Commonwealth conference boosts developing countries’ ability to monitor foreign debt liabilities

The conference examined the sharp increase in the amount of foreign loans, securities and other liabilities incurred by private companies and financial institutions between 2002 and 2007 - the ‘boom period’ - and looked at how policy-makers can better monitor corporate cross-border lending.

“Private sector external debt, especially in developing countries like Zambia, has significantly grown over the past few years,” said Alice Konga, a senior economist at the Bank of Zambia, during the conference.

“For our country, the short-term debt capturing and monitoring has not been sufficiently recorded, and I am hoping I can [learn from] other countries which are doing it more consistently.”

Total debt flows to corporations in developing countries rose from US$81 billion in 2002 to US$423 billion in 2008, while the proportion of private debt out of total external debt rose from 12 per cent in 1991 to approximately 50 per cent in 2008.

The sharp rise in corporate cross-border lending is a “recipe for possible crises in the future”, according to Walton Gilpin, Debt Management Adviser at the Commonwealth Secretariat. “This needs to be closely monitored with appropriate macroeconomic policies and monitoring frameworks,” he said.

“The fact that the private sector has acquired so much more debt in the past five or six years brings to the fore the need to monitor such flows.”

Over the course of the two-day programme, participants from 17 countries looked at the institutional arrangements, policy issues and regulatory frameworks required to manage and monitor private sector external debt. Sessions covered the need for more robust information management systems to assist countries in recording data.