# World Bank Debtor Reporting System

External debt data from the World Bank Debtor Reporting Systeim (DRS), employed for the residuial and Dooley measurLs, cannot be used directly. The mieasures require putting together a few separate components to obtain the annual net increase in external liabilities. The stalling point is the year-to-year change in the dollar-mlieasuire(d debt stock. This can inaccurately reflect net borrowings (new disbursements minuis principal repayments), since it may incilide tht effects of, say, cross-ctirrency exchange-rate flucttiation.s, debt found (reschieduiled or converted), and debt forgiveni or reduced. To correct for these, the change in debt stock (inclusive of short-terim, IMF, and exclusive of private, non-guaranteed debt) is reduced by the change in debt stocks due to cross-currency exchange-rate fluctuiations, while forgiven or reduced debt and debt service is added back to the annual change.

a) Cross-Currency Exchange-Rate Fluctuations: One problem in using the change in dollar-measured debt stock is that non-dollar denomninated debt will fluctuiate in dollar terms from year to year (in addition to any net flows) due to cross-currency exchangerate fluctuations, Excludinig that part of the change due to such fluctuiations, however, can only be done for the public and publicly guaranteed portion of external (debt (PPG) since the currency mix is known only for these loans. (For World Bank loans, it is done only after 1983.) The currency adjuistment on SDR denomilinated debt (for example, IMF credits) has not been calculated.

b) Debt "found": Debt stocks miay increase eacih year because of debt found (for instance, during a rescheduling), debt which was incurred earlier. Since thlis "discovery" is often not reflected in (past) net flows. the change in the stock of debt is preferable to net flow figures, but may not reflect when the debt was incurred. We didn't correct the yearly change for any debt foLuind, but incurred earlier.

c) Debt converted: When private-sector extenial debt is converted to public-sector debt (in, say, a rcscheduling agreement). the private sector substituites a liability to the government for a foreign liability. Although there has been no new net flow of lunds. the private sector will increase its net foreign assets, which may increase the measuire of capital flight. The change in the stock of debt yields better estimates of increases il the private sector's net foreign assets (and thlius of capital flight) than the flow of net borrowings.

d) Capitalizations: The annual stock of debt may change because of capitalization ot arrears, reschedulinig of principal or interest payments due. and capitalization of (interest) penalties imposed, all to the extent that are not fully reflected in net flows ot borrowings. Whether to include rescheduled interest (and other capitalizations) or not? In principle, balance-of-payments data show interest paymentis due. rathier thiall inade. As a result, when interest is rescheduled withinl the year, the currenlt-accoLiunt deficit will be overstated on an actual cash flow basis and thus the resicidial estimiiates of private capital flows understated. Incliding rescheduled interest duie as an ofticial flow in the