1 Debt C risis and Debt Sustainability In Developing Countries Yunhe Qiu A thesis submitted for the degree of Master of Science Wirtschaftsmathematik Models and Method in Quantitative Economics (QEM) Supervisor: Prof. Dr. Alfred Greiner University Bielefeld Matrikelnummer: July, 2010!
2 Abstract: In this paper we, in order to find out how future debt crises can be prevented, first take a look at the history and development of the debt crisis in developing countries. We discuss the causation, as well as preferable, advantageous solutions for the developing countries debt crisis. And some policy suggestions are also given out at the end. Moreover, in order to find out if the governments of developing countries pursued a sustainable debt policy after they experienced the debt crisis, six selected developing countries from Asia and Latin America are tested in terms of sustainability of their public debt. The results show that, although there is a high debt ratio in some countries, the empirical evidence for most of the selected countries show that that their public debt is sustainable. #
3 CONTENT Content 1 Introduction Debt crisis in developing countries What is the government debt? Debt and development Causes of the debt crisis Solutions of the debt crisis Policy suggestion Debt sustainability in developing countries Theoretical considerations Data description Empirical Analysis China$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$%! India$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$%& Philippines:$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$'% Colombia$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$'( Brazil$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$)! Chile$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$)* 4 Conclusion References ##
4 LIST OF FIGURES List of Figures Figure 1 Figure 2 Public debt to GDP ratio for China. Primary surplus to GDP ratio for China. Figure 3 Scatter plot of st VS. dt 1 for China. Figure 4 Figure 5 Public debt to GDP ratio for India. Primary surplus to GDP ratio for India. Figure 6 Scatter plot of st VS. dt 1 for India. Figure 7 Figure 8 Public debt to GDP ratio for the Philippines. Primary surplus to GDP ratio for the Philippines. Figure 9 Scatter plot of st VS. dt 1 for the Philippines. Figure10 Figure11 Public debt to GDP ratio for Colombia. Primary surplus to GDP ratio for Colombia. Figure12 Scatter plot of st VS. dt 1 for Colombia. Figure13 Figure14 Public debt to GDP ratio for Brazil. Primary surplus to GDP ratio for Brazil Figure15 Scatter plot of st VS. dt 1 for Brazil. Figure16 Figure17 Public debt to GDP ratio for Chile. Primary surplus to GDP ratio for Chile Figure18 Scatter plot of st VS. dt 1 for Chile. ###
5 LIST OF TABLES List of Tables Table 1 Table 2 Table 3 Table 4 Table 5 Table 6 Table 7 Table 8 Table 9 Table 10 Table 11 Table 12 Table 13 Table 14 Table 15 Table 16 Table 17 Table 18 Table 19 Coefficients for equation (6) for China. ADF Test result for China. Correlation test for residuals for China. Debt safety index for China. Coefficients for equation (6) for India. ADF Test result for India. Correlation test for residuals for India. Coefficients for equation (6) for the Philippines. ADF Test result for the Philippines. Correlation test for residuals for the Philippines. Coefficients for equation (6) for Colombia. ADF Test result for Colombia. Correlation test for residuals for Colombia. Coefficients for equation (6) for Brazil ADF Test result for Brazil. Correlation test for residuals for Brazil. Coefficients for equation (6) for Chile. ADF Test result for Chile. Correlation test for residuals for Chile. #+
6 ABBREVIATIONS Abbreviations AC ADF CACs CGC CNY DEF DW EU EIU GDP IMF MPDD OLS SDRM FRBMA PAC TFC Auto Correlation Augmented Dickey-Fuller Collective Action Clauses Code of Good Conduct China Yuan (Chinese Local Currency) Deficit Durbin-Watson Europe Union Economist Intelligence Unit Gross Domestic Product International Monetary Fund Macroeconomic Policy and Development Division Ordinary Least Squares The Sovereign Debt Restructuring Mechanism Fiscal Responsibility and Budget Management Act Partial Correlation Twelfth Finance Commission +
7 1. INTRODUCTION 1 Introduction The outbreak of the Euro area debt crisis made people realize once more that the immense growth of the public debt levels as well as the debt to GDP ratios has, in many parts of the world, turned out to be a serious problem. For the developing countries, the burden for the governments has remarkably increased since the 1970s. These governments have the tendency to be too easily affected by debt crises as has been seen during the recessions in the 1980s and the 1990s. We will, in the second chapter of this paper, discuss the debt crisis that affected the developing countries. Meaning we will try to gain an insight and find out just how these debt crises got to be, what the solutions are designed by officials such as the IMF (International Monetary Fund), the US Treasury as well as other official governmental institutions. And finally, In order to improve the policy system