Approved by: Prepared by the staff of the International Asad Alam and Marcello Estevão IDA), Development Association (IDA)1 and the Vivek Arora and Geremia Palomba (IMF) International Monetary Fund (IMF). REPUBLIC OF MADAGASCAR: JOINT BANK-FUND DEBT SUSTAINABILITY ANALYSIS Risk of external debt distress Moderate2 Overall risk of debt distress Moderate Granularity in the risk rating Some space to absorb shocks Application of judgment No Madagascar, classified as having a medium debt carrying capacity, is still assessed at moderate risk of external debt distress with some space to absorb shocks and moderate risk of overall (external plus domestic) debt distress, in line with the assessment at the time of the program request. While no external public and publicly guaranteed (PPG) debt ratios breach their thresholds under the baseline, the present value (PV) of the debt-to-exports ratio, as well as both debt service ratios, breach their thresholds under an exports shock. Overall risk of debt distress remains moderate because of the moderate external PPG debt rating and possible materialization of liquidity pressures. The debt-service- to-revenue ratio could rise to 77 percent within the medium term under the baseline. The government has some space to scale-up investment, assuming ongoing efforts to improve domestic resource mobilization, continued and disproportionate reliance on concessional external financing, and progress in developing domestic bond markets and in the implementation of the governance reform agenda. The current assessment reflects an SDR allocation partly ceded by the central bank to the government as well as debt relief under the Debt Service Suspension Initiative (DSSI), supported by the G-20 and Paris Club, and the IMF’s Catastrophe Containment and Relief Trust (CCRT). Updates with respect to the economic impact of COVID-19 (both domestically and externally) and policy response are rapidly evolving and risks remain tilted to the downside, including the heightened risk of a materialization of contingent liabilities, which could lead to a faster than expected deterioration in external and public debt indicators. However, the distance to risk thresholds under current baseline projections suggests some space to absorb additional shocks. 1 >>> 1. The DSA includes public and publicly guaranteed external and domestic debt. Public and publicly guaranteed (PPG) debt comprises external and domestic debt in a fairly comprehensive manner, including: all external liabilities held by the central bank; all borrowing from the IMF; non-guaranteed domestic debts owed by state-owned enterprises (SOEs) in cases where the government has at least 50 percent of the shares (e.g., JIRAMA and Air Madagascar);3 domestic arrears (which are small at about 0.2 percent of GDP4); and direct guarantees provided by the central government (Text Table 1). Borrowing by local governments requires the authorization from the Ministry of Finance and no request for such authorization has been submitted to date. The measure of debt is on a gross basis and the currency criterion is used to distinguish between domestic and external debt. 5 The authorities publish data on a quarterly basis on both domestic and external debt. Reporting of debt statistics on public enterprises needs to be strengthened further, particularly by: (i) requiring all public enterprises to submit financial statements to the Ministry of Finance within legal limits; (ii) compiling information about public enterprises including debt statistics and monitoring-related risks; and (iii) publishing this information online in budget documents and fiscal risk statements. Subsectors of the public sector Sub-sectors covered 1 Central government X 2 State and local government X 3 Other elements in the general government 4 o/w: Social security fund 5 o/w: Extra budgetary funds (EBFs) 6 Guarantees (to other entities in the public and private sector, including to SOEs) X 7 Central bank (borrowed on behalf of the government) X 8 Non-guaranteed SOE debt X 2. Notwithstanding the comprehensive coverage of debt statistics, a contingent liability shock of 7.6 percent of GDP is simulated to account for potential liabilities. This reflects the default setting for PPPs and financial markets and a country-specific calibration for possible additional SOE liabilities (Text Table 2). • While estimated domestic debt for SOEs in which the government has a majority stake is incorporated in the baseline (i.e., debt of 2.2 percent of GDP for JIRAMA and of 2.2 percent for other SOEs),6 government recognition of some SOE short-term liabilities could also materialize (e.g., if large 2 >>> exchange rate fluctuations require that the government offers assistance in paying external suppliers). In addition, Air Madagascar has accumulated debt to external suppliers of US$29 million due to COVID- 19 related pressures, and there is ongoing litigation with amounts in dispute of EUR 48 million (previously expected to be EUR 20 million). Therefore, the default amount of 2 percent of GDP (which captures risks associated with JIRAMA and other SOEs) was adjusted upwards to reflect Air Madagascar’s potential liabilities (US$85 million or 0.6 percent of GDP), bringing the total to 2.6 percent of GDP. Relative to the previous DSA, future recapitalization of the postal savings scheme and the Madagascar Savings Fund (previously at about 1 percent of GDP) is no longer reckoned with given improved outlooks. • Exposures to PPPs are set to zero since estimates of the PPP-related capital stock fall below 3 percent of GDP, the threshold for the PPP shock to be activated (the stock related to the Ravinala Airport is estimated at only 1.8 percent of GDP). The authorities may develop more PPPs going forward, especially in the area of hydroelectric power, and the potential vulnerabilities associated with such PPPs could increase rapidly, at which point the PPP shock may be triggered. • The default value of 5 percent is programmed for financial markets. Most banks are financially solid with deposits exceeding loans and majority foreign shareholders. Dollarization of deposits and credits is not pronounced, and banks’ foreign assets generally exceed their foreign liabilities. 3. Madagascar is benefitting from an SDR allocation and recent debt service relief initiatives, which are covered in the DSA. The current assessment reflects the authorities’ recent receipt of SDR 234.2 million from the SDR allocation, without envisaging a conversion into hard currency; 7 it also reflects the authorities’ request for an extension of the Debt Service Suspension Initiative (DSSI), supported by the G-20 and Paris Club through June 2021 (approximately US$ 5.6 million or less than 0.1 percent of GDP). The current assessment furthermore reflects debt relief from the IMF under the Catastrophe Containment window of the IMF’s Catastrophe Containment and Relief Trust (CCRT) through April 2022 (subject to the availability of CCRT resources for the next 18 months and amounting to US$ 32 million or 0.2 percent of GDP). In 2021, the World Bank delivered an emergency budget support operation amounting to US$75 million and a total of US$272 million in lending, including US$197 million for project financing with an 3 >>> increased focus on the South of Madagascar where a large-scale humanitarian crisis is unfolding. The disbursement of IDA lending is assumed to moderate in coming years to an annual average of US$210 million by 2024, considering a disbursement rate of somewhat less than 20 percent of outstanding commitments per annum. 