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43
EXTERNAL DEBT POSITION OF
THE CENTRAL ASIAN COUNTRIES: A RETROSPECTIVE AND COMPARATIVE ANALYSIS
Munim HASANOV
Ph.D. (Econ.), Assistant Professor at the Chair of Economics and Finance Management, Civil Servant Advanced Training Institute (Dushanbe, Tajikistan)
Introduction
The national economy of each of the Central Asian countries aims to create conditions that ensure a satisfactory standard of living for its population, to the extent available resources allow, based on sustainable development. According to its landmark definition, sustainable development is "development that meets the needs of the present without compromising the ability of future generations to meet their own needs" (italics mine.—M.H.).1 In other words, future generations should not have to pay for the counterproductive economic and other activity of the present generation. Here it is worth noting that external debt burden is among the factors that have a detrimental impact on such vitally important state budget-financed spheres as public health, education, social security, etc.
1 World Commission on Environment and Development. Our Common Future, Oxford University Press, 1987.
A review and analysis of the sources shows that, in the past, researchers in the Central Asian countries essentially ignored the problem of external debt and did not offer methods to resolve it. There are very few analytical publications on this subject, while the media provides only sparse coverage of external debt. The reasons for this situation are as follows:
(1) this problem is relatively new; it did not emerge until the Central Asian countries declared their independence in 1991;
(2) before the beginning of the 2000s, it was very difficult or practically impossible to obtain reliable information on the external debt stock of the Central Asian countries, including from internal sources;
(3) analysts and researchers were loath to deal with this problem, since public discussion of it was not encouraged.
1. External Debt Burden as a Reason for the Global Financial and Economic Crisis
A large number of researchers point to the following reasons for the world financial and economic crisis of 2008-20102:
2 See: M. Hasanov, "The World Financial and Economic and its Impact on Tajikistan," Central Asia and the Caucasus, Volume 11, Issue 2, 2010.
■ Massive provision of mortgage loans to subprime borrowers with low income or a blemished credit history in the U.S.; the share of this country comprises approximately one quarter to one third of the gross world product, which explains its significant influence on the worldwide financial and economic processes;
■ Imbalances between the real and financial sectors of the economy, and also in the sources of profit acquired by corporations (particularly American).3 "For example, world GDP in 2006 was $48.4 trillion, while financial fixed assets (shares, bonds and commercial bank assets in the aggregate) were estimated at $194.5 trillion, i.e., an amount more than 4 times larger than GDP. For comparison...: in 1980, the ratio of financial fixed assets to world GDP was 109%. The excess of assets over real production is particularly large in developed countries: 4.3 times in the U.S. and almost 5.5. times in the EU, whereas in developing European countries ... the ratio was 1 to 14" (italics mine.—M.H.).4 "According to estimates, for every dollar circulating in the real sector of the world economy there is an average of about $50 in the financial sector (italics mine.—M.H.)."5
In 50 years (from 1947 to 1997), the share ofprofits earned by U.S. corporations from the largely speculative financial sector increased 3.5 times, while the share of profits from the real sector of the national economy (which is largely responsible for meeting effective demand and for the people's quality of life) decreased 1.5 times;
■ Rising world hydrocarbon prices. For example, whereas the price of 1,000 cu m of natural gas imported into Tajikistan in 2007 amounted to $100, in 2008, it was $145, and in 2009, $240, that is, in two years (from 2007 to 2009), it increased 2.4 times. As for rates for 1 kW/ h of electricity, they increased as follows: in 2002, its cost was equal to $0.005, in 2009 to $0.016, and in 2010 to $0.035. Thus, compared to 2002, in 2009, rates increased 3.2-fold, while in 2010—7-fold.6
It should be noted that an increase in the price of energy resources has become an extremely widespread phenomenon in the Central Asian countries. For example, in 2010, this index amounted to 32% in Uzbekistan (a country that produces around 60 bcm of natural gas and 8 million tons of gas condensate annually, which ranks it 8th in the world),7 to 16% in Tajikistan, and to 15% in Kyrgyzstan8;
■ Rising world food prices. This especially applies to the price of grain due to its wide use for the production of motor fuel in the U.S. and a number of other countries. For example, in 2010, 416 million tons of grain were gathered in the U.S., 119 million tons (or 28.6%) of which were used to produce bioethanol. This amount of grain would be enough to meet the annual needs of 350 million people.9 And here is another example: one ton of corn, which is needed to produce the fuel to fill the tank of a powerful sports car, would be enough to feed an aver-
3 Here and below we use data and particular provisions from the following report: Mirovoy finansovyy krizis i Tadzhikistan, Workshop Materials, NDPT, Dushanbe, 2009, 117 pp.
