Macroeconomic Imbalance, External Debt, and the Financial System in Laos

Purpose: The purpose of the study was to evaluate the effect of external debt liability on economic growth in Kenya.
 Materials and Methods: The descriptive research design was adopted. The target population was three institutions: The National Treasury, Kenya National Bureau of Statistics, and the World Bank. The study used time series data. The designated sample for this study covered a period of 43 years (1977–2019). Secondary data was used in this study. The data collected was on GDP of Kenya between 1977 and 2019, External public debt in terms of US dollars from 1977 to 2019, External private debt from 1977 and 2019 and external debt service payments from 1977 to 2019, all in US dollars. A data collection sheet was used to collect the data on the four variables. World Bank and World Development Indicator economic Meta data and published data by Central Bank of Kenya and the Kenya National Bureau of Statistics were the source of data for this study. The study used Eviews version 10 for analyzing and presenting study findings. The study employed multivariate time series and panel data regression analysis. The model employed GDP as a measure of economic growth and external public debt, external private debt, and external debt service payment as its main independent variables.
 Results: The study found out that only the external private debt and the debt service payment showed bilateral causal relationship. External public debt and external private debt had a positive and significant effect on the GDP, indicating that external debt promotes economic growth in Kenya. The external debt service payment showed a negative and a significant effect on the GDP as well. The model explained 97% variability of the GDP as explained by the three independent variables combined. The 3% is attributed to other factors, not included in this study.
 Unique contribution to theory, practice and policy: The study recommends a more robust multivariate model to be employed to include more macro-economic variables to explain economic growth. A decade-to-decade comparison can also be done to compare the effects of the external debt on Kenyan economic growth in different time intervals. Fiscal and monetary policies should be reviewed to encourage more domestic and foreign investments and discourage external borrowing to fund budget deficits or projects with low or no returns.

The paper's relevance is substantiated by the fact that today a rapid growth of external debt of the most developed countries of the world (including European Union (EU) countries) is one of the most acute problems of the modern world economy and global finance. The paper aims to assess the degree of the external debt burden of various EU countries and evaluate the prospects of solving external debt problems in the EU. The article focuses on dynamics, composition, and specifics shaping the EU countries' external debt based on comparative, economic, statistical, and graphical analysis. Special attention we paid to the analysis of specifics of the EU countries' sovereign external debt composition connected with the acute problem of the rapid growth of public debt in general. The paper examines the ratio of public external and internal debt in various EU countries. It determines the EU particular countries where public external debt is shaping based on either cross-border or domestic model. The research results reveal a high degree of dependence of the EU economy on international debt finance. Gross external debt and sovereign external debt of the EU countries are still growing, and its distribution among various member states is very uneven. The structural imbalance of the EU countries' net external debt has also been revealed: the number of net borrowers is double that of net lenders. According to the basic external debt sustainability indicators, some EU countries are in a pretty tricky situation and entirely depend on the possibility of external debt refinancing.

Abstract. Introduction. The problem of public debt management is one of the main problems in Ukraine. Public debt has a significant impact on the financial system, the state of the economy in the country investment climate, national currency stability. The rapid growth in volumes of a gross external debt and in ratio to GDP increases the currency risks of the country. That’s why public structures must form and implement a clear process of public debt management. Purpose. The main purposes of the article are to investigate the theoretical aspects the management of the external state debt in Ukraine, to analysis of the current state of public debt, to identify the main problems the management of the external state debt and search for ways to improve it. Results. It was researched that the growth of the state debt and expends of its servicing are gaining in Ukraine. It was determined that the structure of public debt is dominated by external debt. Also Ukraine is characterized by large amounts of stateguaranteed debt, which involve additional costs due to the insolvency of borrowers. Ukraine has excessive debt burden mainly through external borrowing. During the study period, the maximum amount of public debt has long exceeded the norms approved by the Budget Code, although in the last two years there has been a stabilization. Therefore, a range of debt management actions have been proposed that can alleviate the problem of over-indebtedness in Ukraine and mitigate the risks associated with a distorted debt structure. As such, debt policy of a government must be based on gradual repayment of debt in foreign currency, optimization of state expenditures, improvement of the system of the national debt, refinement of the conditions by which governments service their debt, etc. Thus the government's debt policy should be based on an improved legal framework for regulating public debt; public debt restructuring; rational and targeted use of loans. In addition, the country should introduce strict control over the spending of funds, ensuring the political and economic development of Ukraine and take incentives to intensify the stock market.

