Article on external debt

Article on External Debt: Definitions and Concepts
                          Shamima Siddique, Director (Media & Communication)

                                       External Debt

· Gross external debt, at a point in time, is defined as “the outstanding amount of those actual current, and not contingent, liabilities that require payment(s) of principal and/or interest by the debtor at some point(s) in the future and that are owed to non-residents by residents of an economy” (External Debt Statistics -Guide for Compilers and Users, International Monetary Fund (IMF), 2003).



Original and Residual Maturity

· Original maturity is defined as the period encompassing the precise time of creation of the financial liability to its date of final maturity.

· Debt by residual maturity (or remaining maturity) includes short term debt by original maturity of up to one year, combined with medium to long term debt repayment by original maturity falling due within the twelve month period following a reference date. External debt is commonly expressed in terms of original maturity.

Long and Short-term

· One way of classifying external debt is into long and short-term. Long term debt is defined as debt with an original maturity of more than one year, while short term debt is defined as debt repayments on demand or with an original maturity of one year or less.

· The coverage of short-term was redefined from 2005-06 by including supplier’s credit upto 180 days and FII investment in the Government Treasury Bills and other instruments and further in March 2007 by including external debt liabilities of the banking system and the investment in the Government securities by the foreign central banks and the international institutions.