in developing countries some policy suggestions are given out in the last section of chapter two. This will be important for us, because our set goal will be to come up with possible solutions on how future debt crises can be prevented, meaning we will look at what actions governments of developing countries might need to take up, in order to avoid such hostile situations. And as we have known that the two debt crises of the 1980s and the 1990s brought severe damage to the economies of those countries in a developing state. Therefore from the economic point of view there is also a very important question, which definitely needs to be asked: Are the governments of the developing countries pursuing a sustainable debt policy after they experienced a debt crisis? In the third chapter, we will have a look at a group of six selected developing countries, these being from Asia but also from Latin America. Those chosen regions will be tested for the sustainability of debt policy. The countries that have been put into consideration are China, India, the Philippines, Colombia, Brazil and lastly Chile. The World Bank divide!
8 1. INTRODUCTION performance into different groups, which were calculated and then formed by using the World Bank Atlas Method. By this classification, Colombia, Brazil and Chile can be found in the upper middle income group, while China, India as well as the Philippines are located in the lower-middle income group. 1 There are various techniques to test the sustainability of fiscal policies. In this paper, I use the Bohn s approach (1998). His research concentrates on and analyses reactions of the primary surplus to GDP ratio to the change in the debt to GDP ratio. 2 And the similar research has been performed for European countries by Balabriga and Martinez-Mongay (2005) as well as by Greiner and Fincke for African and Latin-American countries. Further, we will apply an additional test which is going to analyze the stationary of Trehan and Walsh proposed to test the stationary of the government deficit in Their result supported that the path of public debt is sustainable, if the deficit including interest payments is stationary, that is under the condition that the interest rate is not negative. [Trehan and Walsh(1991)] There exist several possible approaches to the stationary test; we will rely on the Augmented Dickey-Fuller testing method in this paper.[ Dickey and Fuller (1981)] The paper is organized as follows: In chapter two the debt crisis in developing countries is being discussed, including the causation, solution but also the policy suggestion for the government. In chapter three the six developing countries that were mentioned earlier are tested for the sustainability of their fiscal policy. Chapter four will then finally, be the conclusion for the paper and presents closing remarks 1 According to the 2008 GNI per capital the groups are: low income, $975 or less; lower middle income, $976 - $3,855; upper middle income, $3,856 - $11,905; and high income, $11,906 or more. 2 Do governments in developing countries pursue sustainable debt policies? Empirical evidence for selected countries in Africa and Latin America, Bettina Fincke, Alfred Greiner, %
9 2. DEBT CRISIS IN DEVELOPING COUNTRIES 2 Debt crisis in developing countries 2.1 What is the government debt? The government debt is the total value of government bonds that are outstanding at any particular time. 3 And t It is possible to differentiate the government debt into two different categories: internal debt as well as the external debt. Internal debt means that the government owes capital to lenders from inside its own country, while external debt occurs when the capital borrowed comes from an external, meaning foreign source or lender. Usually governments acquire loans by issuing government bonds, securities and bills. Alternatively, there is also a way of directly borrowing capital from supranational institutions, but these are only accessible to a few creditworthy countries. It is also common that identified the government debt by duration until repayment. There are three different kinds of debt by duration : first is the so-called long term debt is usually set for a time span longer than ten years. In contrast to that you will find the short term debt, normally only taking up one year or less than that. A third variant of this debt form is the so-called medium term debt, which logically is somewhat in between the two boundaries above. 2.2 Debt and development The positive effect of government debt on a 4 Before we start it should be noted that there are three ways in which debt can affect a country s development positively. For the first manner it is important to understand ',-./ #.45627/189$6:1;5912<$91/2-2=15%>>! '