4. The 2020 PPG debt ratio is projected to have reached 49.0 percent, up over 10 percent of GDP relative to 2019. The increase is owed to a large extent to an increase in the primary deficit and a decline in GDP growth due to the COVID-19 pandemic, occurring on the back of relative stability in this ratio since 2014 (see Text Figure 1 and Table 2). Domestic and external public debt have increased by 0.8 and 9.7 percent of GDP, respectively. External sources continue to account for almost three-quarters of PPG debt, with almost 60 percent of external debt owed to multilateral sources including the World Bank, African Development Bank, and IMF. 60 50 40 30 20 10 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Gross Nominal PPG Debt (in percent of GDP) o/w External 5. The COVID-19 pandemic continues to weigh heavily on Madagascar’s economic prospects in the near and medium term, causing scarring. The contraction of real GDP in 2020 by about 7 percent implies a downward revision of almost 3 percentage points compared to the previous projection made at the time of the 2021 ECF request (see Table 3). 8 Staff expects a partial recovery in 2021 (+3.5 percent), driven by a broad-based resumption of economic activity in the manufacturing, mining, and service sectors (excluding tourism). Output per capita will surpass its 2019 level only in 2024-25 and remain well below 4 >>> pre-shock forecast levels through the medium term. Staff expects a gradual decline in fiscal imbalances during the medium-term and a slow increase in public debt. Based on a gradual tax revenue recovery and an increase in capital spending, the primary deficit would remain large in 2021 (at 5.6 percent of GDP), gradually improving over the medium term. Under these assumptions, public debt would stabilize at around 50 percent of GDP over the medium term, similar to the level implied by the DSA projections at the time of the ECF request. • Growth is expected to peak over the medium-term at 5.4 percent in 2022, with some deceleration thereafter. In 2030, it is expected to hit 5.0 percent. Estimates are in line with the prior forecast (Text Table 3). Growth will be supported by a scale-up of public investment (e.g., transportation and energy infrastructure, health, and education) and good prospects for private investment with the implementation of the current governance reform agenda (e.g., hydroelectric projects, canal construction, and tourism) • Both government and private investment rates over the medium term were revised slightly upward relative to the prior DSA (Figure 4).9 • 2020 inflation estimates met their expectation but rates are expected to be somewhat higher than prior projections over the forecast horizon (hovering around 5.5 percent per year). • The non-interest current account deficit was lower than expected in 2020 (by about 1 percent of GDP), owing to higher net current transfers, but has been revised up by 0.4 percent in 2021 reflecting the ongoing effects of the COVID-19 pandemic on tourism and external demand (with downward pressure on vanilla prices and metals volumes). As in prior forecasts, the deficit is expected to shrink over the medium term. • The primary deficit is expected to be lower than prior estimates in 2022 and 2023; over the medium term, projections are in line with the ECF request. Primary deficits are expected to be kept in check going forward, reflecting gains in revenue mobilization including: (i) continued streamlining of VAT and free-zone companies’ exemptions; (ii) improvements to the taxpayers’ database; (iii) strengthening controls in customs administration; (iv) broader use of electronic tax declarations and payments and the digitalization of related procedures; and (v) continued clearance of tax arrears. 6. Financing assumptions broadly reflect the authorities’ 2021-23 Medium Term Debt Strategy but are conservative with respect to external financing. One of the main targets of the strategy for end- 2023 includes a limit on the share of external public debt relative to total public debt that should not exceed a maximum of 86 percent (it is estimated at around 75 percent in 2020, where it is expected to remain over the projection horizon).10 The financing assumptions of this sustainability analysis deviate from the medium- term debt strategy on domestic financing due to the more conservative approach on the volumes of available budget support and externally-financed investment projects.11 The resulting increased reliance on 5 >>> domestic financing along with SOE debt (recall ¶1) gives rise to higher financing costs. To mitigate the potential liquidity pressures, the authorities will continue to develop the domestic debt market and will prioritize securing external financing on concessional terms (including grants), which would keep debt servicing costs at manageable levels and is in line with their debt strategy. 12 External commercial borrowing is expected to slowly scale back up from 2031 onwards as Madagascar’s fundamentals strengthen. 2020 2025 2030 (In percent of GDP, unless otherwise indicated) Aug 2020 April 2021 Current Aug 2020 April 2021 Current Aug 2020 April 2021 Current Real GDP growth (percent) -1.0 -4.2 -6.1 5.5 5.0 5.0 5.2 5.0 5.0 Inflation, GDP Deflator (percent) 4.6 4.2 4.2 5.4 5.5 5.9 5.2 5.2 5.5 Non-interest CA deficit 3.1 6.1 4.8 2.6 3.2 3.0 3.3 3.6 3.3 Primary deficit 4.3 3.5 3.6 3.4 2.6 2.6 2.8 2.9 2.9 Sources: Malagasy authorities, World Bank and IMF. 7. Realism tools suggest that our assumptions are in line with reasonable bounds. Across a range of realism checks (Figure 4) that point to the projected 3-year adjustment for the primary balance and public investment plans, underlying assumptions appear to not raise any flags. Projected growth in 2021 is below the range of potential growth paths under various fiscal multipliers; however, as for all countries, the magnitude and multifaceted effects of the COVID-19 pandemic are not well-captured by that aspect of the analysis. While the bottom-right panel of Figure 4 may give the impression of over-optimism in growth projections, the picture is distorted by the sharp pandemic-induced swings in real GDP growth—rendering comparisons with Madagascar’s history and the previous DSA (which averaged over 2020-24) less relevant. 