exceptional financing & debt reorganisation course on balance of payments and international...
TRANSCRIPT
Exceptional Financing &Debt Reorganisation
Course on Balance of Payments and International Investment Position Manual
(BPM6)
IMF-PFTACNadi
November 22-December 1, 2010
BP22
Introduction
Exceptional financing transactions (Appendix 1) and Debt reorganisation and related transactions (Appendix 2)
Explore various issues, treatment and accounting of exceptional financing
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Managing the external sector/exchange rate
Economic managers Face a range of issues and have a variety of tools
Managing the economy’s settings Will impact on exchange rate and reserves, While managing exchange and reserves will impact on
domestic economy. Exchange rate regime
Free float, dirty float, fixed exchange rate, exchange controls
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Managing the external sector/exchange rate Cont.
Reserves management Reserve assets IMF credit and loans Exceptional financing
Arrears of principal and interest BOP borrowing Debt forgiveness Inter-government transfers Debt restructuring
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Analytical measurement of BOP
Analytical v neutral approach to BOP presentation
How to compile Need to identify those transactions (and some non
transactions) that will be placed ‘below-the-line’
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Exceptional financing transactions
Transfers Debt forgiveness and other intergovernmental transfers
(including from international organizations)
Direct or other equity investment Debt or equity swaps involving debt reduction
Borrowing Bond issues for balance of payments support by the
government or central bank, or by other sectors of the economy and induced by the authorities, usually through some form of exchange rate or interest subsidy
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Exceptional financing transactions Cont.
Debt rescheduling or refinancing Debt prepayment and buybacks Accumulation and repayment of arrears
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Debt reorganization or restructuring
Four main types Debt forgiveness
The reduction, or the extinguishing of, a debt obligation by the creditor via a contractual arrangement with the debtor
Debt rescheduling or refinancing (or debt exchange) A change in the terms and conditions of the amount
owed, which may result, or not, in a reduction in burden in present value terms
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Debt reorganization or restructuring Cont.
Four main types Cont.
Exchanging debt –something of economic value Debt conversion The creditor exchanges the debt claim
for something of economic value, other than another debt claim, on the same debtor debt-for-equity swaps, debt-for-real-estate swaps, debt-for-
development swaps, and debt-for-nature swaps
Debt prepayment (or debt buybacks for cash)
Debt assumption and debt payments on behalf of others when a third party is also involved
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Accounting entries
For existing loans forgiven or rescheduled we focus on Payments falling due in current period
Interest, interest accrued in previous periods, principal
Payments in arrears Interest, Principal
Payments not yet due in current period Principal
Subsequent commitments For some swaps
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Types of transactions
A1 – G (Appendix 1) Transfers
Debt forgiveness Other intergovernment grants
Debt/equity swaps Direct swaps Indirect swaps
Exchange of a fixed-payment liability denominated in foreign currency for a deposit liability denominated in domestic currency
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