4 Gosudarstvennaia sluzhba, No. 3, 2009, p. 17.
5 V.I. Kushlin, "Innovatsionnye faktory ekonomicheskogo razvitia v sovremennykh usloviakh," in: Gosudarstven-noie regulirovanie ekonomiki i povyshenie effektivnosti deiatel'nosti subiektov khoziaistvovania, Fifth International Workshop on State Regulation of the Economy and Improvements in Economic Efficiency, Collected Reports, Part I, Academy of Management under the President of the Republic of Belarus, Minsk, 2009, p. 379.
6 See: Strategy of the Economic Development and Business Support Program for 2010-2011, Branch of the Open Society Institute-Assistance Fund in Tajikistan, Dushanbe, 2010.
7 [http://www.profi-forex.org], 22 February, 2012.
8 See: Growth Returning to Emerging Europe and Central Asia, Press Release, WB, Washington, 2011, 433/ECA.
9 [http://embacuba. cubaminrex/.cu/Kazajstanrus], 3 February, 2011.
age African for one year.10 So it comes as no surprise that world wheat prices rose by 81% between July 2010 and February 2011.11
By March 2010, the world food situation that had been developing over the past 20 years looked as follows:
(1) the highest price index for food products was reached;
(2) the highest price for beef was established;
(3) the daily allowance had increased—by 50 billion kcal in Australia, Canada, and Russia, to 500 kcal in Brazil, Mexico, and the U.S., and to 1.5 trillion kcal in India and China.12
In 2010, the highest rise in food prices in Central Asia occurred in Kyrgyzstan (by 27%). Tajikistan (by 13%), and Kazakhstan (by 10%); in Uzbekistan, they rose very slightly (by 2%)13;
■ Increase in public and private debt. According to Nobel Prize-Winner in Economics Christopher A. Pissarides the 2008-2010 crisis "was unusual because everything started with the financial sector and then spilled over into debt problems (italics mine.—M.H. )."14 Compared to 1982, the total debt of the U.S. federal government, companies, and the population increased by $2 trillion (40%) in 1985, $9 trillion (2.8 times) in 1991, $11 trillion (3.2 times) in 1994, $14 trillion (3.8 times) in 1997, $20 trillion (5.0 times) in 2000, $26 trillion (6.2 times) in 2003, and $36 trillion (7.2 times) in 2006. While U.S. public debt was $5.8 trillion (40.8% of GDP) in 2006, it had reached almost $14 trillion by the end of 2010 and was equal to GDP.15 The maximum (critical) value of the debt-to-GDP ratio, which characterizes a country's financial and economic security, is 50.0% 1 In the past ten years, U.S. external debt has increased more than three-fold.
"As of the end of March 2010, U.S. external debt to China amounted to $895.2 billion, having increased by $17.7 billion compared to February.
".. .China is still the largest holder of American debts.
"...U.S. debt to Japan compared to February (2010—my clarification.—M.H.) increased to $16.4 billion in March, reaching $784.9 billion. America's debt to England increased by $45.5 billion, amounting to a total of $279 billion.
"The U.S. Department of the Treasury said that in March 2010 promissory notes totaling $157.7 billion were sold abroad. Of this amount, nongovernmental structures acquired $125 billion in debts, and government bodies—$32.7 billion (italics mine.—M.H.)."17
Moreover, the U.S. and many EU member states do not adhere to the macroeconomic and financial limits they have posed on themselves. For example, for the member countries of the European Currency Union, the maximum allowable state debt and state budget deficit to GDP are 60% and 3%, respectively. Of the 27EU member states, only 2 (Luxemburg and Finland) have been able to adhere to the maximum allowable debt-to-GDP ratio. At the beginning of 2011, the actual value of this criterion for Greece, for example, reached 142.8%.1S
10 [http://news.mail.ru/economics], 3 July, 2011.
11 [www.kt.kz], 8 February, 2011.
12 [http://news.mail.ru/economics], 3 July, 2011.
13 See: Growth Returning to Emerging Europe and Central Asia.
14 [http//www.rosbalt.ru/], 30 September, 2011.