8. The outlook remains highly uncertain with risks tilted to the downside. The main risks pertain to reoccurring COVID-19 outbreaks linked to the arrival of new variants in a context of insufficient vaccination, negatively impacting trade and delaying the recovery in tourism; rising oil prices amid a recovery in some trading partners with bouts of volatility weighing on government transfers; disruptions in supply chain; and natural disasters (mainly cyclones for the north and droughts for the south), resulting in losses in lives, livelihoods, and physical capital. Protracted weak budget execution in health and education spending and reversals in the governance reform agenda could also result in social and political volatility especially ahead of the 2023 presidential elections, while weak investment implementation capacity could curtail growth. All downside risks would have negative implications for the debt sustainability of the country. Upside potential includes the unlocking of large-scale projects in the energy sector and extractive industry, which could improve the growth potential and attract additional investment. 6 >>> 9. Over the medium term, scaling up of foreign-financed public investment drives an increase in debt compared with the 5-year historical average (Figure 3). Relative to the period between 2014 to 2019, external and total public debt to GDP ratios are expected to rise faster (by an additional 10 and 11 percentage points, respectively) over the medium term, reflecting pandemic-related borrowing, a gradual nominal increase in borrowing costs, and higher capital investments leading to increasing deficits. Growth (albeit weaker than pre-pandemic averages) and trends in prices and the exchange rate help offset such factors (the framework assumes some real appreciation over the medium term driven by the Balassa- Samuelson effect). 10. Public and private capital spending are revised upward, but average 5-year real growth is nonetheless expected to fall relative to prior forecasts due the pandemic’s effects (Figure 4). Post- pandemic, the authorities still plan to scale up infrastructure spending accompanied with institutional reforms to better prioritize projects and improve execution rates. Given Madagascar’s large infrastructure needs, the conservative assumed baseline fiscal multiplier —flagged in the Realism Tools (Figure 4)— suggests that growth may surprise to the upside. While private investment is estimated to have dropped precipitously in 2020, it is forecasted to rise thereafter as the government reform agenda unfolds and public investment helps crowd-in additional private investment. Therefore, the projected contribution of public investment to real GDP growth over the next 5 years is expected to be higher than suggested by the previous DSA, despite the fall in the 5-year average projected growth due to the pandemic. 11. Madagascar’s debt carrying capacity continues to be classified as medium, although its composite indicator score remains near the cutoff for weak carrying capacity. Based on a calculation of a composite indicator reflecting factors such as the CPIA index, real growth rates, reserve coverage, remittances, and world growth, Madagascar continues to be rated as having medium debt-carrying capacity (Text Table 4). The CI score is at 2.82 and is estimated using October 2021 WEO and 2020 CPIA WB. Text Figure 2 highlights the differences in composite indicator cut-off values and the corresponding external debt burden thresholds and public debt benchmarks at different debt-carrying capacities. 12. Stress tests generally follow standardized settings, with one exception —the growth shock—and include tailored shocks for natural disasters and commodity export prices. The contingent liability stress test is based on the quantification of potential contingent liabilities (including SOE- related concerns that extend beyond the baseline SOE debt coverage as detailed in ¶2), and the standardized stress tests apply the default settings. However, the growth test continues to warrant adjustment, as done in prior DSAs. Given the high levels of uncertainty and with risks tilted heavily towards the downside, the growth shock simulates a two standard deviation shock instead of one (i.e., a reduction of 3.4 percentage points).13 Madagascar also remains exposed and vulnerable to natural disasters, like cyclones and droughts, whose impact is captured by the natural disaster shock. 14 Since commodities (e.g., 7 >>> vanilla, nickel, cobalt) comprise about half of goods and services exports, we also include a commodity shock stress test. The standardized settings of this stress test are customized to better reflect Madagascar’s country-specific circumstances. In particular, we assume an illustrative fall in prices equivalent to 10 percent of commodity exports, with no mitigating effect on imports, alongside declines in real GDP growth of 0.5 percent and in fiscal revenue of 0.25 percent of GDP. The shock occurs in 2021 and unwinds gradually by 2030. Residual financing is assumed to be at less favorable terms than under the baseline. For external debt, the interest rate and maturities are assumed to be 25 percent higher and lower, respectively. For overall public debt stress tests, limited recourse to domestic sources in the short run prompts us to assume that 65 percent of additional financing would come from external sources and that the interest rate for residual domestic financing would be 100 basis points above baseline.15 Components Coefficients (A) 10-year average values CI Score components Contribution of (B) (A*B) = (C) components CPIA 0.385 3.240 1.25 44% Real growth rate (in percent) 2.719 3.218 0.09 3% Import coverage of reserves (in percent) 4.052 43.475 1.76 63% Import coverage of reserves^2 (in percent) -3.990 18.901 -0.75 -27% Remittances (in percent) 2.022 2.521 0.05 2% World economic growth (in percent) 13.520 3.137 0.42 15% CI Score 2.82 100% CI rating Medium Note: 10-year average values are based on an average over 2016-2025. Cut-off values Weak CI < 2.69 Medium 2.69 ≤ CI ≤ 3.05 Strong CI > 3.05 EXTERNAL debt burden thresholds Weak Medium Strong PV of debt in % of Exports 140 180 240 GDP 30 40 55 Debt service in % of Exports 10 15 21 Revenue 14 18 23 TOTAL public debt benchmark PV of total public debt in percent of GDP 35 55 70 8 >>> 13. Under the baseline, rising external PPG debt remains well below thresholds (Table 1, Figure 1). External PPG debt is projected to rise from just over 36 percent of GDP in 2020 to about 41 percent of GDP in 2031 before reaching 45.4 percent of GDP in 2041 (versus 48 percent in the prior DSA). Debt- creating flows include sizable current account deficits over the medium term (owing to declines in the trade balance and falling inflows from official transfers) and less advantageous endogenous debt dynamics (due to higher interest rates).16 In PV terms, external PPG debt is projected to rise from 20.5 percent of GDP in 2020 to 26.9 percent of GDP in 2031 and 32.3 percent in 2041. The long-term rise in PV terms is the result of our assumption that borrowing will become less concessional over time, as well as sizeable gross financing needs. Together with expiring grace periods for some loans (including prior IMF financing), this explains why debt service indicators rise substantially off their low base. For example, the projected debt- service-to-exports ratio rises gradually from 4 percent in 2020 to around 8 percent in 2041. Nonetheless, all indicators remain well below the applicable thresholds for Madagascar (Figure 1). 