# B. Indicators of Relative Indebtedness in the Region

Figure6clearlyshowstheunsustainabilityof Bulgaria's debt situation in 1989-the country's debt service obligations, which were met fully and on Lime, consumed 74.4 percent of total export earnings. For Hungary, the debt service to exports ratio incicabod marginally between 1989 and 1990 (from 44 to 47 percent) and has dropped sharply to around 30 percent since then. The debt reduction agreement together with non-payment of commercial obligations has lowered the ratio for Poland from 50 to 20 percentbetween 1989 and 1991. Romania's sharp decline in debt service ratio appears to follow a pattern similar to Bulgaria's, peaking a year earlier. (The background in each case is of course very different). The ratio for Romania now appears to be holding constant at about 2 percent of export earnings.

The followingcharts illustrate relative levels of indebtedness in the region, before and after the disappearance of the Soviet umbrella in 1990. The ratio of debt service to exports in Figure 6 has been chosen to shed more light on the information presented in Figure 5, to illustrate sustainability in addition to indebtedness.

Figure 5 shows that Poland's total debt/exports ratio was almost double that of Hungary in 1987. This ratio has Figure 5: **Ratio** of Total Debt to Total Exports* <!-- Start of picture text --> 600<br>500<br>400 RoC- gs<br>300<br>-<br>200 ^ ^ -<br>' °° 0 .-<br>I ,,<br>"; ' 1 1 .. 1ackn<br>0 qa cn W X<br>^4 TtlEn rh Onsf g srv^merreE<br>=W8.4 irowert U.=ft,Or* PM<br><!-- End of picture text -->

# C. Summary of Funds Flowing to the Region Post1989

Multilateral and bilateral financing has been the only "WY Hwssource of significant positive transfers to the region since ^ - *-C5fR 1989. However, after the adoption of the far-aching ref )rms supported by this financing, the supply response wiL ultimately depend on the interest displayed by the' -. _fore, qn private sector_ in a given country. It is widely WiU have to be the engine of growth in the region. A newlywledged that foreign direct investment and exports created enterprise will be dependent on foreign savings, foreign technology and foreign management methods if it wishes to penetrate non-traditional markets and pass through a successful transition to establish market-based links with other economies. Overall, the extent to which enough enterprises in a given economy have access to foreign capital or foreign investors, will have an important effect on economic performance. The table below shows the role of each type of creditor.

been declining for Poland and Hungary, remaining relatively constant for CSFR and sharply increasing fo. Bulgaria and Romania. The policy change adopted by Romania with regard to external debt after 1990 is particularly evident in Figure 5. The debt reduction granted to Poland in 1990 by the Paris Club reduced the ratio for Poland by about 90 percentage points compared to the previous year.

_Table 2:_ Net Borrowing from Official **Sources'** (in US$million) Figuro **6:** Ratlo **of** Debt Service to Total Exports ***** <!-- Start of picture text --> 80<br>70<br>60<br>SO oa, cm--<br>40 ;'<br>30 ' -@--*P,m,d<br>20 __ \ _.-<br>10<br>I °<br>1987 1988 1989 1990 1991 1992<br>(El) CP)<br>C= ,"ffii-Ws 1 OltRomania '<br><!-- End of picture text -->

|1989|1990|1991|1992(e)|
|---|---|---|---|
|Hungary<br>-79|346|1,540|843|
|CSFR<br>84|365|2,264|1,059|
|Bulgaria<br>490<br>|-154<br>|915<br>|905|
|<br> <br>Poland<br>n.a.|<br>2,986-|<br>1,245-|1,750|
|Romania<br>-1,403|-20|1,295|1,475|
|Net Borrowing from ot<br>(US$million)|her Private|Creditors||
|1989|1990|1991|1992(e)|
|Hungary<br>818|677|<br>_550_|<br>443|
|<br>CSFR<br>0<br> <br>|221<br>|-201<br>|167<br>|
|Bulgaria<br>675<br>Pld<br>|-140<br>103|-150<br>40|-15<br>115|
|oan<br>na.<br>Pln<br>a|<br>0|<br>0|-<br>_-1_|
|-14|-52|125|125|

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