The External Public Debt of Baltic and Selected CIS countries in Years 1992-1997

Abstract

The aim of this paper is to describe the dynamics and structure of public external liabilities in Baltic countries: Estonia, Latvia, Lithuania and in selected countries of the Commonwealth of Independent States: Kazakhstan, Kyrgyz Republic, Moldova, Russian Federation, Ukraine.

The main finding of the paper is that although the present level of external public debt of  these countries is not large, its growth rate has been very high.

The most rapid growth over the whole 1992-1996 period, in percentage points, was observed in Kyrgyz Republic and Moldova: their debt to GDP ratios have increased by over 40 percentage points. Such rate of growth is very high, much higher then the average growth rate of the total public liabilities in Western OECD countries and clearly unsustainable in the long run.

The debt to GDP ratio increase was also quite large - above 10 percentage points - in Kazakhstan, Ukraine and Lithuania. Although it is comparable to the average growth of public liabilities of Western OECD countries, it seems to be excessive in case of countries, that have unsophisticated and much less developed financial markets as well as much lower international credibility.

The main cause of the rapid increase in public borrowing of the selected countries have been large and persistent fiscal imbalances. A further prolonged rapid increase of government debt is unsustainable - even the present debt service requirements are putting a substantial pressure on the budget. Therefore it is crucial, that the authorities pursue in the effort to curb fiscal imbalances.