# **Table 13. Nominal Exchange Rate Depreciation**

## **Bound Test 5: Real Exchange Rate Shock**

(In percent of GDP, unless otherwise indicated)

||**Actual**|||**Projection**|**s**||||
|---|---|---|---|---|---|---|---|---|
||2005|2006|2007|2008|2009|2010|2011||
|||||||||**Debt-stabilizing**<br>|
||**I. Baseline Me**|**ium-Term Projections**||||||**primary**|
|||||||||**deficit**|
|Public sector debt 1/|61.2|**63.5**|**58.7**|**54.6**|**50.2**|**45.5**|**40.6**||
|o/w foreign-currency denominated (net)|17.1|24.6|23.0|21.4|20.5|19.5|18.4||
|o/w foreign-currency denominated (gross)|22.7|32.7|30.8|28.8|27.6|26.2|24.8||
|o/w domestic debt (net) 3/|44.1|38.9|35.8|33.2|29.7|26.1|22.2||
|Change in public sector debt|-2.0|2.2|-4.7|-4.1|-4.4|-4.7|-4.9|0.0|
|Identified debt-creating flows (4+7+12)|-1.7|2.2|-4.7|-4.1|-4.4|-4.7|-4.9|0.0|
|<br>Primary deficit|-6.5|-6.5|-6.5|-6.5|-6.5|-6.5|-6.5|**-1.3**|
|Revenue and grants|67.2|66.0|65.3|65.3|65.3|65.3|65.3||
|Primary (noninterest) expenditure|60.7|59.4|58.8|58.8|58.8|58.8|58.8||
|<br>Seigniorage|-0.6|-0.7|-0.6|-0.6|-0.6|-0.6|-0.6|-0.6|
|Automatic debt dynamics 2/|5.5|9.8|2.8|3.0|2.7|2.5|2.2|1.9|
|<br>Contribution from interest rate/growth differential|4.5|0.7|3.0|3.1|2.9|2.6|2.4|2.1|
|Of which contribution from real interest rate|7.4|3.7|6.0|5.9|5.5|5.0|4.6|4.1|
|Contribution from domestic real interest rate 4/|6.2|2.1|3.6|3.7|3.4|3.0|2.7|2.3|
|Contribution from real interest rate on foreign debt 5/|1.6|1.7|2.6|2.4|2.3|2.2|2.0|1.9|
|<br>Contribution from real interest rate on net foreign assets 6/|-0.4|-0.1|-0.2|-0.2|-0.2|-0.2|-0.2|-0.1|
|<br>Of which contribution from real GDP growth|-2.9|-2.9|-3.0|-2.8|-2.6|-2.4|-2.2|-1.9|
|Contribution from real exchange rate depreciation 7/|0.9|9.1|-0.1|-0.1|-0.2|-0.2|-0.2|-0.2|
|Other identified debt-creating flows|0.0|-0.4|-0.4|0.0|0.0|0.0|0.0|0.0|
|Privatization receipts (negative)|0.0|-0.4|-0.4|0.0|0.0|0.0|0.0|0.0|
|Recognition of implicit or contingent liabilities|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|
|Other (specify, e.g. bank recapitalization)|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|
|Residual, including asset changes (2-3)|-0.3|0.0|0.0|0.0|0.0|0.0|0.0|0.0|
|Public debt in percent of revenues 1/|91.1|96.2|90.0|83.6|76.9|69.7|62.2||
|Primary deficit that stabilizes the debt-to-GDP ratio|-4.5|-8.7|-1.8|-2.4|-2.1|-1.9|-1.6|-1.3|
|Required deficit reduction|-2.0|2.2|-4.7|-4.1|-4.4|-4.7|-4.9|-5.2|
|**Gross financing**5/|36.9|26.6|25.9|23.3|20.3|17.1|13.7||
|in billions of U.S. dollars|128.9|97.1|102.1|99.4|93.9|85.9|74.7||
|||||||||For debt|
|**Key macroeconomic and fiscal assumptions**||||||||stabilization|
|Real GDP growth (in percent)|4.8|5.0|5.0|5.0|5.0|5.0|5.0|5.0|
|Average nominal interest rate on public debt (percent) 6/|15.9|11.0|13.2|13.1|13.1|12.9|12.8||
|Average nominal interest rate on public domestic debt (in percent) 11/|22.0|11.3|14.6|14.6|14.6|14.6|14.6|14.6|
|Average interest rate on foreign-currrency denominated debt|10.3|10.4|10.9|10.9|10.9|10.9|10.9|10.9|
|<br>Average nominal interest rate on NFA (in percent) 12/||5.0|5.0|5.0|5.0|5.0|5.0|5.0|
|Average real interest rate (nominal rate minus change in GDP deflator, percent)|9.1|5.0|8.7|9.7|9.6|9.4|9.3||
|<br>Change in the real exchange rate (Local currency per US dollar) 13/|5.1|50.9|-0.5|-0.4|-0.8|-0.8|-1.0|-1.0|
|<br>Nominal depreciation of local currency (LC per dollar)|9.3|56.2|1.4|0.5|0.2|0.2|0.0||
|<br>Exchange rate (US dollar per LC)|0.0|0.000|0.000|0.000|0.000|0.000|0.000||
|Nominal appreciation of local currency (increase in US dollar value of local currency)|-8.5|-36.0|-1.4|-0.5|-0.2|-0.2|0.0||
|Inflation rate (in percent)|6.8|6.0|4.5|3.5|3.5|3.5|3.5|3.5|
|US Inflation rate (in percent)|2.7|2.4|2.5|2.5|2.5|2.5|2.5|2.5|
|Growth of real primary spending (deflated by GDP deflator, in percent)|5.9|2.8|3.8|5.0|5.0|5.0|5.0||
|<br>Base Money (percent of GDP)|7.8|7.7|7.7|7.7|7.7|7.7|7.7||

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