is linked to the rate in the ecb ’ s main refinancing operations. if the ecb increases its rates, the costs will also rise for financial institutions over the remaining life of the operations. second, the ecb can at any point withdraw this liquidity through liquidity - absorbing operations. in addition, credit institutions have the option of early repayment of the liquidity to the ecb after one year. some still fear that the generous provision of central bank liquidity will lead to a considerable erosion of the value of money. let me emphasise here that, in order to judge the liquidity situation in the economy, one should look not at the central bank ’ s balance sheet, but at the aggregated balance sheet of the euro area banking sector. ecb liquidity is a very special form of money. it can first of all simply be used to make payments between banks with accounts at the ecb or to fulfil minimum reserve requirements. there is no automatic mechanism which converts this liquidity into credit or asset purchases. lending and purchasing decisions are made by the banks alone, on the basis of their financial situation, their risk aversion and the demand for credit from the real economy and households. we can also see that euro area inflation expectations remained stable both before and after the three - year operations. it is true, however, that all central bank operations involve credit risk. this applies to both standard and non - standard measures, in economically good as well as bad times. for this reason, every central bank operation is covered by collateral. the quality of this collateral is very carefully evaluated on an ongoing basis by our internal risk management team. large haircuts are made, and the credit amount is thus oversecured. in the case of the credit claims recently added to the list of eligible collateral, the haircut amounts to 53 % on average, and reaches up to 75 % in individual cases. it is also true that the non - standard measures have resulted in an increase in the now much discussed target2 balances of some national central banks in the eurosystem. the deutsche bundesbank, for example. the target2 net balance of the deutsche bundesbank vis - a - vis the ecb stood at €644 billion in april. contrary to certain reports, however, the target2 imbalances do not indicate that urgently needed funds are flowing out of countries such as germany. in actual fact, excess liquidity is available

bank shows that the region ’ s foreign currency - denominated debt as a share of total debt reached approximately 60 % in 2017. most of the increase in foreign - currency debt can be attributed to the increasing issuance of eurobonds. a 2in 2014, glencore had lent chad ’ s oil company around usd1, 45 billion, in a move to secure access to the country ’ s oil. however, the decline in the oil price later that year left the sovereign struggling to meet the repayment schedule. by the end of 2016, glencore held 98 per cent of chad ’ s external commercial debt. eighty - five per cent of chad ’ s oil proceeds – its primary source of revenue – was directed towards paying glencore back. mustapha s. and prizzon a., “ africa ’ s rising debt – how to avoid a new crisis ”, october 2018 page 2 of 4 large amount of these eurobonds are set to mature in 2019 - 2020 and in 2024 - 2025, which may pose substantial refinancing risks in the foreseeable future, especially if countries ’ fiscal positions remain weak4. nearly 90 % of the region ’ s eurobonds are denominated in us dollars, which further raise currency and interest rate risks and the potential for tighter global financial conditions in global settings clouded by significant downside risks. it is also important to consider fiscal risks posed by state - owned enterprises ( soes ). in some instances, soe liabilities have reached worrisome levels of 10 % of gdp or more in countries such as cameroon, ghana and south africa, threatening government ’ s debt sustainability and potentially crowding out social spending ( botswana, cabo verde, madagascar ) 5. the dominance of soe debt in the banking system is a considerable financial stability risk in countries that don ’ t have deep financial markets. these challenges also highlight the need for countries to strengthen debt management practices and improve transparency, which is fundamental to sustainable financing. addressing these challenges would require countries to make tough fiscal choices to prevent debt burdens from becoming unsustainable. fast - growing countries that face elevated debt vulnerabilities would also need to prioritise rebuilding buffers, including through structural reforms and improvement in fiscal frameworks. there is wide consensus that countries need to raise more domestic revenue to make debt financing more sustainable. there also needs to be a greater focus on improving the efficiency of public spending in such a way that