Global Development Finance Mobilizing Finance and managing Vulnerability 1: ANALYSIS AND STATISTICAL APPENDIX 2005 THEW。 RLD BANK
THE WORLD BANK Global Development Finance Mobilizing Finance and Managing Vulnerability I: ANALYSIS AND STATISTICAL APPENDIX 2005
o 2005 The International Bank for Reconstruction and Development/The World Bank 1818 H Street nw Washington, DC 20433 Telephone: 202-473-1000 Internetwww.worldbank.org E-mail: feedback @worldbank. org All rights reserved 123408070605 This volume is a product of the staff of the International Bank for Reconstruction and Development/The World Bank. The findings, interpretations, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors denominations, and other information shown on any map in this work do not imply any judgement on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of uch boundaries The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development /The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc, 222 Rosewood Drive, Danvers, MA 01923, USA; telephone978-750-8400;fax978-750-4470:Internet:www.copyright.com ll other queries on rights and licenses, including subsidiary rights, should be addressed to the office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422 e-mail: pubrights@worldbank. org Cover photo: CORBIS Cover design: Naylor Design ISBN=10:0-8213-59843 ISBN=13:978-0-8213-5984-6 eSBN=10:0-8213-6213-5 eSBN=13:9780-8213-6213-6 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
© 2005 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: feedback@worldbank.org All rights reserved 1 2 3 4 08 07 06 05 This volume is a product of the staff of the International Bank for Reconstruction and Development/The World Bank. The findings, interpretations, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgement on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development / The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@worldbank.org. 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 Forew i 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 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
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 v
GLOBAL DEVELOPMENT FINANCE 2005 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 No room for complacency, despite improvements References 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 109 110 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 1 1.3 Regional composition of net portfolio flows to developing countries, 2002-4 19 1.4 t 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 3 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 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 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
GLOBAL DEVELOPMENT FINANCE 2005 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 vi
TABLE OF CONTENTS 1.7 FDI outflows from developing countries, 1990-2004 17 quity 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 1.14 ODA as a percentage of GNI in DAC donor countries, 1990-2006 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 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 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 40 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 4: 2.15 Metals-Low 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 47 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 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 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
T ABLE OF CONTENTS 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 40 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—Low 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 47 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 vii