GDP, and yet continued to have uninterrupted access to commercial lending throughout the 1980s.

Figure 1l:Debt to GDP Ratio <!-- Start of picture text --> l 211<br>1 2~ ~<br>l 00____________ /with<br>I -*- 0<br>80 1 U<br>t* .o -0--- wfortunes<br>60 *<br>I4-0-Ar *-gentina<br>40_- Hgun gay<br>20 --<br>0 * a<br>qn tn to c a) CD<br>c c c co co co<br>a, CD as a) C C a)<br>Source: Staff estifmtes based on IIF Reports.<br><!-- End of picture text --> Detailed information on actual interest rates paid on different types of loans throughou **t** he 1980s is very hard toobtain. Both commercial banks and country authorities acknowledge that spreads for CEE sovereign debtors were often negative for trade lines and general purpose loans, reaching over 100 basis points below LIBOR in many cases. The following chart provides a rough indication of _the favorable interest rates that were enjoyed under the Soviet umbrella, in spite of the high debt ratios._ It traces the gross interest payments in a given period as a percentage of the average total extemal debt, relative to the average six-month dollar LIBOR.

In 1988 and 1989, all countries in the region average interest rates below LIBOR (Bulgaria paid the lowest). This trend reversed in 1990. Poland is the only country to register actual rates below LIBOR in 1991 and 1992, but this is due to non-payment of obligations.

**Figure 2: Average Interest Rate on Commercial Debt**

<!-- Start of picture text --> 7 Ha--- y<br>C 6. -.<br>u 54 - * CSFR<br>e 4 .<br>4-~~~~~~~~~~~~~~~~~~~~~~4<br>0. 3 . Poland<br>2 . * uSS LBOR<br>1 (6 month<br>0 0) c i - - - verage)<br>0 oa 0co 4<br>CD 0) 0)~~~~~~~~~~~~~~~~ ~CD<br>Source: Staff estimates based on IF Re F rtst<br><!-- End of picture text --> The foilowing charts (Figs. 3 and 4) for Hungary and Bulgaria have been included to emphasize the point. Hungary hasbeen theregion's largestdebtortocommercial banks, but mainly due to its good debt servicing record, has been able to access large volumes of funds at below LIBOR in the second half of the 1980s. Bulgaria, which was perceived by bankers to be most closely associated the ex-USSR and therefore the main beneficlary of the "umbrella", enjoyed the largest negative spreads relative to US$LIBOR until 1989. The contrast in the relatdve of the two after 1989 is clearly seen in the figures. While LIBOR is declining from 1989-1992, the "average rate" for Bulgaria is on an upward trend. For Bulgaria, though, the information from 1990 onwards needs to be interpreted with caution. The below LIBOR reading for 1990 arises from non-payment of interest for 6 months of thatyear. After 1990, ithasbeencalculatedon thebasisof unpaidobigations. In contrastto Hungary,Bulgaria does _nothaveaccesstofunds_ attheratesindicatedfor 1991 and 1992 in Figure 5. For Hungary,rates relative to LIBOR are declining after 1990, i.e. following the same pattern as the underlying cost of funds.

<!-- Start of picture text --> Figure 3. Huncary<br>Averaae Interest rare on external<br>debt<br>1 0-<br>9<br>8<br>, 6 7 Hray<br>6 6 LI<br>5 S n-tSSLIOR<br>4 4 average)<br>2<br>1<br>° I<br>co c 0 ^<br>Source Staff estinstes based on IIF reports<br><!-- End of picture text --> _Flqure 4: Bulearle_ Average Interest rate on external debt <!-- Start of picture text --> 8!Bli<br>4.<br>C 6*<br>- O USSL113R<br>4 (6 nonth<br>2<br>0 4-; II<br>11) co<br>a0 CD<br>0) )<br>Source: Staff emaMtes b;d on I IFCountry Reports<br><!-- End of picture text --> 3