# **Table 9. Real Interest Rate Bounds Test.**

## **Bound Test 1: Real Interest Rate Shock**

(In percent of GDP, unless otherwise indicated)

||||**Project**|**ions**||||
|---|---|---|---|---|---|---|---|
||2006|2007|2008|2009|2010|2011||
||||||||**Debt-stabilizing**|
|**I. Baseline Medium-Term Projections**|||||||**primary**|
||||||||**deficit**|
|Public sector debt 1/|**76.3**|**96.9**|**94.4**|**91.6**|**88.6**|**85.4**||
|o/w foreign-currency denominated (net)|22.7|29.8|29.8|31.1|32.9|35.6||
|<br>o/w foreign-currency denominated (gross)|28.1|34.9|34.7|35.8|37.3|39.7||
|o/w domestic debt (net) 3/|53.5|67.1|64.6|60.5|55.8|49.8||
|Change in public sector debt|15.0|20.6|-2.5|-2.8|-3.0|-3.2|0.0|
|Identified debt-creating flows (4+7+12)|15.0|20.6|-2.5|-2.8|-3.0|-3.2|0.0|
|Primary deficit|-6.5|-6.5|-6.5|-6.5|-6.5|-6.5|**-3.0**|
|Revenue and grants|66.0|65.3|65.3|65.3|65.3|65.3||
|Primary (noninterest) expenditure|59.4|58.8|58.8|58.8|58.8|58.8||
|<br>Seigniorage|-0.6|-0.5|-0.5|-0.5|-0.5|-0.5|-0.5|
|Automatic debt dynamics 2/|22.5|28.0|4.5|4.2|4.0|3.7|3.5|
|Contribution from interest rate/growth differential|22.8|28.2|4.6|4.5|4.3|4.1|3.8|
|Of which contribution from real interest rate|25.7|31.8|9.2|8.9|8.6|8.3|7.9|
|Contribution from domestic real interest rate 4/|24.2|29.8|6.9|6.6|6.2|5.7|5.1|
|Contribution from real interest rate on foreign debt 5/|2.0|2.5|2.7|2.7|2.8|2.9|3.1|
|Contribution from real interest rate on net foreign assets 6/|-0.5|-0.5|-0.4|-0.4|-0.4|-0.3|-0.3|
|Of which contribution from real GDP growth|-2.9|-3.6|-4.6|-4.5|-4.4|-4.2|-4.1|
|Contribution from real exchange rate depreciation 7/<br>|-0.3<br>|-0.2<br>|-0.1<br>|-0.2<br>|-0.3<br>|-0.3<br>|-0.4<br>|
|Other identified debt-creating flows|-0.4|-0.4|0.0|0.0|0.0|0.0|0.0|
|Privatization receipts (negative)|-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|
|Other (specify, e.g. bank recapitalization)|0.0|0.0|0.0|0.0|0.0|0.0|0.0|
|Residual, including asset changes (2-3)|0.0|0.0|0.0|0.0|0.0|0.0|0.0|
|Public debt in percent of revenues 1/|115.6|148.3|144.5|140.3|135.7|130.8||
|Primary deficit that stabilizes the debt-to-GDP ratio|-21.5|-27.1|-4.0|-3.7|-3.5|-3.2|-3.0|
|Required deficit reduction|15.0|20.6|-2.5|-2.8|-3.0|-3.2|-3.5|
|**Gross financing**5/|46.1|58.6|44.4|41.6|38.6|34.9||
|in billions of U.S. dollars|168.3|230.1|187.5|190.0|190.7|187.4||
||||||||For debt|
|**Key macroeconomic and fiscal assumptions**|||||||stabilization|
|Real GDP growth (in percent)|5.0|5.0|5.0|5.0|5.0|5.0|5.0|
|Average nominal interest rate on public debt (percent) 6/|36.5|35.0|13.0|12.8|12.7|12.5|12.5|
|Average nominal interest rate on public domestic debt (in percent) 11/|67.0|65.5|14.6|14.6|14.6|14.6|14.6|
|Average interest rate on foreign-currrency denominated debt|12.0|12.1|10.9|10.9|10.9|10.9|10.9|
|Average nominal interest rate on NFA (in percent) 12/|12.0|12.1|10.9|10.9|10.9|10.9|10.9|
|<br>Average real interest rate (nominal rate minus change in GDP deflator, percent)|30.5|30.5|9.5|9.3|9.2|9.0|9.0|
|Average real interest rate on domestic debt (nominal rate minus change in domestic CPI, perc|61.0|61.0|11.2|11.1|11.1|11.1||
|<br>Average real interest rate on foreign debt debt (nominal rate minus change in U.S. CPI, percen|9.6|9.6|8.4|8.4|8.4|8.4||
|Change in the real exchange rate (Local currency per US dollar) 13/|-1.0|-0.5|-0.4|-0.8|-0.8|-1.0|-1.0|
|<br>Nominal depreciation of local currency (LC per dollar)|2.5|1.4|0.5|0.2|0.2|0.0|0.0|
|<br>Exchange rate (US dollar per LC)|0.0|0.0|0.0|0.0|0.0|0.0||
|Nominal appreciation of local currency (increase in US dollar value of local currency)|-2.4|-1.4|-0.5|-0.2|-0.2|0.0||
|Inflation rate (in percent)|6.0|4.5|3.5|3.5|3.5|3.5|3.5|
|US Inflation rate (in percent)|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)|2.8|3.8|5.0|5.0|5.0|5.0||
|<br>Base Money (percent of GDP)|7.7|7.7|7.7|7.7|7.7|7.7||

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