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Ms. Marialuz Moreno Badia, Juliana Gamboa-Arbelaez, and Yuan Xiang
In the wake of the COVID-19 pandemic, debt levels in emerging and developing economies have surged raising concerns about fiscal sustainability. Historically, negative interest-growth differentials in these countries have played a debt-stabilizing role. But is this enough to prevent countries from falling into debt distress? Drawing from a sample of 150 emerging and developing economies going back to the 1970s, we find that interest-growth differentials have remained relatively low, dampening debt increases in the run up to a crisis. But in the face of persistent primary deficits, debt service tends to rise abruptly—particularly in emerging markets—and a fiscal crisis ensues. There is also evidence that a large part of the debt build-up around crises stems from valuation effects associated with external debt and the materialization of contingent liabilities. These findings underscore that, though not necessarily a red-herring, low interest-growth differentials cannot fully offset the deleterious effects of large fiscal deficits, forex exposures, or hidden debts.
Ms. Marialuz Moreno Badia, Juliana Gamboa-Arbelaez, and Yuan Xiang

In the wake of the COVID-19 pandemic, debt levels in emerging and developing economies have surged raising concerns about fiscal sustainability. Historically, negative interest-growth differentials in these countries have played a debt-stabilizing role. But is this enough to prevent countries from falling into debt distress? Drawing from a sample of 150 emerging and developing economies going back to the 1970s, we find that interest-growth differentials have remained relatively low, dampening debt increases in the run up to a crisis. But in the face of persistent primary deficits, debt service tends to rise abruptly—particularly in emerging markets—and a fiscal crisis ensues. There is also evidence that a large part of the debt build-up around crises stems from valuation effects associated with external debt and the materialization of contingent liabilities. These findings underscore that, though not necessarily a red-herring, low interest-growth differentials cannot fully offset the deleterious effects of large fiscal deficits, forex exposures, or hidden debts.

Ms. Marialuz Moreno Badia, Juliana Gamboa-Arbelaez, and Yuan Xiang

. Abstract In the wake of the COVID-19 pandemic, debt levels in emerging and developing economies have surged raising concerns about fiscal sustainability. Historically, negative interest-growth differentials in these countries have played a debt-stabilizing role. But is this enough to prevent countries from falling into debt distress? Drawing from a sample of 150 emerging and developing economies going back to the 1970s, we find that interest-growth differentials have remained relatively low, dampening debt increases in the run up to a crisis. But in the face of

International Monetary Fund. African Dept.

Figure 2 and Bound Test B1 in Table 2a ). THE AUTHORITIES’ VIEWS 18. The authorities believe that improved oil revenue prospects and debt relief through the HIPC process would substantially dampen debt sustainability concerns. The authorities acknowledged potential concerns on debt sustainability and highlighted the recent decision to cancel the MFA with Eximbank China as a signal of the importance that they attach to this issue and to the need for concessional long-term financing. Regarding the latter, they noted that the recent lending operation with

International Monetary Fund. Monetary and Capital Markets Department

predominant risk exposure among Norwegian banks. The FSA should develop supervisory guidance on prudential aspects of loan loss provisioning and the valuation of real estate. Temporary prudential regulations governing residential real estate lending should be made permanent as these measures address structural risks and seem to have successfully dampened debt growth and house price inflation. The dearth of historical loan loss data for banks using the Internal Ratings-Based (IRB) approach for credit risk warrants continued enhancements in oversight of banks’ modeling and

International Monetary Fund. Monetary and Capital Markets Department
This note presents a targeted review of selected aspects in the regulation and supervision of banks in Norway. The review is carried out as part of the 2020 Norway Financial Sector Assessment Program (FSAP) and the findings and recommendations are based on the regulatory framework in place and the supervisory practices employed at end-October 2019. The note focuses on the powers and responsibilities, independence, and resourcing of Finanstilsynet (FSA); its supervisory approach and enforcement powers and practices; key aspects of the prudential framework; and mechanisms to prevent abuse of financial services.
International Monetary Fund. European Dept.

percent for PLN mortgages, while the Polish FSA requires capital add-ons for banks with substantial exposures to FX mortgages. 2. FX mortgages are not a major source of credit risk . Despite the post GFC appreciation of the CHF against the PLN, FX mortgages continued to perform well, partly because a decline in CHF LIBOR dampened debt service increases, and partly because regulations mostly limited their use to higher-income borrowers. FX mortgage NPL ratios are below the average NPL ratio and similar to that for PLN mortgages from corresponding vintages. The

International Monetary Fund. African Dept.
The staff report for the 2013 Article IV Consultation on Chad focuses on economic background and policy. The country continues to enjoy its longest period of domestic political stability since independence. Macroeconomic performance continued to be stable in 2013, with some deceleration in economic growth and inflation. Recently revised balance-of-payments data show that Chad has been running much larger external current account deficits. Chad’s ability to tackle its developmental needs and poverty reduction objectives is seriously hampered by the projected oil revenue trajectory.
International Monetary Fund. European Dept.
The Polish economy has rebounded strongly, with policy actions limiting the damage from the pandemic-induced recession by supporting employment and avoiding unnecessary bankruptcies. While the pandemic continues to take a toll on lives, the economy has been less impacted by successive waves of the pandemic.