15 [http://top.rbc.ru/finances/], 3 June, 2010.
16 See: M.M. Hasanov and H.D. Saidhojaev, Vneshni dolg: mirovye tendentsii i ikh prilozhenie k ekonomike Tadzhikis-tana, 3rd edition (revised and enlarged), NPITsentr, Dushanbe, 2004, 67 pp.
17 [http://news.mail.ru/politics/3825277/].
18 See: Transition Report 2011. Crisis in Transition: The People's Perspective, EBRR, 2011, 154 pp.
In the past period, the ratio of household debt to household income also increased. For example, in forty years (1959-1999) the ratio of private household debt to income increased 1.8 times; in 2003, more than 2.1 times, and in 2007, more than 2.5 times.
2. The Need for Evaluating the External Debt Position of Countries; Existing Method, its Shortcomings, and Proposals to Improve It
What gets measured gets done.
Tom Peters
Although "it is very obvious that the danger of extreme borrowing cannot be measured with mathematical accuracy.,"19 a system of criteria is nevertheless needed to evaluate the external debt position of countries.
The word "criterion," from the Greek krites, to judge, is usually understood as an index that reflects the degree to which the set goal can be achieved using the given means. Turning an index into criteria depends on the set goal, which could change at different times.
For example, in conditions of stable economic activity, the level of an enterprise's (company's) profitability is offered as a criterion, while in emergencies associated with eliminating the consequences of natural (for example, earthquakes) or man-made destructive phenomena (fires), a criterion might be the length of time it takes the enterprise to perform restoration work. So, "by weighing the goal against the means, and the results against the expenses, a criterion expresses the degree of expediency of achieving the goal using the available means and can be used to evaluate the performance of the system and its parts."20
A criterion must meet the following requirements:
(1) it must be measurable (quantitatively appraisable);
(2) it must reliably evaluate the phenomenon being examined and the feasibility of the set goal;
(3) its value must be determined using the available data and without significant material and time outlays;
(4) it must make economic (financial, physical, etc.) sense with respect to comparing the desirable and real state of the phenomenon being examined;
(5) it must take into account, to the extent possible, the interests of all the sides involved in the said phenomenon.
However, researchers often fail to observe the above-listed requirements. For example, in order to assess the efficiency and performance of the state power and local self-government systems, the following set of criteria is offered21:
19 A.G. Sarkisiants, Sistema mezhdunarodnykh dolgov, OOO DeKA, Moscow, 1999, 720 pp.
20 B.A. Binkin, V.I. Cherniak, Effektivnost upravleniia: nauka i praktika, Nauka Publishers, Moscow, 1982, 144 pp.,
illust.
21 See: A. Khokhlov, "Ratsionalnost i effektivnost gosudarstvennogo upravleniia," in: Sotsialnoe razvitie regiona: sostoianie, problemy, perspektivy, Collection of papers from the International Conference of Young Scientists on the Latest Changes and Urgent Problems in the Territorial Development of Contemporary Russia and the CIS Countries, ORAGS, Orel, 2006, pp. 3-6.
(1) degree of goal orientation;
(2) amount of time spent on solving managerial issues and performing managerial activity;
(3) way in which the state management system operates;
(4) degree of organizational complexity of the state management entity, its sub-systems and components;
(5) total (aggregate) outlays on maintaining and ensuring the operation of the state management system.
However, a few flaws should also be noted:
■ First, these criteria cannot be measured (apart from maybe No. 5).
■ Second, there are no precisely formulated goals regarding the functional efficiency of two (not one, as is indicated) systems, i.e. state power and local self-government, and, consequently, the dependence between them and the offered criteria.
■ Third, the criteria (particular Nos. 3 and 4) are not clearly defined.
■ Fourth, the criteria take into account the interests of only one of the systems. The interests of society, for which these systems have been created, are totally ignored.
Sometimes as many as 100 criteria (!) are offered for assessing the efficiency of investment projects22; such absurdities are reminiscent of the actions of the swan, the pike, and the crab in the well-known fable by Ivan Krylov.
A criteria system should consist of the necessary minimum but sufficient number of items, otherwise their possible variance could reduce the system to chaos.
At present, the following system of criteria is used to evaluate and analyze the external debt position of countries23:
K1 = Gross external debt (GED)/GDP with a maximum (threshold, critical) value of 50%;
K2 = GED/export earnings (EE) with a maximum value of 275%;
K3 = GED/EE service expenses with a maximum value of 30%;
K4 = GED/EE interest payment expenses with a maximum value of 20%.
