LEARNING OBJECTIVES AND STRUCTURE OF PART 2

Transcription

1 The Public DSA Framework for Market Access Countries Instructor: Adina Popescu (IMF) Unit 1 LEARNING OBJECTIVES AND STRUCTURE OF PART 2 This training material is the property of the International Monetary Fund and is intended for use in IMF Institute for Capacity Development courses. Any reuse requires the permission of the IMF. The views expressed in this material are those of the course staff and do not necessarily represent those of the IMF or IMF policy.

2 U1.V1 Content and Goals of Part 2 U1.V2 A History of Debt and Growth: Understand the past, chart the Understand the past, chart the Future (IMF Video)

3 Unit 2 DEBT SUSTAINABILITY IN MARKET ACCESS COUNTRIES U2.V1 What is the MAC DSA?

4 What is the MAC DSA? Description Timeline Approach Part of the IMF s framework for debt sustainability analysis Designed and followed by the IMF to assess public debt sustainability in market access countries (MACs) In the context of both surveillance and program design/reviews i MAC DSA Timeline Definition Timeline Approach

5 The MAC DSA Aproach Definition Timeline Approach A formal and standardized tool Implemented through an Excel based template Who are Market Access Countries? Countries with significant access to international capital markets on a durable and sustainable basis De facto all advanced economies and most emerging markets

6 U2.V2 Assessing Sustainability in the MAC DSA How is Debt Sustainability Assessed in the MAC DSA? Solvency Liquidity Realistic adjustment

7 What is Solvency? The current debt stock is fully The government will be able to covered by the present discounted service the debt in the short, value of all expected future primary medium and long run without balances renegotiating or defaulting SOLVENCY The debt burden indicators are projected to either stabilize or decline - in the baseline scenario and under plausible shock scenarios What is Liquidity? Available financing and liquid assets are sufficient to meet maturing obligations Level and dtrajectory t of fdebt burden indicators facilitate continued market access and rollover risk is low LIQUIDITY The debt profile is well balanced in terms of: maturity, currency composition, and investor base

8 What is Realistic Adjustment? Realistic macroeconomic assumptions and projections for the primary balance adjustment Adjustment is economically and politically feasible REALISTIC ADJUSTMENT Potential growth is preserved at a satisfactory level Caveats DSAs involve probabilistic judgments about the trajectory of debt and the availability of financing on favorable terms DSAs should not be interpreted in a mechanistic or rigid fashion DSAs should take into consideration DSAs should take into consideration country-specific circumstances

9 U2.V3 What are the Benchmarks in the MAC DSA? Main Features of the MAC DSA Template A complex and multifaceted exercise Highlights the risks and uncertainty surrounding the central forecast Is risk-based - more analysis required for countries with greater vulnerabilities

10 Lower versus Higher Scrutiny Countries are classified as: Lower scrutiny Higher scrutiny on the basis of: a set of benchmarks of debt burden and other indicators access to Fund resources What Are the Benchmarks for Classification? Public debt level Public gross financing needs Exceptional access to IMF > 50% of GDP for EMs > 60% of GDP for AEs > 10% of GDP for EMs > 15% of GDP for AEs

11 Early Warning Models Benchmarks estimated from early warning models These identify the level of the indicators which best predict the occurrence of a crisis The MAC DSA benchmarks are conservative estimates (about 15 percent less than the model estimates) However Debt problems may emerge at lower debt burden levels than the ones suggested above (particularly for EMs) Other indicators may point to emerging vulnerabilities

12 Indicators for Additional Analysis iscal ris sks Growt th and f 3-year cumulative primary balance adjustment (percent of GDP) Coefficient of variation of growth Deb bt profil le risks Bond yield spreads External financing requirement (% of GDP) Public debt held by non-residents (share of total) Public debt in foreigncurrency (share of total) Annual change in the share of short-term debt at original maturity Indicator AEs EMs 3-year cumulative primary 2 2 balance adjustment (percent of GDP) Example: 24

13 Indicator AEs EMs Coefficient of variation of growth 1 1 Coeff. of variation = Standard deviation Mean Indicator AEs EMs Bond yield spreads or EMBI global spreads (basis points) Spread over US or German bonds JP Morgans's EMBI

14 Indicator AEs EMs External financing requirements (percent of GDP) External financing requirements = ST External debt + Amortization of MLT external debt - Current account balance Indicator AEs EMs Public debt held by non residents (share of total) Public debt in foreign currency n.a. 60 (share of total)

15 Indicator AEs EMs Annual change in the share of short-term public debt at original maturity Short-term debt (t)/total public debt (t) - Short-term debt (t-1)/total public debt (t-1) U2.V4 What are the Steps in Preparing the MAC DSA?

