3 Sectoral distribution of ODA to poor countries, 1990–2002 93
5.4 Natural resource availability and ratios of FDI to GDP in poor countries, 1990–2003 94
5.5 Improving risk conditions in poor countries, 1985–2003 97
5.6 FDI in oil- and mineral-exporting poor countries, 1990–2003 98
5.7 Global military spending and aid, 1992–2003 104
5.8 Change in volatility of aid, 1970–2002 106
5.9 Volatility of different components of aid, remittances, and FDI, 1990–2002 106
Boxes
1.1 Measuring capital flows in dollars versus as a percentage of GDP 18
1.2 Implementation of the Heavily Indebted Poor Countries (HIPC) Initiative 25
1.3 Aid in the wake of the Asian tsunami 27
3.1 Asset prices and unanticipated news 55
3.2 Determinants of emerging-market spreads 56
3.3 Developing countries as exporters of capital—a new twist on the Bretton
Woods system 59
4.1 Currency valuation effects have significant impacts 73
4.2 The role of short-term bank credit in trade financing 75
4.3 Foreign investment in developing countries’ domestic debt markets 78
4.4 Assessing the risk of external versus domestic debt 84
5.1 Wide variations in the mix of external financing in poor countries 92
5.2 Growing financing role for NGOs 94
5.3 Workers’ remittances to poor countries 95
5.4 The rise, fall, and recovery of FDI to poor countries, 1990–2003 96
5.5 Realizing the development promise of trade 97
5.6 Collapse in international bank lending to poor countries 98
5.7 UNDP, Japan, and triangular cooperation 101
5.8 New sources of financing 105
5.9 Securitization of future workers’ remittances and other external flows 108
viii