External public debt is not only a means of raising funds to finance public needs, but also an effective tool for stabilizing a country`s economic development, the assessment and analysis of which allows making effective management decisions at the state level and developing effective measures to improve the economic and debt situation. The paper aims to assess the impact of external public debt on Ukraine’s economic development indicators (GDP, foreign direct investment, foreign exchange reserves). In order to achieve the stated goal distributed lag models are used, which allow modeling a country’s economic development (according to key indicators) within certain forecast scenarios. The study covers the period from 2009 to 2021. An analysis of the dynamics of external public debt in Ukraine led to the conclusion about the unstable debt situation in Ukraine and a significant increase in external debt in recent years. Econometric models with a distributed lag of three years are built and the results of the influence of external public debt in different time periods are analyzed. The average lag in the built models is about one and a half years (for GDP) and two and a half years (for foreign direct investment). This value indicates that the average change (increase/decrease) in external public debt will change economic development over time. A positive conclusion is made on the possibility of not only assessing the time lag between the indicators, but also on the prospects for forecasting both the public debt and key indicators of Ukraine`s economic development. AcknowledgmentThe article was published as part of research projects “Convergence of economic and educational transformations in the digital society: modeling the impact on regional and national security” (No. 0121U109553) and “Reforming the lifelong learning system in Ukraine for the prevention of the labor emigration: a coopetition model of institutional partnership” (No. 0120U102001).

The object of research is the policy of public debt management of the United States of America and Ukraine. The problem solved is the low level of efficiency of the policy of public external and internal debt management of Ukraine in the context of financing economic growth. The main scientific results: based on the analysis of the policy of public debt management of the United States of America, it has been proved, that the public debt and the US budget deficit should be perceived not as a problem or threat to macroeconomic stability, but as a tool to stimulate economic growth. It is substantiated, that in order to optimize the policy of internal and external public debt management of Ukraine it is expedient to introduce a debt rule, which is based on the program-targeted method of attracting public debt and provides for the use of public borrowing exclusively to finance economic development programs. In this case, Ukraine, following the example of the United States, will be able to achieve sustainable economic growth, because changing the priorities from debt financing of current state budget expenditures to financing capital expenditures will allow the Ukrainian government to develop economic infrastructure, create conditions for high value-added goods and to develop small and medium business, which will ultimately ensure macroeconomic stability and progressive economic development of the state. The scope of practical use of research results. The results of the study can be used by the Cabinet of Ministers of Ukraine, and in particular by the Ministry of Finance during the formation of the Medium-Term public debt management strategy of Ukraine. Innovative technological product: The debt rule is based on the program-target method of attraction and use of the state internal and external debt that allows to use effectively the state borrowings for financing of economic growth. Scope of application of an innovative technological product: Policy of management of the state internal and external debt of Ukraine