16 Roadmap: the MAC DSA Template Lower scrutiny countries Higher scrutiny countries Basic DSA Baseline scenario Standardized alternative scenarios Customized alternative scenarios (contingent liabilities)

17 Risk Identification and Analysis Realism of baseline scenario Sensitivity to macrofiscal risks Contingent liabilities Vulnerability of the debt profile Risk Reporting Heat map Fan charts Write-up

18 Unit 3 DATA: COVERAGE, ISSUES, SOURCES U3.V1 Data Coverage and Issues

19 Issues Related to Coverage of Public Debt Coverage of the public sector Gross versus net debt Long-term spending pressures The Coverage of the Public Sector: The Issue Sub-national governments Contingent liabilities Bailouts State-owned enterprises (SOEs) Public-private partnerships (PPPs) Offset fiscal adjustments efforts

20 Example: Portugal The reclassification of reclassifications of SOEs and PPPs into the general government has weighed on the sizable increase in general government debt Source: IMF Public Sector Coverage: Guidelines The coverage of public debt in the DSA should be: as broad as possible, ideally based on the entire public sector one should try to add, at least, high-risk public enterprises

21 Net versus Gross Debt: The Issue There are risks associated with high levels of gross debt High levels of financial assets can mitigate these risks Gross debt = All liabilities held in debt instruments Net debt = Gross debt Assets held in dbtintumnt debt instruments Japan: Gross and Net Debt

22 Net versus Gross Debt: Guidelines The MAC DSA is based on gross debt Net debt complementary measure Long-Run Spending Pressures: The Issue Long-run spending pressures Pensions Health-care

23 US: Long-Term Budget Projections Long-Run Spending Pressures: Guidelines The DSAs should reflect long-term spending pressures Reporting options: Memo item for the present value of projected spending increases Extend the projection horizon beyond 5 years

24 U3.V2 MAC DSA Template: Introductory Video Unit 4 THE BASELINE SCENARIO

25 U4.V1 How to Construct the Baseline Scenario? Constructing a Baseline Scenario Macroeconomic framework the most likely scenario - for surveillance countries - based on current and projected government policies the programmed macroeconomic adjustment - for program countries

26 Generic Debt Dynamics Equation automatic debt dynamics residual d t * ( 1) d t 1 pb t o t res t debt/gdp ratio primary balance o Privatization receipts o Recognition of implicit or contingent liabilities o Other (e.g. bank recapitalization) other identified d debt-creating flows What Drives the Debt-to-GDP to Dynamics? Contribution of real GDP growth Contribution of the primary balance d t w it t (1 gt ) (1 gt )(1 t ) gt 1 g )(1 ) f t t 1(1 it ) dt ( 1 t t (1 gt )(1 t ) pbt... Contribution of effective real interest rate Contribution of exchange rate depreciation

27 Debt-Creating Flows (in percent of GDP) Example t t+1 t+2 t+3 t+4 t+5 t+6 t+7 t+8 t+9 t+10 cumulative Primary deficit Real GDP growth Real interest rate Exchange rate depreciation Other debt-creating flows Residual Change in gross public sector debt Where Do Residuals Come From? changes in gross debt arising from below-the-line line operations the use of different definitions iti for the stock of debt and the fiscal balance sales/purchases of financial assets one-off factors affecting the stock of debt cross-currency movements

28 U4.V2 MAC DSA Template: The Baseline Scenario REALISM OF THE BASELINE Unit 5 REALISM OF THE BASELINE ASSUMPTIONS

29 U5.V1 How to Evaluate the Forecast Track Record? Realism Tools Does in the MAC DSA Realism of macro-assumptions Examines the track record in projecting macroeconomic variables Realism of fiscal adjustment Assesses the realism of projected fiscal adjustments Boom-bust analysis Assesses growth projections in countries that may have entered a boom-bust cycle

30 Realism of Macro-Assumptions The DSA template automatically produces charts statistics for the forecast track record for real GDP growth primary balance inflation by comparing forecast errors for a country to the distribution of forecast errors for other MACs What is the Forecast Track Record? Forecast error (t) = Actual (t,t+2) - Projection (t,t-1)

