Improving Public Debt Management
In the OIC Member Countries
25
international investors to provide financial resources. These impediments are reinforced if the
borrower is a sovereign whose likelihood to repay does not only depend on its abilitytorepay,
but also on its willingnesstorepay. Hence, the share of concessional debt in total public debt
is a key figure in a country’s public debt structure. It shows whether a country is able to issue
bonds on domestic or external markets or whether it depends on the willingness of
international institutions and other governments to supply funds. Figure 26 displays the
average grant element inherent in public debt. The grant element of a loan is a measure of its
concessionality. It is calculated as the difference between its nominal face value and the sum of
the discounted future debtservice payments (net present value) of the borrower, expressed as
a percentage of the nominal value of the committed loan. Hence, a loan entails a grant element
whenever the interest rate charged for a loan is lower than the discount rate. The grant
element has been rising over time and amounted to 50% in 2014. While grants are primarily
extended by official creditors, private credit contracts also have a small grant element on
average. Grants to lowincome countries are more generous than to middleincome countries.
Grants have been above the global average in SubSaharan Africa and the MENA countries.
Figure 2-6: Grant Element Worldwide
Sources: World Bank (2016) International Debt Statistics, calculations by the Ifo Institute.
0
20
40
60
%
1980 1985 1990 1995 2000 2005 2010 2015
Year
All creditors Official creditors Private creditors
0
10
20
30
40
50
60
%
1980 1985 1990 1995 2000 2005 2010 2015
Year
All Low income
Middle income
0
20
40
60
%
1980 1985 1990 1995 2000 2005 2010 2015
Year
All East Asia, Pacific
Europe, Central Asia Latin America & Carib.
MENA North America
South Asia Sub-Saharan Africa