Cyclicality of Taxes and External Debt

Problem setting. Studying the impact of public debt on economic security is particularly important, as debt burden directly affects a country’s ability to ensure macroeconomic stability, creditworthiness, and social obligations. The global increase in public debt, especially after the global crises – financial, pandemic, and energy – creates additional risks for the stability of national economies. For Ukraine, this problem is exacerbated by the ongoing war, the destruction of economic infrastructure, and significant external borrowing, which are creating critical levels of debt pressure. Studying debt risks in conditions of geopolitical instability is necessary for developing an effective financial security strategy and maintaining investor and donor confidence. Therefore, this study is important at both the national and international levels. Analyses of recent researches and publications. Various aspects of debt policy and financial security of the state have been studied by many economists and lawyers. Romanovskaya Yu. A. analyzed Ukraine’s public debt in wartime. Kirov B. S. studied aspects of public debt formation and debt security. The management of Ukraine’s public debt in special conditions was studied by Krupyak I. Y. and Krupyak L. B. The analysis of the impact of external debt on the financial stability and national economic security of Ukraine was carried out by Pikulina O. V., Ogdansky K. M., and Pikulina N. Y. The purpose of this article is to study the impact of external and internal public debt on the financial security of the state and to identify areas for optimizing debt policy in order to strengthen financial stability. Article’s main body. The article examines the relationship between the level of public debt and the financial security of the state, which is one of the key components of national economic security. It is argued that the growth of public debt, especially external debt, increases the risks of losing economic sovereignty, intensifies fiscal pressure, and limits the possibilities of budgetary policy. It is determined that for Ukraine, which is in a state of war, ensuring debt security through transparency, control over borrowing, and compliance with international standards of responsible debt management is of particular importance. The impact of external debt dependence, in particular the conditions of IMF programs, on domestic economic policy and social parameters of the state is analyzed. It is noted that effective debt policy should be aimed at balancing domestic and external borrowing, optimizing the debt structure, and increasing the state’s ability to service its obligations without creating threats to financial stability. The role of the Stockholm Principles as an international ethical standard for preventing debt pyramids and a tool for increasing creditor confidence is highlighted. Conclusions and prospects for the development. Debt security is a component of a state’s financial security, according to which the state is obliged to ensure not only formal solvency, but also a balanced structure of debt obligations that does not pose a threat to sovereignty, macroeconomic stability, and social stability. External debt dependence, which is formed as a result of Ukraine’s participation in programs of the IMF and other creditors, has legally significant consequences for state sovereignty. Responsible debt policy is an element of economic sovereignty. Ukrainian legislation needs to be improved in terms of the regulatory definition of debt security limits and the introduction of a debt risk monitoring system.

Purpose: This study examines the short-run and long-run impact of the expansionary fiscal policy on economic growth in Zambia from 1991 to 2021. Materials and Methods: The study employs the Vector Error Correction Model (VECM) and Auto Regressive Distributed Lag (ARDL) Models to examine the short-run and long-run impact of total public expenditure, total tax revenue and total public debt time series data on the gross domestic product (GDP) of Zambia from 1991 to 2021. The Keynesian theory informed our study, which presupposes that the unemployment problem might be solved by boosting government spending on consumption and that government spending was an exogenous factor that contributed to economic growth (Keynes, 1936; Singh & Sahni, 1984). Findings: Both the VECM and ARDL Models show the existence of statistically significant long-run cointegration among public expenditure, external debt, tax revenue and GDP. Specifically, VECM estimates show that for a 1% increase, Tax revenues have a positive long-run significant effect on Zambia’s economic growth of 3.36%, while external debt and public expenditure have significant negative effects on the economic growth of 1.17% and 0.003% in Zambia respectively. The ARDL model estimates indicate that, in the short run, an increase in tax revenue of 1% increases GDP growth by 1.92%, while a rise in government expenditure and external debt by 1% results in a decline in Zambia’s economic growth by 0.003% and 6.14% respectively. Implications to Theory, Practice and Policy: Given the foregoing findings, the therefore study recommends that the Government of Zambia should widen the tax base to mobilize more tax revenues and reduce the budget deficits emanating from high government expenditures. External public debt should also be reduced.