31 Summary Statistics in the distribution of median forecast errors of all MACs How to Interpret the Forecast Errors? Suggest systematic projection bias Calibrate realistic baseline projections

32 U5.V2 How to Evaluate the Realism of the Projected Fiscal Adjustment? Is the Planned Fiscal Consolidation Plausible? Lessons from History 1. Large primary surpluses have been frequent, but sustained large surpluses have been less common Figure 1. Frequency Plots of Maximum Primary Balance (by country, annual data, , source: World Economic Outlook database, IMF)

33 Is the Planned Fiscal Consolidation Plausible? Lessons from History 2. Large fiscal corrections are usually associated with worse starting fiscal positions Figure 2. Largest Primary Balance Turnaround (source: World Economic Outlook database, IMF) Some Simple Rules-of-Thumb Close scrutiny of assumptions warranted if planned fiscal adjustment is located close to the right-hand tail of the cross-country distributions maximum 3-year adjustment maximum 3-year average level

34 Country-Specific Information The analysis would take account of past record of fiscal adjustment extent of political commitment the design of the authorities fiscal adjustment plans experience regarding budget forecast errors legal and institutional mechanisms U5.V3 How to Use the Boom-Bust Tool?

35 What are the Triggers for the Boom-Bust Tool? Countries are identified to be in a boom, if either of the following conditions is met: Output gap = Actual output Potential output A positive output gap during the last 3 consecutive years A 3-year cumulative level change in private sector credit-to-gdp exceeding 15 percent for EMs 30 percent for AEs Example: Private sector credit-to-gdp t t+1 t+2 t+3 30% 35% 45% 50% 20% The Boom-Bust Bust Tool Compares growth assumptions for a particular country to 8 6 the historical 4 experience of 2 0 boom-bust b cases -6 Interquartile til range = 75 th percentile - 25 th percentile Boom-Bust Analysis Real GDP growth (in percent) Example -2-4 Boom-bust inter-quartile range around crisis events (t) t-5 t-4 t-3 t-2 t-1 t t+1 t+2 t+3 t+4 t+5 Median

36 U5.V4 MAC DSA Template: Realism Tools DEALING WITH UNCERTAINTY 1: Unit 6 DEALING WITH UNCERTAINTY 1: ALTERNATIVE SCENARIOS

37 U6.V1 Sensitivity Analysis in the MAC DSA Sensitivity Analysis in the MAC DSA Historical scenario Standardized sensitivity analysis Constant primary balance scenario Standardized macro-fiscal stress tests Financial sector contingent t liabilities shock Customized sensitivity analysis Customized scenarios

38 Historical Scenario Set at historical average real GDP growth the primary balance real interest rates Baseline Other variables same as in baseline Constant Primary Balance (CPB) Scenario The primary balance assumed to remain unchanged at current level Baseline Other variables same as in baseline

39 How to Analyze the Historical and CPB Scenarios? Are baseline assumptions unrealistic (overly optimistic)? Are policy actions substantial enough to make a credible break from past or current trends? Standardized Macro-Fiscal Shocks Primary balance Real GDP growth Standardized macro-fiscal stress tests Interest rate Exchange rate Combined macro-fiscal

40 Primary Balance Shock Size and duration of shock Minimum shock equivalent to the maximum of: - 50% of planned cumulative adjustment in the baseline - baseline minus half of the 10-year historical standard deviation of the primary balance Default interactions - Increase in interest rates Real GDP Growth Shock Size and duration of shock Real GDP growth is reduced by 1 standard deviation for 2 consecutive years Default interactions - Deterioration in the primary balance - Increase in interest rates - Decrease in inflation

41 Interest Rate Shock Size and duration of shock Interest rate increases by the maximum of: - the difference between average real interest rate level over the projection period and maximum real historical level, or - 200bps - None Default interactions Exchange Rate Shock Size and duration of shock Exchange rate increases by the maximum of: - estimated overvaluation - maximum historical movement of the exchange rate Default interaction - pass-through to inflation (default elasticity of 0.25 for EMs and 0.03 for AEs) change in domestic inflation due to a change in the exchange rate

42 Combined Macro-Fiscal Based on the underlying shocks Size and duration of shock Default interactions Incorporates the largest effect of individual shocks on all relevant variables (real GDP growth, inflation, primary balance, exchange rate, and interest rate) U6.V2 MAC DSA Template: Introduction to the Alternative Scenarios, the Historical Scenario and the No-Policy Change Scenario