In terms of financial resource deficit, all countries can be divided into three groups:
(1) countries with an extreme (high) debt (when the values of three of the four criteria listed above exceed 100 percent or more of their maximum values);
(2) countries with a moderate (average) debt (when the values of three of the four criteria amount to 60-100% of their maximum values);
(3) countries with a low (small) debt (when the values of three of the four criteria do not exceed 60% of their maximum values).
Nevertheless, this system of criteria for evaluating and analyzing the external debt stock of countries has a serious drawback. Export earnings (EE) are taken into account in the denominator of three of the four criteria, and the higher this index, the lower the values of K2, K3, and K4 will be; this gives countries a more favorable external debt position than is actually the case.
However, the export commodity structure must also be taken into account, which in Tajikistan, for example, continues to primarily comprise raw materials (cotton fiber and tobacco) with a preva-
See: Project Questionnaire. Project Risk. User Guide, Pro-Invest Consulting, Moscow, 1995, 81 pp.
22
23 See: A.G. Sarkisiants, op. cit.
lence of products with a low processing level (primary aluminum); for example, between 2003 and 2008, the average percentage of raw and other materials in the total volume of the countries' EE amounted to almost 85%, whereby machinery and equipment accounted for less than 2%.24
It should be noted that an imperfect export commodity structure is not only characteristic of Tajikistan, but also of almost all the Central Asian countries. For example, according to the year-end results of 2010, the EE of oil and metals from Kazakhstan amounted to $70 billion, which is equal to almost 47% of the country's GDP ($150 billion).25
Table 1 shows that in 2009, compared to 2007, EE in Tajikistan decreased by $457.9 million (or by 31.2%), and compared to 2008, by $396.0 million (or 28.2%). The reason for this in particular is the decrease in external demand and drop in world prices for primary aluminum; in 2005-2010, its percentage in EE decreased from 75.0% in 2006 to 58.3% in 2009.
At the same time, the share of hydroelectric power, in which Tajikistan is very rich and the export of which is extremely profitable in the spring and summer months, amounted to 6.3% in EE in 2009 and to only 0.3% in 2010.
In 2009, the production volume of primary aluminum in Tajikistan amounted to 360,000 tons, which was almost 40,000 tons (or 9%) less than in 2008. Compared with 2008 (393,400 tons totaling $1 billion 13 million), in 2009, its export volume (348,700 tons totaling $589.5 million) decreased by 44,700 tons, or by $423.5 million (see Table 1).
Table 1
Export Commodity Structure and Average Prices for Tajikistan's Main Export Commodities in 2005-2010
Indices 81 2005 2006 2007 2008 2009 2010
Export volume of primary aluminum, in tons 375,344 408,862 411,157 393,405 348,691 337,964
Export volume of cotton fiber, in tons 132,883 120,405 119,965 83,592 86,648 95,320
Total EE 908.717* 1,399.023 1,468.170 1,406.350 1,010.320 1,195.238
100.0 100.0 100.0 100.0 100.0 100.0
EE from primary aluminum 563.016 1,049.510 1,082.983 1,012.992 589.463 736.560
62.0 75.0 73.7 72.1 58.3 61.1
EE from cotton fiber *- 143.912 128.667 137.845 108.218 99.683 200.105
15.8 9.2 9.4 7.7 9.9 16.7 -i
24 See: Vneshneekonomicheskaia deiatelnost RT, Statistics Collection, Goskomstat, Dushanbe, 2009.
25 See: P. Svoik, "Dvadtsatiletie natsionalnogo suvereniteta dlia ekonomiki Kazakhstana: itogi i riski," Tsentralnaia Azia v fokuse, Information and Analytical Bulletin, No. 1, 2011, pp. 25-26.
Table 1 (continued)
2008 2009 2
EE from
hydroelectric power
52.555
49.015
59.619
59.748
63.475
5.8
3.5
4.1
4.2
6.3
3.442
0.3
EE from other commodities
149.234
171.831
187.724 225.392 257.700 256.131
16.4
12.3
12.8
16.0
25.5
21.4
Average export price of 1 ton of primary aluminum, $
1,500
2,567
2,634
2,575
1,691
2,179
Change rate (+ increase, -decrease) in average export price of 1 ton of primary aluminum, %
71.1
2.6
-2.2
-34.3
28.9
Average export price of 1 ton of cotton fiber, $
1,083
1,069
1,149
1,295
1,150
2,099
Change rate in average export price of 1 ton of primary aluminum, %
-1.3
7.5
12.7
-11.2
82.5
* EE is given in $m in the numerator, and the share in % in the denominator.