Does high external debt predict lower economic growth? Role of sovereign spreads and institutional quality

Introduction. The consequences of the COVID-19 pandemic on macroeconomic dynamics and the state of external public debt are analised. The main reasons for the growth of the State Budget deficit of Ukraine are identified and the need to increase the efficiency of the external public debt management policy in the context of minimizing the budget deficit is proved. Emphasis is placed on the situational and imbalance of Ukraine’s external public debt management policy, which is due to the lack of the Economic Development Strategy of Ukraine and the Government’s program of activities for 2020. It is substantiated that the lack of clear strategic goals of economic development of the state and adherence to such a strategy has led to an increase in the cost of servicing external pu blic debt, increasing the cost of attracting it and reducing the maturity. It is also proved that the lack of strategy together with the low level of fiscal, debt and monetary policy coherence are the main reasons for inefficient conversion of external public debt, as the main amounts of external government borrowing are not used to finance economic development, but to finance state budget expenditures and to repay old debts. The purpose of to the article is to study the theoretical and practical aspects of debt policy in the context of the COVID-19 pandemic in order to justify a new paradigm of Ukraine’s external public debt management policy. Results. Based on the analysis of major macroeconomic trends in Ukraine and identifying external debt problems, the latest paradigm of external public debt management policy is proposed, the essence of which is to subordinate debt policy to tactical and strategic goals of the national economy budget, debt and monetary policy, as well as in achieving effective conversion of external government borrowing to stimulate economic development. It is proposed to use a program-targeted method of external public debt management policy, which involves raising funds from international organizations exclusively to finance specific government programs. Perspectives. It is necessary to increase the efficiency of conversion of external government loans to finance capital investments from the State budget, which will use the foreign debt potential to stimulate Ukraine’s economic development.

Indebtedness has become one of the major development policy issues for the Sri Lankan economy. The excessive government borrowings over the capacity of the country cause adverse impacts on an economy, particularly its unfavourable effects on domestic and foreign investment inflows. Therefore, this study investigates the impact of the components of public debts (domestic and external debts) on the various forms of investment (domestic investment and foreign direct investment) in Sri Lanka for the period between 1980 and 2020. Thus, this study estimated two investment models where domestic investment and foreign direct investment were dependent variables. ARDL bounds testing approach was employed in this study which confirmed the existence of a long-run cointegration relationship among the variables. Empirical findings of this study show the evidence for the presence of a crowding out effect of both domestic and external debt on domestic investment in Sri Lanka both in the short-run and long-run. It was also found that domestic debt crowds out FDI inflows in the long-run, but it crowds-in the flow of FDI in the short-run. Furthermore, external debt has a significant inverse relationship with FDI inflows in the short-run, as expected, but it does not influence FDI in the long-run. The findings also showed that higher lending interest rates reduce the volume of domestic investment, but it does not influence FDI in the long-run. However, in short-run, an increase in the rate of lending interest rate lowers the expectation of foreign investors and crowds out the flow of FDI in Sri Lanka, as expected. Furthermore, the depreciation of the exchange rate decreases both domestic and foreign investment in the short-run, but it encourages both types of investments in the long-run. The results further concluded that the impact of domestic debt on various forms of investment in Sri Lanka is greater than external debts. The study, therefore, recommends that the government should strive to reduce its higher debt profile by improving its revenue base and formulate better debt management strategies in order to increase the volume of investment in the country.
 Keywords: Domestic Debt, External Debt, Domestic Investment, Foreign Direct Investment, Sri Lanka

