Introduction to External Debt

Standards for the accounting of external debt stemmed initially from the efforts of the World Bank to collect detailed external debt data from all countries to which the World Bank lends. The Bank’s Debtor Reporting System Manual defines the data elements that are to be included in these reports, and these definitions form the basis of an international standard of external debt accounting.

Countries that would like to borrow from the World Bank must submit detailed information on their external long term debt – loans with an original maturity of more than one year. Reliable and timely debt information is needed to allow the Bank to know a borrowing country’s foreign debt situation, and to assess its creditworthiness and overall economic management. Borrowing countries must be current in reporting debt to the Bank before new loans can be submitted to the Board of Executive Directors for approval.

Historically, the Bank requested only summary information on debt from borrowing member countries. However, even for countries with a solid statistical basis, reports were not comparable between years, and it was especially hard to conduct inter-country comparisons. Thus, already in 1951 the Bank moved in the direction of collection loan-by-loan data rather than aggregated debt statistics.

Debt statistics by international organizations

The world Bank is not the only international organization that takes interest in monitoring external debt and related flows, thus, several international organizations have their own system, all designed to meet somewhat different needs.

• World Bank compiles a complete record of member borrowing countries' external long-term debt to evaluate their capacity to service future borrowing. Data on total external debt are estimated and presented in World Bank publications and databases.

• Bank for International Settlements (BIS) measures cross-border banking assets and liabilities of commercial banks to provide member central banks with data for meeting monetary and regulatory responsibilities. Following commercial accounting procedures, maturity of claims is on a time remaining to maturity basis, compared with an original maturity basis for the World Bank's DRS.

• International Monetary Fund (IMF) collects and presents Balance of Payments data, (that is, transactions between residents and foreigners) for member countries to provide both a basis for analyzing the international financial position of individual countries and for evaluating global trends. The balance of payments report includes figures on interest payments, loan disbursements, loan repayments and changes in liabilities, all of which are also covered by the DRS. Furthermore, the IMF collects and presents data on external financial assets and liabilities for those (relatively few) countries compiling the International Investment Position. In addition, the IMF compiles cross-border banking statistics, using a larger universe than the BIS.

• Organization for Economic Co-operation and Development (OECD) measures financial flows to developing countries, Eastern European countries and countries of the former Soviet Union. The aim is to record the contribution of countries that are members of the OECD's Development Assistance Committee, particularly with respect to concessional aid (Official Development Assistance). Data are compiled by donor countries, and some flows and stock data have the same coverage as the DRS. This makes comparison of debtor and creditor country data for the same transactions possible.