43 U6.V3 MAC DSA Template: The Standardized Macro-fiscal Stress Tests Unit 7 DEALING WITH UNCERTAINTY 2: CUSTOMIZED SCENARIOS AND FAN CHARTS

44 U7.V1 MAC DSA Template: Customized Alternative Scenarios U7.V2 Fan Charts

45 What Does the Fan Chart Tool Do? provides a probabilistic view of the uncertainty around the baseline shows a spectrum of possible outcomes based on the stochastic properties the data incorporates interaction between macroeconomic variables relies on historical data to calibrate the persistence of shocks How Are Fan Charts Constructed? RGDP,RIR w, RER,PB Historical data, N(, ) Confidence bands Projections Draws

46 What are the Types of Fan Charts? Symmetric upside risks match downside risks centered around the baseline Asymmetric downside risks higher than upside capture the analyst s best assessment of fthe likely balance of risks Symmetric Fan Charts upside and downside risks are equally lk likelyl Fan Chart Evolution of Debt-to-GDP ratio 25 t t+1 t+2 t+3 t+4 t+5 t+6 t+7 10th-25th 25th-50th 50th-75th 75th-90th Baseline

47 Asymmetric Fan Charts cut off the upward or 45 downward distribution of 40 shocks in order to represents 35 the analyst s 30 best assessment of 25 the likelihood of shocks Fan Chart Evolution of Debt-to-GDP ratio t t+1 t+2 t+3 t+4 t+5 t+6 t+7 10th-25th 25th-50th 50th-75th 75th-90th Baseline U7.V3 MAC DSA Template: Fan Charts

48 Unit 8 CONTINGENT LIABILITIES U8.V1 What are Contingent Liabilities?

49 What are Contingent Liabilities (CLs)? Government financial interventions which arise out of explicit and implicit guarantees to public entities (including sub-national governments, state-owned t enterprises (SOEs) and state banks) public-private partnerships (PPPs) depositors (deposit insurance) support to private companies deemed too big to fail, etc. Examples Explicit Liabilities Recognized by a law or contract State guarantees for non-sovereign borrowing and obligations issued by subnational governments and public or private sector entities State guarantees for various types of loans and private investments Trade and exchange rate guarantees State t insurance schemes

50 Implicit Liabilities Assumed due to public and interest-group pressures Examples Defaults on non-guaranteed debt and other obligations by subnational governments or public or private enterprises Financial system bailout Corporate sector bailout Clean-up of liabilities of entities being privatized Implicit insurance for disaster relief Contingent Liabilities Are Significant

51 Contingent Liabilities in the DSA The DSA envisages several types of CL shocks Treatment in the MAC DSA Guaranteed debt (of SOEs and PPPs) Natural disasters Customized scenarios Not standardized Banking/financial crisis Built-in financial CL scenario Standardized U8.V2 Contingent Liabilities Stemming from a Financial Crisis

52 Costs of Banking Crises Median gross fiscal costs (net of any subsequent recoveries) were 13% of banking system assets Source: Laeven and Valencia (2012) Triggers for the Financial CL Shock Contingent Liabilities: Quantitative Triggers for Baking Crises EMs AEs Private sector credit-to-gdp (3-year cumulative level change), in percent Loan-to-deposit ratio average annual increase in nominal housing prices over the preceding 5- year period in excess of 7.5% Additional

53 The Financial CL in the MAC DSA If a quantitative trigger is breached A financial CL shock of 10% of banking sector assets is automatically generated The standard contingent liability shock also includes Or other financial vulnerabilities are identified negative shock to growth resulting deterioration of the primary balance increase in interest rates decrease in inflation U8.V2 MAC DSA Template: The Financial Contingent Liabilities Shock

54 Unit 9 VULNERABILITIES STEMMING FROM THE DEBT LEVEL AND FINANCING PROFILE U9.V1 Vulnerabilities Stemming from the Level of Debt

55 Why is High Debt an Issue? High debt requires large primary fiscal surpluses to service it exacerbates an economy s vulnerability to shocks exposes a country to a higher risk of a rollover crisis may be detrimental to economic growth Benchmarks for the Debt Burden Indicators Based on early warning models which trigger higher scrutiny in the MAC DSA To assess risks to debt-to-gdp: indicative benchmarks derived from the signal approach are increased by about 20 percent (to 70 for EMs and 85 for AEs)