S o u r c e: The table was compiled based on data borrowed from the statistics collection Vneshneekonomicheskaia deiatelnost RT, State Statistics Board, Dushanbe, 2009.
^S -¿>
So in 2009, 96.9% of primary aluminum was exported, while only 11,300 tons, or 3.1% of its total production volume, was used within the country. By way of reference, we will note that high value added products, which high-quality rolled stock, foil, and molded articles, etc. can be qualified as, are sold in the world market at prices 2-4 times higher than primary aluminum.26
"One ton of primary aluminum that is not exported but used for manufacturing rolled metal increases the value added by $600 (italics mine.—M.H.).
26 See: Bank Statistics Bulletin, No. 3 (188), 2011.
"Exporting finished aluminum products instead of primary metal increases foreign exchange receipts into the republic manifold; furthermore, additional jobs are created for the unemployed workforce. This alleviates the unemployment problems, which is extremely important for Tajikistan."27
"There is a 10-12-fold price difference between cotton fiber and the cotton fabric made from it (based on 1 kg of fiber). If 40% of the cotton fiber produced is processed into yarn and fabric, the gross earnings from selling cotton products will increase approximately 2.1-fold... (italics mine.—MH.)."28
Whereas the average price of one ton of primary aluminum in the world market amounted to $2,575 in 2008, in 2009 it was equal to $1,691, that is, in one year, this index had dropped by $884, or 34.3%. The same essentially applies to cotton fiber, the average world price of which was $1,150 per ton in 2009, compared to $1,295 in 2008. So in one year the price of cotton fiber dropped by $145, or by almost 11.2% (see Table 1).
When summing up the above, it should be noted that in one year, in terms of primary aluminum and cotton fiber alone, EE decreased by $442 million,29 or by 38.5%.
In the fall of2009, the average world prices for these main export commodities of Tajikistan began to rise; compared with the beginning of the year, they increased from 7 to 12%.30 In the last 6 months of2009 and the beginning of 2010, the price of one ton of primary aluminum increased from $1,600 to $2,400, and of cotton fiber—from $800 to $1,60031 On the whole, the world price for cotton fiber rose in 2010 compared to 2009 by 82.5% and was equal to $2,099 (on average) and for primary aluminum—by 28.9%, amounting to $2,179 (see Table 1).
It should be noted that Tajikistan's production capacities could process up to 64,000 tons of raw cotton. But in 2010, only 10.4% of raw cotton (a little more than 30,000 tons) was sold in the internal market, whereby the total volume produced in the republic topped 300,000 tons?2
Keeping in mind the imperfect export commodity structure in the Central Asian countries, it would not be expedient to strictly peg the system of criteria for evaluating and analyzing their external debt position to EE. Therefore, we are offering a system that supplements the present one and makes it possible to carry out a more reliable evaluation and analysis using the criteria below:
Kl = GED/GDP, %;
K2 = GED/EE, %;
K31 = ED per capita/income per capita, %;
K4' = amount of official international reserves/GED, %.
The need for K31 is dictated by the fact that the external debt per capita index gives a better idea of the country's foreign economic dependence than its absolute value.33 In order to adhere to the comparability stipulations for the countries being analyzed, the average per capita value of the external debt must be correlated with per capita income.
As for K4', it should be noted that the ratio of official international reserves to the external debt is one of the criteria for evaluating and analyzing the external debt position of countries, for one of the functions of the former is servicing international payments and, primarily, the state external debt.