10 2. DEBT CRISIS IN DEVELOPING COUNTRIES that government debt is a way of raising funds, keep the balance between revenues and expenditures while at the same time evenly offsetting the construction funds. With the development of a country's economy, the national financial functions are increasing in size. Finally chances are, our government will lack of the financial resources handle an economic situation. However, the debts can definitely be a feasible way to fill in this gap. Making an acceptable, sustainable amount of debt can both be used as compensation for budget deficits but also helps avoid overdraft from banks that would otherwise cause the problems of currency issuance and inflation. For example, in a certain set period, a government might need a huge amount of capital to ensure the provision of the nationwide coverage of energy, transportation and other infrastructural key elements. However, the money available from budget alone may not meet the internal needs, and external debt might just be the best way to attract foreign investors. The second way in which debt can affect the economy positively is by adjusting a country s industrial structure, regional structure as well as promote a stable development of the national economy. Like the external debt, it is usually applied to finance investment projects and programs such as those of the World Bank s energy or transportation program. These try and help to develop as well as enhance the energy supply or the coverage of transportation help to eliminate the bottlenecks of the development of the national economies. And the poverty alleviation projects are specifically designed to enhance the development of economically backward regions. These measures would help the entire country to benefit from the economic development and thus prevent a big financial and social gap between different regions or social classes. They would definitely contribute to social stability. Therefore, public debt is beneficial for the adjustment in a country's industrial structure while enhancing the compliance among different industries in order to achieve a healthy, nationwide development. )
11 2. DEBT CRISIS IN DEVELOPING COUNTRIES To enhance the country s economic growth, a government needs to endorse national development planning that implements strict control on foreign investment. This will be beneficial to the national macro-control, greatly lowering the number of blind and duplicated investment while at the same time optimizing one s industrial structure, making the debt an important way of controlling macroeconomic. Finally, the third effect that the public debt has on an economy is that debts will help improve the liquidity when it comes to international payments. The external borrowings are going to have a direct impact on the country s international income. Those earnings from foreign currency improve a country s payment capabilities and enhance international liquidity while giving a government the opportunity to invest into productivity. Developing the infrastructural key sectors, already mentioned above, and strengthening the export industries can contribute to the adjustment of the domestic industrial structure. They also increase the production of import substitutes, reduce import itself, thus increasing foreign reserve. Finally they can help in the production of exporting goods and enhance export capacity as well as the capacity of international payment. The negative effect of government debt on a However, the more debt the better will backfire on the lender. There is also a dark side to government debt. Actually, after the government debt surpasses a certain level, it will not remain a blessing to one s development. Excessive debt may depress the growth by limiting the productivity and weakening investment growth. Safia Shabbir talked about the dark side of external debt in his paper. He pointed out that developing countries should strive hard to achieve a sustainable economic growth. Therefore these governments need to gain control over their expending fiscal deficit. In contrast to that, if the government debt is not sustainable, it will put the economic prosperity into a risky situation. Since it should be remembered that the debt also hints at a higher current account deficit, which means the debt most *
12 2. DEBT CRISIS IN DEVELOPING COUNTRIES certainly could just as well lead to an unbalanced debt in a country. The debt for any economy is either a public or a publically guaranteed debt. It involves the contingent liabilities which play an important role in the cultivation of the entire economy. Developing countries usually have limited internal sources to yield their If they fail to utilize their debt productively, mobilize investment and create new employment opportunities; they will eventually get stuck up with the dilemma of lower revenue base which will affect their spending capacity, thereby leading to higher debt servicing. The inability to service debt on time not only makes it harder for developing countries to get aid at concessional rates with less conditionalities from donor agencies, but it also increases the country s risk. 5 This handicap will see to it that those governments that are unable to repay this debt will have to rely more on domestic borrowings. However, the more domestic borrowings are performed, the stronger domestic interest rate will increase; this then leads to a slowdown in the growth of the economy. 