56 Debt Burden Benchmarks for Risk- Assessment in the Heat Map Debt Burden Benchmarks for Risk Assessment Debt profile indicators Debt-to-GDP GFN-to-GDP EMs AEs U9.V2 The Assessment of Debt Profile Risks in the MAC DSA

57 Risks from the Debt Financing Profile Currency Composi tion Maturity Creditor base Debt Profile Vulnerabilities Indicators of Debt Profile Vulnerabilities Debt profile risks Bond yield spreads (EMBI Global spreads for EMs or Spread over US bonds for AEs) External financing requirement (% of GDP) Public debt held by non-residents (share of total) Public debt in foreign-currency (share of total) Annual change in the share of short-term debt at original maturity

58 Benchmarks for Debt Profile Vulnerabilities Indicative benchmarks (IB) estimated from early warning models To provide an early warning of emerging risks, and to err on the side of caution, two further benchmarks are computed: Upper benchmark: 75% of the IB Lower benchmark: 25% of the IB for EMs 50 % of the IB for AEs Debt Profile Risk Benchmarks for EMs Debt profile indicators EMBI Global Bond spreads (basis points) Risk-Assessment for EMs: Debt Profile Indicative benchmark Upper benchmark (75%) Lower benchmark (25%) External financing requirements (percent of GDP) Annual change in the share of short-term public debt (in percent of total t debt) Public debt held by nonresidents (share of total) Public debt in foreign currency (share of total)

59 Debt Profile Risk Benchmarks for AEs Debt profile indicators EMBI Global Bond spreads (basis points) External financing requirements (percent of GDP) Annual change in the share of short-term public debt (in percent of total debt) Public debt held by nonresidents (share of total) Risk-Assessment for EMs: Debt Profile Indicative benchmark Upper benchmark (75%) Lower benchmark (50%) Differences with EMs Reporting of Debt Profile Risks

60 U9.V3 MAC DSA Template: Financing Assumptions and the Debt Profile Unit 10 ASSESSMENT AND WRITE-UP

61 U10.V1 The Heat Map Conveys in a standardized way the risks to dbt debt sustainability from the various modules in the template The Heat Map

62 Assessment of Risks from Macro-Fiscal and Contingent Liabilities Shocks Risk Assessment: Macro-Fiscal Risks and Contingent Liabilities (done automatically for all stress tests) Baseline Stress-test High (red) above benchmark above benchmark Moderate (yellow) below benchmark above benchmark Low (green) below benchmark below benchmark Assessment of Debt Profile Risks for EMs Risk-Assessment for EMs: Debt Profile Debt profile indicators Low Moderate risk High risk Risk Bond spreads (basis points) Below Between 200 and Above External financing requirements (percent of GDP) Annual change in the share of shortterm public debt (in percent of total debt) Public debt held by non-residents (share of total) Public debt in foreign currency (share of total) Below 5 Between 5 and 15 Above 15 Below 0.5 Below 15 Between 0.5 and 1.0 Between 15 and 45 Between 20 and 60 Above 1.0 Above 45 Above 60 Public debt in foreign currency Below 20 Between 20 and Above

63 Assessment of Debt Profile Risks for AEs Risk-Assessment for AEs: Debt Profile Debt profile indicators Low Moderate risk High risk Risk Bond spreads (basis points) Below Between 400 and Above External financing requirements (percent of GDP) Annual change in the share of shortterm public debt (in percent of total debt) Public debt held by non-residents (share of total) Below 17 Below 1.0 Below 30 Between 17 and 25 Between 1.0 and 1.5 Between 30 and 45 Above 25 Above 1.5 Above 45 Summarizing Risks: Heat Maps Public DSA Risk Assessment Heat Map Debt level Real GDP Growth Shock Primary Balance Shock Real Interest Rate Shock Exchange Rate Shock Contingent Liability shock Gross financing needs Real GDP Growth Shock Primary Balance Shock Real Interest Rate Shock Exchange Rate Shock Contingent Liability Shock Debt profile Market Perception External Financing Requirements Change in the Share of Short-Term Debt Public Debt Held by Non- Residents Foreign Currency Debt

64 U10.V2 The Write-Up and Risk-Assessment Natalia Novikova Ireland: High Vulnerabilities from the Debt Level Source: Ireland: Twelfth Review under the Extended Arrangement and Proposal for Post program Monitoring, December 2013.