14. The exports shock scenario gives rise to three breaches of the medium-carrying capacity external thresholds applicable to Madagascar within the forecast horizon (Table 3; Figure 1). Under the exports shock, the applicable thresholds for Madagascar’s medium debt -carrying capacity is breached for the PV of debt-to-exports in 2022; the same holds for the two debt service ratios towards the end of the applicable horizon. Under the same shock, the PV of external-debt-to-GDP rises to 37 percent of GDP, just below the threshold of 40 percent.17 15. The granularity assessment suggests that Madagascar has some space to absorb shocks. All baseline debt indicators remain well below their thresholds under a median composite debt shock, but two indicators (PV of external PPG debt-to-GDP and debt-service-to-revenue) would exceed them under a more extreme scenario. This suggests that Madagascar has some space to absorb shocks (Figure 5). 16. External private sector debt is not assessed to pose a significant threat to external sustainability (Table 1). The risks associated with the levels of external private debt, which was recently revised upward, appear contained. 18 Around 80 percent of the private debt is associated with the mining sector, whose income is in foreign currency (providing it with a natural hedge); the majority of its debt is medium-to-long term; and a sizeable portion of its debt is with its affiliated headquarters or global groups. Moreover, much of mining companies’ loans do not bear large interest payments and many of the debt instruments are not required to be fully reimbursed to parent companies until liquidation. Private external debt is projected to rapidly decline as the loans related to major mining projects are repaid, with the stock of external private debt falling by over half by 2030. Still, such debts will be closely monitored going forward for potential risks and, in line with recent DSAs, we have conservatively assumed that more borrowing 9 >>> would be needed to sustain mining exports towards the end of the DSA horizon, contributing to private debt equivalent to about 5 percent of GDP in 2040. 17. Under the baseline, total public debt levels are projected to remain well below the benchmark (Table 2). Total public debt (both external and domestic) is projected to remain at around 50 percent of GDP over the medium-term horizon, increasing to just over 55 percent by 2041 (versus 59 percent in the prior DSA). In PV terms, total public debt/GDP is expected to rise from 33 percent in 2020 to 38 percent in 2031 and 42 percent in 2041, below the benchmark of 55 percent for medium-capacity countries. The projected primary deficit is higher than previously assumed in 2021 (5.6 vs. 4.9 in the prior DSA), but lower in several years over the medium-term horizon. Ongoing revenue mobilization and PFM reforms are expected to continue; this is partly reflected in the decrease in the PV of debt-to-revenue-and- grants compared to a rise in PV of debt-to-GDP since the share of tax revenue in GDP is projected to rise in the medium term. 18. The rise in the PPG debt-service-to-revenue-and-grants ratio could introduce liquidity risks. The PPG debt-service-to-revenue-and-grants ratio is forecasted to peak at 72 percent by 2026 and reflects the repayment of prior IMF loans and conservative financing assumptions in the baseline framework that place a high reliance on domestic financing during the program horizon. Although no explicit benchmark exists for this ratio, the projections point to potential debt service and liquidity difficulties within the medium term. The authorities should prioritize securing ongoing external concessional financing, as done in recent years and in line with their medium-term debt strategy, as well as continuing to accelerate domestic debt market development to bring down borrowing costs. If strong donor support continues, liquidity risks can be mitigated. 19. Total public debt is vulnerable to commodity price and growth shocks and such stress tests lead to a breach of its benchmark (Figure 2; Table 4). Under both the growth shock and the commodity price shock, the PV of debt to GDP breaches 80 percent of GDP (well above the 55 percent benchmark for medium capacity countries like Madagascar). 20. Madagascar is classified as being at moderate risk of external debt distress. Under the baseline, no thresholds are breached. However, an export shock leads to a breach in the PV of debt-to- exports threshold. A granularity assessment suggests that Madagascar has some space to absorb shocks. 21. The overall assessment is that Madagascar is at moderate risk of overall debt distress . The PPG external debt has a moderate risk signal, while the PV of debt-to-GDP indicator breaches its benchmark following a growth or commodity price shock. Moreover, liquidity pressures could arise if more concessional external financing is not secured or if domestic debt market development is delayed, including under the baseline and under a natural disaster shock. Both the overall and external debt distress risk assessments are in line with the authorities’ most recent April 2021 debt sustainability analysis. 22. Conditional on the mobilization of continued concessional external financing, this assessment is supportive of Madagascar’s current plans to sca le up its borrowing. A steeper-than- expected increase in borrowing in line with a rapid execution of the government’s ambitious medium -term 10 >>> borrowing plan would carry significant risks, especially in the absence of securing additional external concessional financing. Also, poorly selected public investments and less favorable financing terms could affect debt vulnerability. The state of SOE liabilities could also influence future assessments. Less grant financing and a switch to a less concessional mix of borrowing would raise the debt burden, especially when measured in PV terms, as well as debt service risks . The domestic debt market should continue to be developed in order to lower borrowing costs. Finally, external private debt could increase in less ringfenced sectors (e.g., banking) that would increase the vulnerabilities associated with such debt. As mentioned in prior DSAs, in addition to debt sustainability, other crucial considerations for the pace of borrowing include the economy’s vulnerability to terms-of-trade shocks, natural disasters, general absorptive capacity, public financial management, and public investment management. 