"The 1982 debt crisis, when many developing countries declared their inability to perform their external debt obligations (as a result of which the crisis, comparable in its severity to the Great De-
27 Biznes i politika, No. 16 (484), 2002.
28 Biznes i politika, Nos. 1, 2 (510, 511), 2002.
29 See: Vremia—dengi, No. 24 (024), 2001.
30 See: Asia-Plus, No. 1 (520), 2010.
31 See: Asia-Plus, No. 4 (523), 2010.
32 See: News Agency Asia Plus, 26 January, 2011.
33 See: S. Fischer, R. Dornbusch, R. Schmalensee, Economics, Second edition, McGraw-Hill, Inc., New York, 1988.
pression of the 1930s, developed), made it necessary to correlate official reserves with the country's external debt. This function is less important for developed economies with a free capital market, but it plays a significant role for developing countries with a low credit rating, which limits such access and leads to value appreciation of borrowed funds."34
International reserves determine ... whether a country can use its own reserves (or part of them) to settle its external debt.35
3. External Debt Position of the Central Asian Countries
If theGEDindex for 1997,calculated using the chaining method, is taken as 100.0% (see Table 2), its value in the CA countries (with the exception of Turkmenistan) changed as follows:
Table 2
External Debt Position of the Central Asian Countries in 1997-2009
Criteria and Indices 1
Year GED, $m GED Index, %* Rate of Change in GED Compared with Previous Years, %* K1; % K2, % K3, % Share of Soft Loans in GED, % Share of Multilateral Loans in GED, % Unit Volume of ED Per Capita, $** Unit Volume of ED Per Capita/GDP Per Capita, unit fraction**
2 3 4 5 6 7 8 9 10
Kazakhstan 1
1997 4,078 100.0 — 19 52 6 4 20 263 0.24
1998 6,084 149.2 49.2 28 89 14 4 20 399 0.37
1999 6,122 150.1 0.6 38 87 19 6 24 409 0.37
2000 12,433 304.9 103.1 73 118 32 3 12 299 0.24
2001 14,887 365.1 19.7 71 142 32 3 10 300 0.21
2002 17,981 440.9 20.8 77 151 35 3 9 316 0.21
^2003 22,767 558.3 26.6 78 149 35 3 8 394 0.24 1
34 T. Zolotukhina, "K voprosu ob opredelenii urovnia dostatochnosti ofitsialnykh zolotovaliutnykh rezervov," Voprosy ekonomiki, No. 3, 2002.
35 See: S. Fischer, R. Dornbusch, R. Schmalensee, op. cit.
Table 2 (continued)
- 2 3 4 5 6 7 8 9 10
2004 32,812 804.6 44.1 81 142 38 3 5 516 0.28
2005 43,354 1,063.1 32.1 84 139 42 2 2 427 0.22
2006 74,148 1,818.2 71.0 92 — 34 — — 562 0.26
2007 96,133 2,357.4 29.7 92 — 50 — — 551 0.24
2008 108,130 26,651.5 12.5 82 — 42 — — 680 0.29
2009 113,229 2,776.6 4.7 95 — 80 — — 882 0.37
^ Kyrgyzstan J
1997 1,341 100.0 — 79 196 11 35 29 288 1.11
1998 1,505 112.2 12.2 96 246 19 42 36 318 1.22
1999 1,736 129.5 15.3 148 322 20 46 38 361 1.35
2000 1,827 136.2 5.2 142 309 29 48 40 375 1.34
2001 1,717 128.0 -0.6 118 296 31 57 45 349 1.20
2002 1,851 138.0 7.8 120 274 19 63 48 373 1.29
2003 2,024 150.9 9.3 109 246 20 68 50 504 1.65
2004 2,107 157.1 4.1 99 186 14 74 54 415 1.28
2005 2,032 151.5 -3.5 86 160 10 81 54 396 1.23
2006 2,382 177.6 17.2 85 — 6 — — 459 1.40
2007 2,401 179.0 0.8 64 — 7 — — 458 1.30
2008 3,194 238.2 33.0 72 — 12 — — 604 1.59
2009 4,002 298.4 25.3 63 — 14 — — 748 1.94
^ Tajikistan
1997 1,065 100.0 — 93 138 6 52 5 185 1.52
1998 1,243 116.7 16.7 98 193 14 50 8 212 1.67
1999 1,275 119.7 2.6 124 183 11 52 12 212 1.63
2000 1,034 97.1 -18.9 110 129 8 65 18 169 1.22
2001 1,058 99.3 2.3 103 151 12 71 25 169 1.11