2.3 Causes of the debt crisis 6 (1) The development of developing countries over reliance on external debt Since the 1960s, Latin American countries as well as other developing areas across the globe turned more and more over to economic nationalism. As a result both the developing countries and the developed western countries prefer to choose loan capital as their principal means of capital input and output. The Latin American countries implemented an Import-substituting Industrialization strategy in the period from the mid-sixties to Therefore their manufacturing became more capital and technology intensive. This has lead to the development of these countries * Safia Shabbir, Does External Debt Affect Economic Growth: Evidence from Developing Countries. Mengnan Zhu, International Finance, Chapter 7, Section 6, The international debt crisis. (
13 2. DEBT CRISIS IN DEVELOPING COUNTRIES relying more on import than export. Undue emphasis on import substitute brings about an internal-oriented economy and leads to shortage of internal funds. 7 Therefore the Latin American countries relied on loans for growth. These loans were used to pay for current consumption, but not for productive investments. The money was not being used to mobilize underutilized resources, but rather to maintain a current, albeit desperate, standard of living. In the same period, the western industrial countries were experiencing an economical depression. Their domestic demand was decreased and there was a large surplus of international capital. They therefore enhanced the loan capital export to developing countries. (2) The improper debt structure The structure of debt plays an important role in the changing of debt. The mainly impertinences of debt structure are: a. Commercial loans taking a too large proportion The term of commercial loans is usually short. The international bank wanted to continue lending to developing countries while the economic situation was still good. These countries could then use the new debt to pay off their old debt. However as soon as stable factors such as government deficit, a large adverse trade balance or political unrest appear, those involved lose their faith in the market. When the foreign reserves are insufficient to repay the maturity debt, the exchange rate is certain to plummet. When this happens the bank will no longer lend. In order to repay the maturity debt, the foreign exchange funds, which were already short, have to outflow, which leads to the explosion of a crisis. b. Excessive concentration of currencies used to buy debt. rate moveme external debt also increases and repayment becomes more difficult. I Mingde Li, The perspicuity encyclopedia of Latin American, P123, I
14 2. DEBT CRISIS IN DEVELOPING COUNTRIES c. Improper term structure of debt If short-term external debt occupies too large a proportion (beyond the international acceptable alarm level) or the repayment terms are not arranged rationally, then it may causes a concentration time for repayment. And if financial liquidity is not large enough to repay the maturity debt, this may lead to financial crisis. (3) Improper use of debt How to use the loan best guarantees the repayment ability. In the long term, solvency is determined by export rate. Therefore, what people are really worried about is not the scale of the debt, but its production capacity - and its capacity to earn foreign exchange. Some debtors lent a great deal of money but did not make the repayment strategy by considering their amount of investment, term of repayment or the development rate of macroeconomic. They simply built a number of huge and thoughtless projects. These projects usually lasted a long time, but could not get enough return in the short term to repay the existing debt. And there were also many debts are not used in production or to import capital goods but used instead to import durable goods and luxury. This caused a decrease in the investment rate and a also reduced ability to pay back. There are even some countries that took out a short-term loan, but used it on a long-term investment program such as real estate and stock market. This may cause a bubble economy, and as soon as the bubble bursts the crisis begins. (4) The deterioration of foreign trade caused a sharp cutoff in export income The capacity of earnings from foreign exchange trough exports determines a time according to the changing of the international market, then their export income will decrease and the current account deficit will increase. This has a serious impact upon their ability of debt service. At the same time the current account deficit &