65 Ireland: High Vulnerabilities from the Debt Level the planned reduction in the large cash buffer after a major debt amortization in January 2014 allows gross public debt to decline from 2014 net public debt falls to just below 100 percent of GDP by 2018 when the cash buffer is assumed to shrink to more normal levels of about 7 percent of GDP. Debt reductions from asset sales present an upside risk. Current baseline assumptions do not incorporate proceeds from state asset disposals of up to 3 billion (around 1¾ percent of GDP), at least half of which are to be used for debt reduction. Similarly, no allowance is made for further transactions reducing the cost incurred in supporting the banking system Source: Ireland: Twelfth Review under the Extended Arrangement and Proposal for Post program Monitoring, December Low Debt Level Belarus Source: Republic of Belarus: Fifth Post-Program Monitoring Discussions, January Mexico Source: Mexico: Staff Report for the 2013 Article IV Consultation, November 2013.

66 Belarus: Low Debt Level with Large Contingent Liabilities Assessing public sector debt dynamics in Belarus is complicated owing to the large contingent liabilities associated with directed and subsidized lending programs as well as the large stock of domestic guarantees issued by both the central and local governments. Although, the headline debt ratios remain moderate at around 25 percent of GDP in 2013, the medium term outlook is weighed down by risks stemming from quasi-fiscal operations, changes to the macroeconomic environment, large external financing requirements, and limited market access. Source: Republic of Belarus: Fifth Post-Program Monitoring Discussions, January Mexico: Low Debt Level with Wide Coverage of the Public Sector Gross debt levels e in Mexico, at 45 percent of GDP projected by end-2013, remain moderate. The broad institutional coverage which includes development banks and other key public entities i such as PEMEX, the state oil company, provides reassurance that gross liabilities of the public sector are well captured.the different DSA scenarios suggest that Mexico s public debt is sustainable even under the most extreme shocks. Source: Mexico: Staff Report for the 2013 Article IV Consultation, November 2013.

67 U10.V3 Concluding remarks Supplementary Material The Benchmarks in the MAC DSA: Methodology and Usages

68 How are the Benchmarks Derived? Signal approach/ early warning models The early warning benchmarks are derived by finding the value of the threshold X that minimizes the: False alarms Noise - to - signal ratio B B D A A C Type I errors = C/(A+C) Type II errors = B/(B+D) Missed crises 135 Use of the Benchmarks in the Template Indicative/Early warning/signal approach benchmarks Classification benchmarks: lower vs higher scrutiny Benchmarks for assessing risks in the heat map

69 Debt Burden Indicators Indicative benchmarks Debt/GDP -15% +20% Classification benchmarks Heat map benchmarks Debt-to-GDP Benchmarks Debt-to-GDP Indicative Classification Heat map benchmark benchmark benchmark EM 60-15%*60= %*60=72 70 AE 70-15%*70= %*70=84 85

70 GFN-to-GDP Benchmarks GFN-to-GDP Indicative Classification Heat map benchmark benchmark benchmark EM 15-15%*15= AE 20-15%*20= Summary: Debt Burden Indicators Benchmarks Benchmarks for Debt Burden Indicators EM EM EM AE AE AE Heat Heat Indicator Unit Indic Classif map Indic Classif map Gross government debt Percent of GDP Gross public sector financing requirements Percent of GDP

71 Assessment of Risks from Macro-Fiscal and Contingent Liabilities Shocks Debt-to-GDP Baseline < 70/85 < 70/85 > 70/85 Shock Scenario < 70/85 > 70/85 > 70/85 GFN-to-GDP Baseline < 15/20 < 15/20 > 15/20 Shock Scenario < 15/20 > 15/20 > 15/20 Benchmarks for Debt Profile Vulnerabilities Indicative benchmarks Lower early Upper early EMs:25% warning warning 75% AEs:50% benchmarks benchmarks Classification benchmarks

72 Debt Profile Benchmark in the Heat Map Indicative Benchmark (100%) Upper Benchmark (75%) Lower Benchmark AEs (50%) Lower Benchmark EMs (25%) EM AE Risk Assessment Benchmarks for Debt Profile Vulnerabilities Benchmarks for Debt Profile Vulnerabilities EM EM EM AE AE AE Indicator Unit Full 25% 75% Full 50% 75% EMBI Global spreads (EMs) or Spread over US bonds (AEs) Basis points External Financing Requirement Percent of GDP Annual Change in Share of Short-Term Public Debt at Original Maturity Percent of total Public Debt Public Debt Held by Non- Residents Percent of total Public Debt Public Debt in Foreign Currency Percent of total Public Debt