Improving Public Debt Management
In the OIC Member Countries
44
3 Public Debt Management in the OIC Member Countries This chapter examines public debt developments, debt structures and performance indicators
for public debt management in the OIC member countries. Section 3.1 describes how debt
levels and structures have evolved in the OIC member countries since 2006. The structure and
performance of public debt might depend on the underlying institutional framework.
Therefore, governance structures and public debt management strategies are discussed based
on a survey among OIC member countries in Section 3.2. Islamic finance has become an
important part of the financial systems in several OIC countries. Consequently, Islamic finance
practices in OIC member countries will be described and the advantages and disadvantages of
using sovereign Islamic bonds (sukuk) in public debt management will be discussed in Section
3.3.
3.1 Descriptive Statistics and Performance Indicators This chapter describes how levels of sovereign debt have evolved over time in the OIC member
countries. Moreover, it presents data on government budget balances and provides stylized
facts of the structure of sovereign debt, including but not limited to its maturity, currency
denomination and creditor structure. To examine whether developments depend on the level
of income, which is commonly regarded as a measure of a country’s stage of development, and
to identify potential common features, countries are grouped into low, middle, and highincome countries. Furthermore, countries are grouped according to the OIC classification into
the Arab, African and Asian region.
3.1.1 Public Debt Dynamics Figure 31 shows the evolution of sovereign debt as a percentage of GDP for the OIC member
countries over the period 20062015 including projections until 2017. The upper panel of
Figure 31 shows two different measures of average debt levels. The blue line corresponds to
the unweighted average of public debt relative to GDP across OIC countries. The red line
displays the ratio of the sum of public debt in all OIC countries relative to GDP of all OIC
countries. After a moderate decline between 2006 and 2012, the average debttoGDP ratio in
the OIC member states started to increase slightly in 2013. The average debttoGDP ratio
increased from 36.7% in 2012 to 46.1% in 2015 and is projected to rise to 51.1% in 2017. This
is a substantial increase over this short time period.
Since 2006 the average debttoGDP ratio in high income OIC countries has been lower than in
lowand middleincome countries (see lower left panel of Figure 31). Average debttoGDP
ratios in lowand middleincome countries are at similar levels in most years. Average debttoGDP ratios have started to increase across all income groups after 2013. The highest
average debttoGDP ratios are expected in lowincome countries in the next years, while
average debttoGDP ratios in the middleincome countries are expected to decrease. The highincome countries are expected to experience the largest increase in the average debttoGDP
ratio. Different dynamics can also be observed among the regional country groups: debt ratios
in the African group have substantially decreased between 2006 and 2009 and have been only
slightly rising again afterwards. Several African countries have been granted debt relief or
restructuring under the Heavily Indebted Poor Countries (HIPC) Initiative or by external
bilateral and multilateral creditors over the last decade.7 The average debttoGDP ratio in the
7 On sovereign debt restructurings, see, e.g., Das et al. (2012).