Borrowing to finance public infrastructure has pushed debt levels to record highs within the East African Community (EAC) countries. Total external debt stock grew by 333.38 percent between 1970 and 2020. The rise in external debt exceeded growth in GDP and exports in all the countries except for the Democratic Republic of Congo between 2010 and 2020. The situation could have been worse had it not been for a massive external debt cancellation by the international community under the Heavily Indebted Poor Countries (HIPC) and Multilateral Debt Relief Initiative (MDRI) programmes that benefitted all the EAC countries except Kenya. Virtually all the countries are increasingly borrowing more long-term than short-term external loans. Multilateral and official bilateral creditors continue to be the major financiers in all the countries even though these countries are gradually diversifying their sources of borrowing. All the EAC countries except Burundi had publicly guaranteed private sector external debt from commercial banks between 2010 and 2020. Three of the countries, Kenya, Tanzania and Rwanda, had nonguaranteed private sector external debt during the period. Two countries, Kenya and Rwanda, have joined a fast growing number of African countries that are issuing international sovereign bonds. The EAC countries are in a vulnerable position, with public external debt already at elevated levels. Trends in some of the external debt ratios including debt-to GDP, debt-to-exports, and debt service-to-exports ratios suggest that these countries could face challenges in servicing their external debts and meeting other foreign exchange obligations. High levels of external debt seem to have led to a vicious cycle of debt. Even after benefitting from the HIPC and MDRI debt relief programmes, the countries are once again facing high debt ratios. In light of the above findings, governments of the EAC countries should: look for improved terms on new loans; restructure external commercial loans that have heavy maturities and high interest rates; continue to diversify sources of external financing to reduce high dependency on expensive loans; make concerted efforts to increase concessional public external debt; explore non-debt creating financing options for public investments such as Public Private Partnerships; and look into refinancing expensive debt with debt on more favourable terms. Keywords : External debt, multilateral and bilateral debt, publicly guaranteed debt, external debt indicators, vicious cycle of debt DOI: 10.7176/JESD/14-4-01 Publication date: February 28 th 2023

This research aims to analyze whether mudharabah and murabaha financing have an impact on maximizing real sector growth in Indonesia, Malaysia and Brunei Darussalam. The method used in this research is quantitative with a descriptive-associative approach. The data used in this research comes from secondary data and time series data obtained from the Financial Services Authority (FSA) Islamic banking statistics report, Indonesian economic and financial statistics report, Kuwait Finance House annual report, Malaysian economy in Figures 2022 report, report annual Islamic bank Brunei Darussalam, and the International Monetary Fund (IMF) report. This research uses panel data regression analysis. The research results show that partial mudharabah and murabaha financing does not impact real sector growth. Simultaneously, mudharabah and murabaha financing significantly impact real sector growth. This research provides a new contribution to scientific development, stating that mudharabah and murabaha financing do not impact real sector growth. Practically, this research proves that there must be improvements related to mudharabah and murabaha financing so that they can have an impact on real sector growth.

This work aims to highlight the characteristic elements of Togo's external public debt. The results after estimates, revealing the external debt as the dependent variable, indicate that, in the short term, the quality of the institutions and imports have significant effects on the external debt and the effect of the 1994 devaluation. In the long run, imports, export variation, and the quality of institutions have a significant impact on external debt and the effect of the devaluation in 1994.

This study empirically evaluates external public debt and economic growth relationships in the Sub-Saharan African region; it anchors on the classical, neoclassical, and Keynesian economic growth theories. Given the lack of consensus amongst researchers from different countries, several research outputs on external public debt have yielded conflicting results. Based on the World Development Indicators (WDI) panel dataset for 1980-2018, this study applies Autoregressive Distributed Lagged Model (ARDL) using balanced cross-sectional panels. The study makes a novel contribution using vector autoregression (VAR), impulse response functions (IRF), and variance decomposition to show the impact of external public debt innovation shocks on economic growth. The findings of this study support classical economists and Keynesian conflicting views on economic growth and the external public debt relationship. The results reveal a positive and statistically significant long-run relationship between external public debt and economic growth in the countries studied. A positive short-run and negative long-run relationship between economic growth and external public debt are observed in Kenya and Nigeria. These findings are consistent with the classical economist's stance, suggesting that public debt hampers economic growth. Conversely, Keynesian propositions are confirmed in Malawi, Botswana, and Lesotho, where external public debt has a negative short-run and positive long-run impact on economic growth. Most of these countries responded differently in terms of growth, which may be External public debt and economic growth relationship: