12 capital account will correct this. If, however, interest paid is measured in the current accouInt (and no new flow for the rescheduled interest payments is recorded in the capital accounit) using the adjiusted change in the stock of debt, including rescheduled interest, will overstate thie extent to which the private sector has increased its claims ab)road." This paper uses current-accouint figtures from the balance of payments and loes not correct thie change in debt stock for the possibility that interest paid (instead of interest dIlue) is recorded in the balance of payments.

e) Adhistment for Forgiveness: Forgiveness of debt, principal, and interest and other debt and debt service re(ductions (throuigh market-based transactions) will decrease the debt stock in that year. This would imply a lower annual change in the stock of debt, but with no correspontding net flow (or decrease in capital flight). Therefore, the debt stock figures are adjusted for the net amounts forgiven or reduced each year. ' f) Private Non-G(uaranteed Debt (PNG): Including or excluding private non-guaranteed debt in capital flight depends on whether gross or net private sector foreign assets are to be measuired. If net private external claims are to be measured, the relevant debt figure is the change in public and publicly guarantee(d external debt. If it is gross privatesector foreigin assets, then the change in private, non-guaranteed debt should be incltlded, and the residual measuire of capital flight will be higher. However, since private external indebtedness represents an actual liability of the private sector (expected to be serviced and repaid by the private sector), arguably the simultaneous acquisition of a foreign asset and foreign liability shouild not be considered "capital fliglht". In calculating the World Bank residual measures net acquisition of foreign assets by the private sector is chosen as the relevant measure and PNG-debt is thus excluded'. However, a measuire of capital flight is also provided which includes PNGdebt (and the necessary adtjustimients for debt reduction. forgiveness, etc.).

h) Short-Termi Debt: The same argument for excluding PNG-debt can be made for short-tenr debt-niamilely, that it sihould be included when measuring gross capital outflows, while only public and publicly guaranteed short-term debt should be used for net capital outtflows. Untfortuniately. World Bank data on short-term external debt are not clisaggregated between public and private flows. Anecdotal evidence for Sub'"l1Ihe same reasoning suge,ests that interest arrears ought to be added to the stock of debt if interest due hut unpaid is included in the current-account bal-snce-of-pavnments data. '"For market-hased debt reductions transactions. for example, debt huyhacks. the change in debt stock is only1 corrected bN the discount in the transaction. The repaNyment part. say the cash used in a buNback (the price times the face value of the debt). represents a prepayment bN the borrower, and a corresponding reductioll in net liabilities. This is normally reported in the W'orld [)ebt Tables under tile line Amortizations. Once corrected for the discount in the debt reduction transactions, the year to year chanige in the debt stockls Vould thus corre..pond to the net borroAings (abstracting from possible other di tetrences).

In examining net private sector acquisition of foreign assets. we differ from much preNious literature. Dooley et. aL. ( 1985). the World Bank ( 1985), and Miorgan Guaranty, ( 1986) all use private, nonguaranteed debt in addition to public and publicly guaranteed debt in computing residual estimates of private sector acquisition of foreign assets.