15 2. DEBT CRISIS IN DEVELOPING COUNTRIES continues to cause more dependence on external debt. When the international investors lose faith in the debtors, they stop lending or they prevent a time extension for repayment, leading to the debt crisis. (5) Protectionism of developed countries developed western countries launched a series of policies and measures which raised the debt burden of the developing countries. Since the seventies, developed countries, taking America as their lead, practiced trade protectionism, causing the trading condition of Latin America to worsen. The trade deficit increased with the years, and as a consequence their ability to repay decreased. 2.4 Solutions of the debt crisis For the debt crisis of developing countries, which was caused by the failed management of debt risk, the international community designed several solutions: (1) The Sovereign Debt Restructuring Mechanism (SDR M) 8 After the Argentine crisis, the IMF (International Monetary Fund) proposed a sovereign debt restructuring mechanism (SDRM) in This proposal provided an essential forum to discuss the resolution. It introduced an international bankruptcy court which, similar to the bankruptcy statues for companies, which are. 9 The core characteristic of this proposed system is, the national government can request a convening of an international panel. This panel is in charge of negotiating with private creditors in order to arrive at an agreement for debt restructuring. If the majority of creditors reach an agreement, the rest of the creditors have to abide by it. 8, 9 Implementing the Monterrey Consensus in the Asian and Pacific Region: Achieving Coherence and Consistency, Macroeconomic Policy and Development Division (MPDD), J
16 2. DEBT CRISIS IN DEVELOPING COUNTRIES Another characteristic of this proposal is the limit of the lawsuit in suspending the debt repayment. It means that when the debtors and creditors therefore arrived at the debt restructuring agreement, the debtors temporarily stop paying back the debt, and the creditors cannot take legal action. The IMF tried to build a framework of orderly workouts by providing legal protection for debtors and putting macroeconomic policies in place at the same time. However, the Treasury Department argued against (2) Collective Action Clauses, C A Cs 10 in other G-10 countries and the US Treasury proposed a new approach which was more market-friendly than debt restructurings. It was not a substitute of the existing restructuring mechanism, but a complement of it. These clauses seek to address the holdout problem by allowing a supermajority of bondholders to am basic payment terms, removing the threat that a small minority of investors could forestall a restructuring effort. 11 Collective action clauses can avoid the rent-seeking wars of attrition which is in restructurings that are possible under the 12 Since 2003, most of the new issued sovereign debt introduced collective action clauses. pivotal voter may be used to eliminate the rent. 13 (3) Code of Good Conduct, C G C 14 While people were still arguing whether CACS or SDRM (IMF proposal), two 10 Collective Action Clauses: Recent Progress and Challenges Ahead, Sergio. J. Galvis, Angel L. Saad, See Emerging Markets Creditors Association, Institute of International Finance. 12, 13 Sovereign Bond Restructuring: Collective Action Clauses and Official Crisis Intervention, Kenneth M.Kletzer, , Towards a Code of Good Conduct on Sovereign Debt Re-Negotiation,!>
17 2. DEBT CRISIS IN DEVELOPING COUNTRIES sovereign debt restructuring mechanisms, is better a new proposal which is called CGC (Code of Good Conduct was proposed by the Banque France and the Institute of International Finance. This proposal may provide an acceptable solution which can support the concerned of all parties who have different interests and standpoint. The CGC does not replace either of the two but is used complementarily. The Code tried clarify a set of common principles. They are (1) Early and regular dialogue based on trust among debtors and creditors; (2) Make the information transparent; (3) Fair representation of creditors; (4) Comparable treatment of the different creditors; (5) Economic and financial conditionality of debt rescheduling; (6) Fair burden sharing between the different stakeholders; (7) Preservation, re-establishment or strengthening of normal financial relations between creditors and debtors; 15 These standardization principles make the debt restructuring more rapidly and orderly. However it against by debtors since it gives more power to creditors. (4) Solution from Institute of International Finance In June of 2004, the Institute of International Finance drafted Principles for stable capital flows and fair debt re 16 with the countries which are highly relying on international capital funding, such as Brazil, Mexico, Turkey and South Korea. Principles for stable capital flows and fair debt restructuring in emerging markets refers to taking precautions against and the solving of the external debt crisis. Compared to the CGC, it is more maneuverable. The main principles of the draft are that the debtor is obliged have an ideal economic policy, such as the monetary, exchange-rate and debt management policy. Further the public support for the policy, a supportive legal system and investment 15 Towards a Code of Good Conduct for Enhanced Prevention and Resolution of International Financial Crises, Baanque de France Bulletin Digest, Principles for Stable Capital Flows and Fair Debt Restructuring in Emerging Markets, a c-91d9-!!