2002 1,142 107.2 7.9 97 135 11 69 27 179 1.09
2003 1,152 108.2 0.9 79 101 7 75 34 177 0.99
2004 ■N. 910 85.4 -21.0 46 62 7 79 55 137 0.70 -y y
Table 2 (continued)
1 2 3 4 5 6 7 8 9 10 11 1
2005 1,022 95.9 12.3 46 59 5 73 51 151 0.73
2006 1,154 108.4 12.9 41 — 5 — — 167 ,0.77
2007 1,120 105.2 -2.9 31 — 2 — — 159 0.69
2008 1,371 128.7 22.4 27 — 7 — — 190 0.78
2009 1,691 158.8 23.3 36 — 12 — — 229 0.92
^ Uzbekistan
1997 2,858 100.0 — 20 72 13 10 7 122 0.24
1998 3,315 115.9 16.0 22 97 10 14 8 139 0.26
1999 4,882 170.8 47.3 29 156 18 17 8 202 0.37
2000 4,634 162.1 -5.1 34 135 26 30 10 189 0.34
2001 4,877 170.6 5.2 44 150 27 30 11 197 0.34
2002 4,798 167.9 -1.6 50 157 25 33 12 401 0.32
2003 4,921 172.2 2.6 49 132 21 34 13 191 0.32
2004 4,833 169.1 -1.9 40 — — 36 15 194 0.29
2005 4,226 147.9 -12.6 30 — — 38 19 188 0.24
2006 3,892 136.2 -7.9 23 — — — — 162 0.20
2007 3,871 135.4 -0.54 17 — — — — 148 0.19
2008 3,983 139.4 2.9 13 — — — — 147 0.18
2009 4,109 143.8 3.2 13 — — — 149 0.17
* Calculated by the author on the basis of the data in the second column of this table. ** Calculated by the author on the basis of reports on Tajikistan's external debt for 2008-2010 and the TransMONEE 2011 Data Base prepared by the regional UNICEF office for the Central Eastern Europe/CIS countries.
S o u r c e: Table compiled on the basis of reports on Tajikistan's external debt for 2008-l 2010 prepared by the Ministry of Finance of the Republic of Tajikistan. J
1998—from 112.2% in Kyrgyzstan to 149.2% in Kazakhstan, with intermediate values of 115.9% in Uzbekistan and 116.7% in Tajikistan;
1999—from 119.7% in Tajikistan to 170.8% in Uzbekistan, with intermediate values of 129.5% in Kyrgyzstan and 150.1% in Kazakhstan;
2000—from 97.1% (i.e. that year GED decreased by 2.9% compared to 1997) in Tajikistan to 304.9% in Kazakhstan, with intermediate values of 136.2% in Kyrgyzstan and 162.1% in Uzbekistan;
■ 2001—from 99.3% in Tajikistan to 365.1% in Kazakhstan, with intermediate values of 128.0% in Kyrgyzstan and 170.6% in Uzbekistan;
■ 2002—from 107.2% in Tajikistan to 440.9% in Kazakhstan, with intermediate values of 138.0% in Kyrgyzstan and 167.9% in Uzbekistan;
■ 2003—from 108.2% in Tajikistan to 558.3% in Kazakhstan, with intermediate values of 150.9% in Kyrgyzstan and 172.2% in Uzbekistan;
■ 2004—from 85.4% in Tajikistan to 804.6% in Kazakhstan, with intermediate values of 157.1% in Kyrgyzstan and 169.1% in Uzbekistan.
■ 2005—from 95.9% in Tajikistan to 1,063.1% in Kazakhstan, with intermediate values of 147.9% in Uzbekistan and 151.5% in Kyrgyzstan;
■ 2006—from 108.4% in Tajikistan to 1,818.2% in Kazakhstan (i.e. compared to 1997, the GED of this country increased almost 18.2-fold), with intermediate values of 136.2% in Uzbekistan and 177.6% in Kyrgyzstan;
■ 2007—from 105.2% in Tajikistan to 2,357.4% in Kazakhstan (i.e. compared to 1997, the GED of this country increased almost 23.4-fold), with intermediate values of 135.4% in Uzbekistan and 179% in Kyrgyzstan;
■ 2008—from 128.7% in Tajikistan to 2,651.5% in Kazakhstan (i.e. compared to 1997, the GED of this country increased almost 26.5-fold), with intermediate values of 139.4% in Uzbekistan and 238.2% in Kyrgyzstan;
■ 2009—from 143.8% in Uzbekistan to 2,776.6% in Kazakhstan (i.e. compared to 1997, the GED of this country increased almost 28.8-fold), with intermediate values of 158.8% in Tajikistan and 298.4% in Kyrgyzstan.