23. Structural reforms and improvements in debt coverage statistics remain paramount, especially in light of the CI score, which is near the weak carrying capacity threshold. Efforts to enhance external statistics could improve private debt coverage. Also, Madagascar’s ability to preserve and build its debt-carrying capacity rely on strengthening the capacity and quality of its institutions, including on the Public Financial Management-front where identification and mitigation of fiscal risks (relating to fuel subsidies, SOEs, PPPs, and pensions), the transparency and accountability of public sector institutions, and more effective and rules-based management of public investment within a credible medium-term expenditure framework are key. If Madagascar’s CI score were to drop by more than 0.13 points (below 2.69), it would be assessed to have weak debt-carrying capacity. In that event, the baseline PV of public debt-to-GDP would likely be pushed above its benchmark leading to a “high overall risk of debt distress” - rating. 24. The authorities agreed that Madagascar remains at moderate risk of debt distress. They acknowledged the need to mobilize more revenue and strengthen public financial management, both to mitigate fiscal risks and to improve their ability to weather shocks. They emphasized their goal to increase public investment, potentially financed by larger external debt, but remain committed to prioritize concessional financing to safeguard debt sustainability 11 >>> Actual Projections Average 8/ 2018 2019 2020 2021 2022 2023 2024 2025 2026 2031 2041 Historical Projections External debt (nominal) 1/ 70.5 67.0 80.5 76.8 73.3 67.8 64.9 61.9 59.5 53.4 50.3 50.7 61.9 Definition of external/domestic debt Currency-based of which: public and publicly guaranteed (PPG) 26.8 27.0 36.7 38.6 39.5 39.0 39.2 39.1 39.2 41.4 45.4 25.8 39.6 Is there a material difference between the No two criteria? Change in external debt 20.3 -3.5 13.4 -3.7 -3.5 -5.5 -2.9 -3.0 -2.4 -0.6 -2.0 Identified net debt-creating flows -6.5 -2.1 8.8 1.3 -0.7 -0.9 -1.6 -1.5 -1.1 -1.4 -2.9 -1.6 -1.0 Non-interest current account deficit -1.2 1.8 4.9 4.9 4.5 4.0 3.5 3.4 3.6 2.6 0.5 2.6 3.5 Deficit in balance of goods and services 3.5 4.7 9.0 10.2 8.1 8.0 7.0 7.1 7.3 6.4 4.5 5.6 7.4 Exports 31.7 28.7 19.7 22.9 25.3 26.0 26.4 27.0 27.2 27.8 29.1 Debt Accumulation Imports 35.1 33.4 28.7 33.0 33.4 34.0 33.4 34.0 34.5 34.2 33.7 Net current transfers (negative = inflow) -7.1 -5.7 -6.5 -6.9 -5.5 -5.8 -5.7 -5.7 -5.7 -5.3 -4.8 -5.6 -5.7 4.5 50 of which: official -2.6 -3.1 -2.5 -1.7 -2.1 -2.0 -1.2 -0.9 -0.8 -0.6 -0.1 4.0 Other current account flows (negative = net inflow) 2.4 2.7 2.4 1.6 1.9 1.8 2.2 2.1 2.0 1.5 0.8 2.6 1.8 45 Net FDI (negative = inflow) -3.6 -2.6 -1.9 -1.5 -1.9 -2.1 -2.5 -2.6 -2.5 -2.5 -2.5 -3.9 -2.3 3.5 Endogenous debt dynamics 2/ -1.6 -1.2 5.9 -2.0 -3.3 -2.8 -2.5 -2.3 -2.1 -1.6 -0.9 3.0 Contribution from nominal interest rate 0.5 0.5 0.5 0.6 0.5 0.6 0.6 0.7 0.7 0.9 1.3 40 Contribution from real GDP growth -1.5 -3.0 5.2 -2.6 -3.8 -3.4 -3.2 -3.0 -2.9 -2.5 -2.2 2.5 Contribution from price and exchange rate changes -0.6 1.3 0.2 … … … … … … … … Residual 3/ 26.7 -1.4 4.6 -5.0 -2.8 -4.5 -1.3 -1.5 -1.3 0.9 0.8 7.1 -1.5 2.0 35 of which: exceptional financing 0.0 0.0 -0.1 -0.2 0.1 0.0 0.0 0.0 0.0 0.0 0.0 1.5 Sustainability indicators 1.0 30 PV of PPG external debt-to-GDP ratio ... ... 20.5 21.4 23.2 23.1 23.5 23.7 24.0 26.9 32.3 0.5 PV of PPG external debt-to-exports ratio ... ... 104.3 93.6 91.6 88.6 89.0 87.8 88.3 96.9 110.9 Total external debt service-to-exports ratio ... ... 207.9 199.3 194.9 185.2 182.4 178.0 177.7 193.6 217.8 0.0 25 PPG debt service-to-exports ratio 2.9 11.1 4.2 4.2 4.4 5.2 5.0 5.3 5.6 5.7 7.9 2021 2023 2025 2027 2029 2031 PPG debt service-to-revenue ratio 8.9 29.4 8.4 9.0 9.4 10.9 10.2 10.8 11.2 11.4 15.4 Gross external financing need (Million of U.S. dollars) -488.0 699.6 1036.8 933.9 1297.0 1300.4 899.4 943.8 1044.7 1013.7 895.5 Debt Accumulation Grant-equivalent financing (% of GDP) Key macroeconomic assumptions Grant element of new borrowing (% right scale) Real GDP growth (in percent) 3.2 4.4 -7.1 3.5 5.4 5.1 5.0 5.0 5.0 5.0 4.5 2.2 4.9 GDP deflator in US dollar terms (change in percent) 1.2 -1.8 -0.3 4.9 1.9 4.8 3.1 2.8 2.8 2.8 2.5 0.8 3.1 Effective interest rate (percent) 4/ 1.1 0.7 0.7 0.8 0.8 0.9 1.0 1.1 1.3 1.9 2.7 0.9 1.3 External debt (nominal) 1/ Growth of exports of G&S (US dollar terms, in percent) 7.0 -7.2 -36.4 26.3 18.6 13.3 9.8 10.3 8.9 8.2 7.9 3.4 11.7 of which: Private Growth of imports of G&S (US dollar terms, in percent) 7.1 -2.5 -20.5 25.3 8.4 12.3 6.2 10.2 9.3 7.5 7.0 1.7 10.0 90 Grant element of new public sector borrowing (in percent) ... ... ... 45.0 42.5 42.4 41.5 40.4 39.4 35.7 33.6 ... 39.4 80 Government revenues (excluding grants, in percent of GDP) 10.5 10.8 9.9 10.8 11.9 12.5 12.9 13.3 13.5 13.9 14.8 9.3 13.1 Aid flows (in Million of US dollars) 5/ 597.5 714.1 622.9 702.0 746.0 828.1 843.7 812.5 944.8 1356.2 1785.7 70 Grant-equivalent financing (in percent of GDP) 6/ ... ... ... 3.8 4.2 3.7 2.9 2.4 2.4 2.3 1.2 ... 2.9 60 Grant-equivalent financing (in percent of external financing) 6/ ... ... ... 59.7 58.9 61.5 54.6 51.4 49.2 42.9 36.3 ... 51.3 Nominal GDP (Million of US dollars) 13,760 14,105 13,056 14,184 15,226 16,774 18,167 19,610 21,158 30,940 64,195 50 Nominal dollar GDP growth 4.4 2.5 -7.4 8.6 7.3 10.2 8.3 7.9 7.9 7.9 7.1 3.0 8.2 40 Memorandum items: 30 PV of external debt 7/ ... ... 64.3 59.6 57.0 51.9 49.2 46.5 44.3 39.0 37.3 20 In percent of exports ... ... 326.4 260.3 225.3 199.6 186.4 172.6 162.9 140.2 127.9 Total external debt service-to-exports ratio 4.1 20.3 25.4 14.2 23.4 22.5 15.2 14.7 14.2 11.4 11.5 10 PV of PPG external debt (in Million of US dollars) 2681.5 3039.5 3526.6 3867.6 4266.7 4639.9 5083.0 8335.8 20739.5 0 (PVt-PVt-1)/GDPt-1 (in percent) 2.7 3.4 2.2 2.4 2.1 2.3 2.9 1.4 2021 2023 2025 2027 2029 2031 Non-interest current account deficit that stabilizes debt ratio -21.5 5.2 -8.6 8.5 8.0 9.5 6.4 6.4 6.0 3.2 2.6 Sources: Country authorities; and staff estimates and projections. 0 1/ Includes both public and private sector external debt. 2/ Derived as [r - g - ρ(1+g)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, and ρ = growth rate of GDP deflator in U.S. dollar terms. 3/ Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes. 4/ Current-year interest payments divided by previous period debt stock. 5/ Defined as grants, concessional loans, and debt relief. 6/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt). 7/ Assumes that PV of private sector debt is equivalent to its face value. 