18 2. DEBT CRISIS IN DEVELOPING COUNTRIES environment is needed as well. Furthermore the debtor has to share the economic and financial information about the region at that time and keeping the information transparent. Finally the creditor should make assumption about the risks of lending capital and should not expect a government bailout. Meaning, the creditor has to keep on improving its investment and risks management policy, including multi analysis of mic and fiscal policy. Financial institutes, especially the IMF, should provide international public goods, such as information on e.g. macroeconomic fundamentals, equity gaps, optimal debt structures, but also on financing for both sides who participate the sovereign debt restructuring. 2.5 Policy suggestion In order to improve the policy system and avoid further debt crises in developing countries some policy suggestion will be given out in this section. The Macroeconomic Policy and Development Division to developing countries provided some suggestions concerning this Consensus in the Asian and Pacific Region: Achieving Coherence and. 17 It is more advantageous for nations to consider debt finance a reliable source for developing country's financial infrastructure. In order to do so, one must first determine the four most essential elements that need to be put into consideration. (a) the country level; (b) the bilateral level; (c) the regional level; (d) the global level. 18 a. Country Level A macroeconomic resilience is highly dependent on its durability, which is assured by its sustainability. Attention should be paid to the monetary, fiscal and exchange!i 5!& Most result of this section comes from the article Implementing the Monterrey Consensus in the Asian and Pacific Region: Achieving Coherence and Consistency, Development Division,, 2005.!% Macroeconomic Policy and
19 2. DEBT CRISIS IN DEVELOPING COUNTRIES rate policy coherence as well as pervasiveness. Especially the development of the public sector s fiscal deficits should be eyed carefully. To assure a prosperous economic advancement, special caution is advised when considering the liberalization and deregulation of markets. Even though these factors may result in a higher productivity, they might have a negative effect on an economy without proper sequencing being performed. Another factor to be taken into consideration is the creation, promotion and or prosperity of the domestic as well as the government bond and derivative markets, the latter being needed for risk management. It is important to, as much as possible, neglect short-term borrowings and focus on building a surrounding benefitting long-term investment. When, however, deciding to venture into short-term debt, it is of utter importance to invest into an effective monitoring mechanism auditing the flow of capital. An inacceptable option however is investing into speculative short-term capital. These can be prevented by altering one's tax system and caps, as well as intelligently handling the debt by duration, by implementing maturity restrictions, when confronted with an overwhelming amount of short-term debt. Instead the creation of a safeguard against foreign contingencies is the key to sustainability. This can be done by monitoring the situation of major currencies and managing foreign reserve portfolios. Keeping a suitable level of foreign reserves is therefore a necessity. A government should also seek to, as often as possible, do unscheduled repayments of loans which will prevent overly high costs and interests as well as redistribute the existing high-cost debt, which are neglectable, without providing further expenses, such as penalties. This should however only be performed if these actions show no effect on the maturity rate of the debt. If foreign aid is available it is wise to utilize the money for the progression of one's economy and abbreviate the expenses of the capital. Again, precautions should be made. Systems that give out warning in advance about uncertain deals as well as sustainability analysis see to it that!'
20 2. DEBT CRISIS IN DEVELOPING COUNTRIES everything will remain bearable for the debtor. In order to keep track on these elements, sufficient computerized data on several sectors, such as the contingent liabilities of the public, the external and internal, as well as the public and private sectors, are of utter importance. These will help make up an effective institutional outline for an accurate and punctual provision of information. This means that that the country s economy has to become as transparent and adjacent to international standards as possible. Additionally good governance should cling to minimizing and downsizing loans while also effectively handling loans. An administration therefore has to support set ways of handling and organizing the coordination of debt management. b. Bilateral level Invest in the accession of concessional resources, including grants to emerging and developing economies, especially the ones of the Least Developed Countries and for those regions focusing on commodity-trade-dependent. c. Regional level Even if a general economic outline might already exist, it should nevertheless be questioned, challenged, improved and adjusted, thus enabling the provision of aid for those regions having severe troubles managing and obtaining capital on the international platform. A higher calibration of regional bond markets can be achieved by strengthening the standardization of issuance and settlement procedures. These will serve the purpose of stability. In order to do so, it is advised to better up the collaboration of different regions by participating in more summits and living up to pre-arranged agreements between the different countries in the World. This will improve capabilities of the debt management. Experiences and observations in the handling and managing of loans but also the risk management are important to advance into higher levels. Apart from this, do not neglect but instead find out more and more ways to efficiently operate the region s foreign exchange reserves. For this!)
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