2) Managing external debt using sustainability indicators
External debt management involves balancing resource mobilization and deployment as well as orderly repayment of future obligations. For sustainable debt management, policy makers need to project accuratedebt dynamics that are sensitive to the way the current account deficits are being financed. If borrowed resources are not used produ
Credit Rating Agency
A credit rating agency (CRA) is a company that
assigns credit ratings for
-issuers of certain types of debt obligations
-the debt instruments themselves
-even a country.
Three major global credit rating agencies
- Standard & Poor’s (S&P)
- Fitch IBCA
- Moody’s
credit rating
*Moody’s
21 levels (Aaa~C), If the level is lower t
the part of the total debt in a country that is owed to creditors outside the country
money owed to private commercial banks, other governments, or international financial institutions such as the IMF and World Bank
Foreign debt management
1) Risk management
currency and interest rate movements
frequent commodity price fluctuations
The debt crises of the early 1980’s
oil price hikes
- The directors voted to establish a subsidiary in Thailand
- Its initial estimates = 550 million Thai Baht(TB)
= $ 12.65 million (∵ spot rate = $0.023/TB)
- Now Blades has $2.65 million available
- The remaining $10 million (=TB434,782,609) should be obtained from other sources
- CFO prefers 'debt' to equity financing to raise the funds since Blades is a
Summary
The directors voted to establish
a subsidiary in Thailand
- Its initial estimates = 550 million Thai Baht(TB)
= $ 12.65 million (∵ spot rate = $0.023/TB)
- Now Blades has $2.65 million available
The remaining $10 million (=TB434,782,609)
should be obtained from other sources
CFO prefers 'debt' to equity financing to