8/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 12 >>> Actual Projections Average 6/ 2018 2019 2020 2021 2022 2023 2024 2025 2026 2031 2041 Historical Projections Public sector debt 1/ 40.4 38.5 49.0 50.3 50.4 49.7 49.8 49.8 49.9 52.0 55.0 38.7 50.5 Definition of external/domestic of which: external debt 26.8 27.0 36.7 38.6 39.5 39.0 39.2 39.1 39.2 41.4 45.4 25.8 39.6 Currency-based debt of which: local-currency denominated Change in public sector debt 0.3 -1.9 10.5 1.3 0.1 -0.7 0.1 -0.1 0.2 0.4 -1.7 Is there a material difference Identified debt-creating flows -1.7 -2.5 6.5 3.5 1.6 0.0 0.7 0.2 0.6 0.8 0.7 0.1 0.9 No between the two criteria? Primary deficit 0.6 0.7 3.2 5.6 4.9 3.0 3.0 2.4 2.7 3.1 2.6 1.6 3.2 Revenue and grants 13.0 13.9 12.4 12.4 13.9 14.5 14.1 14.1 14.3 14.5 15.0 11.4 14.2 of which: grants 2.5 3.1 2.5 1.7 2.1 2.0 1.2 0.9 0.8 0.6 0.1 Public sector debt 1/ Primary (noninterest) expenditure 13.6 14.7 15.6 18.0 18.8 17.4 17.1 16.5 17.0 17.6 17.6 13.0 17.4 Automatic debt dynamics -2.2 -2.7 3.0 -2.5 -3.6 -3.4 -2.7 -2.6 -2.5 -2.6 -2.3 of which: local-currency denominated Contribution from interest rate/growth differential -2.3 -2.7 2.0 -2.2 -2.3 -2.3 -2.3 -2.2 -2.2 -2.3 -2.2 of which: foreign-currency denominated of which: contribution from average real interest rate -1.1 -1.0 -1.0 -0.5 0.3 0.1 0.1 0.1 0.2 0.2 0.3 of which: contribution from real GDP growth -1.2 -1.7 3.0 -1.7 -2.6 -2.5 -2.4 -2.4 -2.4 -2.5 -2.5 60 Contribution from real exchange rate depreciation 0.1 0.0 1.0 ... ... ... ... ... ... ... ... 50 Other identified debt-creating flows 0.0 -0.5 0.2 0.4 0.4 0.5 0.4 0.4 0.4 0.3 0.4 0.0 0.4 Privatization receipts (negative) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 40 Recognition of contingent liabilities (e.g., bank recapitalization) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 30 Debt relief (HIPC and other) 0.0 0.0 0.0 -0.1 -0.1 0.0 0.0 0.0 0.0 0.0 0.0 Other debt creating or reducing flow (please specify) 0.0 -0.5 0.2 0.5 0.5 0.5 0.4 0.4 0.4 0.3 0.4 20 Residual 1.9 0.6 4.0 -2.4 -2.8 -1.8 -1.0 -0.6 -0.8 -0.7 -2.5 1.6 -1.0 10 Sustainability indicators 0 PV of public debt-to-GDP ratio 2/ ... ... 33.0 33.8 34.3 34.1 34.4 34.6 35.0 37.8 42.2 2021 2023 2025 2027 2029 2031 PV of public debt-to-revenue and grants ratio … … 266.3 271.8 246.0 235.5 244.1 244.9 244.3 260.2 282.2 Debt service-to-revenue and grants ratio 3/ 6.4 37.5 6.7 41.5 51.0 63.0 67.2 71.5 72.4 67.4 66.4 Gross financing need 4/ 1.4 5.5 4.3 11.3 12.4 12.8 13.2 13.0 13.5 13.1 12.9 of which: held by residents of which: held by non-residents Key macroeconomic and fiscal assumptions 1 Real GDP growth (in percent) 3.2 4.4 -7.1 3.5 5.4 5.1 5.0 5.0 5.0 5.0 4.5 2.2 4.9 1 Average nominal interest rate on external debt (in percent) 1.1 1.0 0.9 0.8 0.8 0.8 0.9 1.0 1.0 1.3 1.6 0.8 1.0 1 Average real interest rate on domestic debt (in percent) -7.7 -6.1 -4.2 -1.5 2.0 3.4 4.3 4.7 4.8 4.4 5.5 -6.3 3.7 1 1 Real exchange rate depreciation (in percent, + indicates depreciation) 0.2 0.0 3.5 … ... ... ... ... ... ... ... 1.1 ... 1 n.a. Inflation rate (GDP deflator, in percent) 8.3 6.5 4.4 6.1 6.1 6.9 5.6 5.4 5.3 5.0 4.6 6.8 5.5 0 Growth of real primary spending (deflated by GDP deflator, in percent) -1.6 12.7 -1.1 19.5 9.9 -2.6 3.0 1.4 8.2 6.0 3.2 5.4 6.2 0 0 Primary deficit that stabilizes the debt-to-GDP ratio 5/ 0.3 2.6 -7.3 4.2 4.8 3.7 2.9 2.4 2.5 2.6 4.3 -1.5 2.9 0 PV of contingent liabilities (not included in public sector debt) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0 2021 2023 2025 2027 2029 2031 Sources: Country authorities; and staff estimates and projections. 1/ Coverage of debt: The central, state, and local governments, central bank, government-guaranteed debt, non-guaranteed SOE debt . Definition of external debt is Currency-based. 2/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rates projections. 3/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt. 4/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows. 5/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question. 6/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 13 >>> PV of debt-to GDP ratio PV of debt-to-exports ratio 45 300 40 250 35 30 200 25 150 20 15 100 10 50 5 Most extreme shock: Exports Most extreme shock: Exports 0 0 2021 2023 2025 2027 2029 2031 2021 2023 2025 2027 2029 2031 Debt service-to-exports ratio Debt service-to-revenue ratio 18 25 16 20 14 12 15 10 8 10 6 4 5 2 Most extreme shock: Exports Most extreme shock: Exports 0 0 2021 2023 2025 2027 2029 2031 2021 2023 2025 2027 2029 2031 Baseline Historical scenario Most extreme shock 1/ Threshold Customization of Default Settings Borrowing assumptions on additional financing needs resulting from the stress tests* Size Interactions Default User defined Shares of marginal debt Standardized Tests Yes No External PPG MLT debt 100% Tailored Stress Terms of marginal debt Combined CL Yes Avg. nominal interest rate on new borrowing in USD 1.3% 1.7% Natural disaster No No USD Discount rate 5.0% 5.0% Commodity price Yes Yes Avg. maturity (incl. grace period) 28 21 Market financing n.a. n.a. Avg. grace period 4 4 Note: "Yes" indicates any change to the size or interactions of * Note: All the additional financing needs generated by the shocks under the stress tests are assumed the default settings for the stress tests. "n.a." indicates that the to be covered by PPG external MLT debt in the external DSA. Default terms of marginal debt are stress test does not apply. based on baseline 10-year projections. Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2031. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 2/ The magnitude of shocks used for the commodity price shock stress test are based on the commodity prices outlook prepared by the IMF research department. 14 >>> WORLD BANK GROUP PV of Debt-to-GDP Ratio 90 80 70 60 50 40 30 Most extreme shock: Growth 20 10 0 2021 2023 2025 2027 2029 2031 PV of Debt-to-Revenue Ratio Debt Service-to-Revenue Ratio 600 140 120 500 100 400 80 300 60 200 40 100 Most extreme shock: Growth Most extreme shock: Growth 20 0 0 2021 2023 2025 2027 2029 2031 2021 2023 2025 2027 2029 2031 Baseline Most extreme shock 1/ TOTAL public debt benchmark Historical scenario Borrowing assumptions on additional financing needs resulting from the stress Default User defined tests* Shares of marginal debt External PPG medium and long-term 34% 65% Domestic medium and long-term 21% 15% Domestic short-term 45% 20% Terms of marginal debt External MLT debt Avg. nominal interest rate on new borrowing in USD 1.3% 1.7% Avg. maturity (incl. grace period) 28 21 Avg. grace period 4 4 Domestic MLT debt Avg. real interest rate on new borrowing 4.9% 8.9% Avg. maturity (incl. grace period) 2 2 Avg. grace period 1 1 Domestic short-term debt Avg. real interest rate 3.3% 3.5% * Note: The public DSA allows for domestic financing to cover the additional financing needs generated by the shocks under the stress tests in the public DSA. Default terms of marginal debt are based on baseline 10-year projections. Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2031. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 15 >>> Projections 1/ 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 PV of debt-to GDP ratio Baseline 21 23 23 23 24 24 24 25 26 26 27 A. Alternative Scenarios A1. Key variables at their historical averages in 2021-2031 2/ 21 21 21 21 20 20 20 21 22 23 24 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A B. Bound Tests B1. Real GDP growth 21 27 32 32 32 33 33 34 35 36 37 B2. Primary balance 21 23 24 24 24 25 25 26 26 27 27 B3. Exports 21 29 38 38 37 37 37 36 36 36 36 B4. Other flows 3/ 21 25 26 27 27 27 27 27 28 28 29 B5. Depreciation 21 29 26 27 27 28 28 29 30 31 32 B6. Combination of B1-B5 21 31 33 34 34 34 34 34 34 35 35 C. Tailored Tests C1. Combined contingent liabilities 21 27 27 28 28 28 28 29 29 30 31 C2. Natural disaster 21 28 29 30 30 30 31 31 32 32 33 C3. Commodity price 21 24 24 25 25 25 25 26 26 27 27 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 40 40 40 40 40 40 40 40 40 40 40 PV of debt-to-exports ratio Baseline 94 92 89 89 88 88 89 90 92 94 97 A. Alternative Scenarios A1. Key variables at their historical averages in 2021-2031 2/ 94 85 79 78 76 74 74 75 78 82 88 0 94 92 89 89 88 88 89 90 92 94 97 B. Bound Tests B1. Real GDP growth 94 92 89 89 88 88 89 90 92 94 97 B2. Primary balance 94 93 91 92 90 91 91 93 94 96 99 B3. Exports 94 153 252 248 241 239 235 230 227 224 223 B4. Other flows 3/ 94 98 101 101 99 99 99 99 100 101 103 B5. Depreciation 94 92 80 81 80 81 82 84 86 89 92 B6. Combination of B1-B5 94 139 106 159 156 156 154 154 155 156 158 C. Tailored Tests C1. Combined contingent liabilities 94 105 103 105 103 103 104 104 106 108 110 C2. Natural disaster 94 112 112 114 113 113 114 115 117 119 121 C3. Commodity price 94 96 95 95 93 93 94 94 95 97 99 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 180 180 180 180 180 180 180 180 180 180 180 Debt service-to-exports ratio Baseline 4 4 5 5 5 6 6 6 6 6 6 A. Alternative Scenarios A1. Key variables at their historical averages in 2021-2031 2/ 4 5 6 5 6 6 6 6 6 6 5 0 4 4 5 5 5 6 6 6 6 6 6 B. Bound Tests B1. Real GDP growth 4 4 5 5 5 6 6 6 6 6 6 B2. Primary balance 4 4 5 5 5 6 6 6 6 6 6 B3. Exports 4 6 10 11 11 12 14 16 16 16 15 B4. Other flows 3/ 4 4 5 5 6 6 6 6 7 7 6 B5. Depreciation 4 4 5 5 5 5 5 5 5 5 5 B6. Combination of B1-B5 4 6 8 8 8 9 10 10 10 10 10 C. Tailored Tests C1. Combined contingent liabilities 4 4 6 5 6 6 6 6 6 6 6 C2. Natural disaster 4 5 6 6 6 6 6 6 6 7 6 C3. Commodity price 4 5 5 5 6 6 6 6 6 6 6 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 15 15 15 15 15 15 15 15 15 15 15 Debt service-to-revenue ratio Baseline 9 9 11 10 11 11 11 11 12 12 11 A. Alternative Scenarios A1. Key variables at their historical averages in 2021-2031 2/ 9 10 12 11 12 13 12 11 11 11 10 0 9 9 11 10 11 11 11 11 12 12 11 B. Bound Tests B1. Real GDP growth 9 11 15 14 15 15 15 15 16 16 16 B2. Primary balance 9 9 11 10 11 11 11 12 12 12 12 B3. Exports 9 10 12 13 13 14 16 19 19 19 18 B4. Other flows 3/ 9 9 11 11 11 12 12 13 13 13 13 B5. Depreciation 9 12 14 12 13 14 14 13 13 14 13 B6. Combination of B1-B5 9 11 14 13 14 14 16 16 17 17 16 C. Tailored Tests C1. Combined contingent liabilities 9 9 12 11 11 12 12 12 12 12 12 C2. Natural disaster 9 9 12 11 12 12 12 12 12 13 12 C3. Commodity price 9 10 11 11 11 12 12 12 12 12 12 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 18 18 18 18 18 18 18 18 18 18 18 Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the threshold. 2/ Variables include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows. 3/ Includes official and private transfers and FDI. 16 >>> WORLD BANK GROUP Projections 1/ 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 PV of Debt-to-GDP Ratio Baseline 34 34 34 34 35 35 35 36 37 37 38 A. Alternative Scenarios A1. Key variables at their historical averages in 2021-2031 2/ 34 32 32 32 32 32 32 33 33 33 33 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A B. Bound Tests B1. Real GDP growth 34 42 52 56 59 63 67 70 74 78 81 B2. Primary balance 34 35 36 36 36 36 37 37 38 38 39 B3. Exports 34 39 47 47 47 47 46 46 46 45 45 B4. Other flows 3/ 34 36 37 38 38 38 38 39 39 39 40 B5. Depreciation 34 38 36 35 35 34 33 32 32 32 31 B6. Combination of B1-B5 34 35 36 37 38 38 39 40 40 41 41 C. Tailored Tests C1. Combined contingent liabilities 34 40 40 40 40 40 40 40 41 41 42 C2. Natural disaster 34 43 42 42 42 43 43 43 44 44 45 C3. Commodity price 34 37 42 48 53 57 62 66 70 74 78 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. TOTAL public debt benchmark 55 55 55 55 55 55 55 55 55 55 55 PV of Debt-to-Revenue Ratio Baseline 272 246 236 244 245 244 242 247 252 257 260 A. Alternative Scenarios A1. Key variables at their historical averages in 2021-2031 2/ 272 232 221 226 227 224 220 223 224 226 224 0 42 80 89 79 80 81 81 79 79 79 79 B. Bound Tests B1. Real GDP growth 272 292 341 384 411 431 445 474 501 527 550 B2. Primary balance 272 252 246 254 255 253 250 255 259 263 266 B3. Exports 272 281 325 333 330 326 317 315 313 312 309 B4. Other flows 3/ 272 258 258 267 267 265 261 264 267 271 272 B5. Depreciation 272 278 255 254 245 236 226 223 221 219 216 B6. Combination of B1-B5 272 251 249 263 267 268 265 271 276 281 284 C. Tailored Tests C1. Combined contingent liabilities 272 290 275 282 281 278 274 278 281 285 287 C2. Natural disaster 272 308 292 300 299 297 292 297 301 305 308 C3. Commodity price 272 272 298 345 376 404 425 452 481 509 534 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Debt Service-to-Revenue Ratio Baseline 42 51 63 67 72 72 72 69 69 68 67 A. Alternative Scenarios A1. Key variables at their historical averages in 2021-2031 2/ 42 52 60 64 69 72 72 70 70 68 67 0 42 80 89 79 80 81 81 79 79 79 79 B. Bound Tests B1. Real GDP growth 42 58 85 98 109 113 114 114 116 118 119 B2. Primary balance 42 51 64 69 73 73 72 70 70 69 68 B3. Exports 42 51 64 69 73 74 75 76 75 74 73 B4. Other flows 3/ 42 51 63 68 72 73 73 71 71 70 69 B5. Depreciation 42 49 62 64 69 71 70 67 67 66 65 B6. Combination of B1-B5 42 51 66 70 76 77 77 75 75 74 73 C. Tailored Tests C1. Combined contingent liabilities 42 51 75 77 75 75 73 70 70 69 68 C2. Natural disaster 42 52 79 82 78 78 76 73 72 71 70 C3. Commodity price 42 52 70 85 96 100 102 101 104 106 108 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the benchmark. 2/ Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP. 3/ Includes official and private transfers and FDI. 17 >>> Gross Nominal PPG External Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) Current DSA 40 80 Residual 20 Previous DSA proj. 30 70 DSA-2016 Interquartile range 15 (25-75) Price and 20 60 exchange rate 10 50 10 Real GDP growth 0 Change in PPG 40 debt 3/ 5 30 -10 Nominal interest rate 20 -20 0 Median Current 10 account + FDI-30 -5 0 -40 2016 2020 2024 2028 2017 2018 2019 2021 2022 2023 2025 2026 2027 2029 2030 2031 Change in PPG debt 3/ 5-year 5-year Contribution of Distribution across LICs 2/ historical projected -10 unexpected change change Public debt Gross Nominal Public Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) 30 Current DSA Residual 20 Previous DSA proj. DSA-2016 80 20 15 Other debt Interquartile creating flows range (25-75) 70 10 10 Real Exchange Change in debt 60 rate depreciation 50 0 5 Real GDP growth Median 40 0 -10 30 Real interest rate 20 -5 -20 Primary deficit 10 -10 0 -30 2016 2023 2024 2017 2018 2019 2020 2021 2022 2025 2026 2027 2028 2029 2030 2031 Change in debt 5-year 5-year Contribution of Distribution across LICs 2/ -15 unexpected historical projected changes change change 1/ Difference between anticipated and actual contributions on debt ratios. 2/ Distribution across LICs for which LIC DSAs were produced. 3/ Given the relatively low private external debt for average low-income countries, a ppt change in PPG external debt should be largely explained by the drivers of the external debt dynamics equation. 18 >>> WORLD BANK GROUP 3-Year Adjustment in Primary Balance Fiscal Adjustment and Possible Growth Paths 1/ (Percentage points of GDP) 6 2 14 Distribution 1/ 4 12 Projected 3-yr adjustment 1 3-year PB adjustment greater In percentage points of GDP 2 than 2.5 percentage points of 10 GDP in approx. top quartile 0 In percent 0 8 -2 -1 6 -4 4 -2 -6 2 -8 -3 0 2015 2016 2017 2018 2019 2020 2021 2022 Baseline Multiplier = 0.2 Multiplier = 0.4 more -4.5 -4.0 -3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 1.5 3.0 0.5 1.0 2.0 2.5 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 Multiplier = 0.6 Multiplier = 0.8 1/ Data cover Fund-supported programs for LICs (excluding emergency financing) approved since 1990. The 1/ Bars refer to annual projected fiscal adjustment (right-hand side scale) and lines show possible size of 3-year adjustment from program inception is found on the horizontal axis; the percent of sample is real GDP growth paths under different fiscal multipliers (left-hand side scale). found on the vertical axis. Public and Private Investment Rates, Real Contribution to Real GDP growth (percent of GDP) (percent, 5-year average) 24 23 6.0 22 21 20 5.0 19 18 17 16 4.0 15 14 13 3.0 12 11 10 9 2.0 8 7 6 5 1.0 4 3 2 0.0 1 Historical Projected (Prev. DSA) Projected (Curr. DSA) 0 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Gov. Invest. - Prev. DSA Gov. Invest. - Curr. DSA Priv. Invest. - Prev. DSA Priv. Invest. - Curr. DSA Contribution of other factors Contribution of government capital 19 >>> PV of debt-to GDP ratio PV of debt-to-exports ratio 45 200 40 180 35 160 140 30 120 25 100 20 80 15 60 10 40 5 20 0 0 2021 2023 2025 2027 2029 2031 2021 2023 2025 2027 2029 2031 Debt service-to-exports ratio Debt service-to-revenue ratio 16 20 18 14 16 12 14 10 12 8 10 8 6 6 4 4 2 2 0 0 2021 2023 2025 2027 2029 2031 2021 2023 2025 2027 2029 2031 Threshold Baseline Limited space Some space Substantial space Sources: Country authorities; and staff estimates and projections. 1/ For the PV debt/GDP and PV debt/exports thresholds, x is 20 percent and y is 40 percent. For debt service/Exports and debt service/revenue thresholds, x is 12 percent and y is 35 percent. 20 >>> WORLD BANK GROUP Debt Stock (end of period) Debt Service 2020 2020 2021 2022 2020 2021 2022 (In US$) (Percent total debt) (Percent GDP) (In US$) (Percent GDP) Total 5,464,427,929 100.00 41.85 807,518,266 949,878,808 952,039,887 6.18 6.70 6.25 External 4,304,316,147 78.77 32.97 101,722,272 140,517,781 201,832,067 0.78 0.99 1.33 2 Multilateral creditors 3,533,920,247 64.67 27.07 61,474,886 75,288,143 97,662,125 0.47 0.53 0.64 IMF 786,475,955 14.39 6.02 World Bank 1,877,097,914 34.35 14.38 ADB/AfDB/IADB 519,496,914 9.51 3.98 Other Multilaterals 350,849,464 6.42 2.69 o/w: Intern'l Fund for Agricultural Dev. 176,576,590 3.23 1.35 European Investment Bank 82,230,776 1.50 0.63 Bilateral Creditors 671,919,443 12.30 5.15 23,282,316 33,023,359 41,396,061 0.18 0.23 0.27 Paris Club 282,916,913 5.18 2.17 11,412,639 14,791,710 17,981,852 0.09 0.10 0.12 o/w: Agence Française de Développement 109,470,493 2.00 0.84 Japan International Cooperation Agency 76,722,023 1.40 0.59 Non-Paris Club 389,002,530 7.12 2.98 11,869,677 18,231,648 23,414,209 0.09 0.13 0.15 o/w: Export-Import Bank of China 153,025,045 2.80 1.17 Kuwait Fund 20,575,821 0.38 0.16 Bonds 0 0 0 Commercial creditors 98,476,457 1.80 0.75 16,965,070 32,206,279 62,773,881 0.13 0.23 0.41 o/w: Deutsche Bank 79,969,646 1.46 0.61 Consorz GIFIEX 15,504,629 0.28 0.12 Other international creditors 0 0 0 0 0 Domestic 1,160,111,782 21.23 8.89 705,795,994 809,361,027 750,207,819 5.41 5.71 4.93 Held by residents, total 1,160,111,782 21.23 8.89 705,795,994 809,361,027 750,207,819 5.41 5.71 4.93 Held by non-residents, total 0 0 0 T-Bills 261,012,812 4.78 2.00 438,001,076 366,280,649 416,577,643 3.35 2.58 2.74 Bonds 531,496,313 9.73 4.07 219,182,326 254,390,922 237,170,300 1.68 1.79 1.56 Loans 367,602,657 6.73 2.82 48,612,591 188,689,456 96,459,876 0.37 1.33 0.63 Memo items: Collateralized debt3 0 o/w: Related 0 o/w: Unrelated 0 Contingent liabilities N/A o/w: Public guarantees N/A o/w: Other explicit contingent liabilities4 N/A Nominal GDP 13,056,080,127 13,056,080,127 14,183,881,667 15,225,569,061 Sources: Country authorities; and IMF staff estimates. 1/As reported by Country authorities according to their classification of creditors, including by official and commercial. Debt coverage is the same as the DSA. 2/Multilateral creditors” are simply institutions with more than one official shareholder and may not necessarily align with creditor classification under other IMF policies (e.g. Lending Into Arrears). 3/Debt is collateralized when the creditor has rights over an asset or revenue stream that would allow it, if the borrower defaults on its payment obligations, to rely on the asset or revenue stream to secure repayment of the debt. Collateralization entails a borrower granting liens over specific existing assets or future receivables to a lender as security against repayment of the loan. Collateral is “unrelated” when it has no relationship to a project financed by the loan. An example would be borrowing to finance the budget deficit, collateralized by oil revenue receipts. See the joint IMF-World Bank note for the G20 “Collateralized Transactions: Key Considerations for Public Lenders and Borrowers” for a discussion of issues raised by collateral. 4/Includes other-one off guarantees not included in publicly guaranteed debt (e.g. credit lines) and other explicit contingent liabilities not elsewhere classified (e.g. potential legal claims, payments resulting from PPP arrangements). Entries showing “N/A” are not yet available and are in the process of being collected with the aim of adding them at the time of the next review. 21 >>>