So in the 13 years between 1997 and 2009, in terms of GED index, Tajikistan occupied a favorable position among the Central Asian countries for 9years (1999—2007), while for 10years (1998, 2000—2009) an unfavorable position was observed in Kazakhstan.
In 1997-2009, the GED rates in the Central Asian countries had the following trends (see Table 2):
■ in 1998 compared to 1997, the rates increased from 12.2% in Kyrgyzstan to 49.2% in Kazakhstan, with intermediate values of 15.9% in Uzbekistan and 16.7% in Tajikistan;
■ in 1999 compared to 1998, there was an increase from 0.6% in Kazakhstan to 47.3% in Uzbekistan, with intermediate values of 2.6% in Tajikistan and 15.3% in Kyrgyzstan;
■ in 2000 compared to 1999, there was a decrease of 18.9% in Tajikistan and 5.1% in Uzbekistan to an increase of 103.1% in Kazakhstan, with an intermediate value of 5.2% in Kyrgyzstan;
■ in 2001 compared to 2000, there was a decrease of 0.6% in Kyrgyzstan to an increase of 2.3% in Tajikistan and 19.7% in Kazakhstan, with an intermediate value of 5.2% in Uzbekistan;
■ in 2002 compared to 2001, there was a decrease of 1.6% in Uzbekistan to an increase of 7.8% in Kyrgyzstan and 20.8% in Kazakhstan, with an intermediate value of 7.9% in Tajikistan;
■ in 2003 compared to 2002, there was an increase of 0.9% in Tajikistan to 26.6% in Kazakhstan, with an intermediate value of 2.6% in Uzbekistan to 9.3% in Kyrgyzstan;
■ in 2004 compared to 2003, there was a decrease of 21.0% in Tajikistan and 1.9% in Uzbekistan to an increase of 4.1% in Kyrgyzstan and 44.1% in Kazakhstan;
■ in 2005 compared to 2004, there was a decrease of 12.6% in Uzbekistan and 3.5% in Kyrgyzstan to an increase of 12.3% in Tajikistan and 32.1% in Kazakhstan;
■ in 2006 compared to 2005, there was a decrease of 7.9% in Uzbekistan to an increase of 12.9% in Tajikistan and 71.0% in Kazakhstan, with an intermediate value of 17.2% in Kyrgyzstan;
■ in 2007compared to 2006, there was a decrease of 2.9% in Tajikistan and 0.5% in Uzbekistan to an increase of 0.8% in Kyrgyzstan and 29.7% in Kazakhstan;
■ in 2008 compared to 2007, there was an increase of 2.9% in Uzbekistan to 33.0% in Kyrgyzstan, with an intermediate value of 22.4% in Tajikistan;
■ in 2009 compared to 2008, there was an increase of 3.2% in Uzbekistan to 25.3% in Kyrgyzstan, with an intermediate value of 4.7% in Kazakhstan and 23.3% in Tajikistan.
So in the 13 years being analyzed, there was a decrease in GED rates in the Central Asian countries: for 6years (2000, 2002, 2004-2007) in Uzbekistan, with values from 12.6% to 0.5%; for 3years (2000, 2004, and 2007) in Tajikistan, changing from 21.0% in 2004 to 2.9% in 2007; and for 2 years in Kyrgyzstan, with intermediate values of 3.5% in 2005 and 0.6% in 2001.
Unfortunately, GED increased all these years in Kazakhstan, changing from 0.6% in 1999 to 103.1% in 2000, for 10years in Kyrgyzstan, with values ranging from 4.1% in 2004 to 33.0% in 2009, for 9years in Tajikistan, changing from 0.9% in 2003 to 23.3% in 2009, and for 6 years in Uzbekistan, with intermediate values of 2.6% in 2003 and 47.3% in 1999.
Table 2 shows that during the 13 years being examined, Kl exceeded its maximum value (50%) in the following countries:
■ in all 13 years in Kyrgyzstan, with values ranging from 63% in 2009 to 148% in 1999;
■ for 10 years (2000-2009) in Kazakhstan, with intermediate values of 71% in 2001 and 95% in 2009;
■ for 7 years (1997-2003) in Tajikistan, changing from 79% in 2003 to 124% in 1999.
In Uzbekistan, K was only equal to its maximum value in 2002.
So in the period being analyzed, Uzbekistan had the best position in terms of K1, and Kyrgyzstan the worst.
As Table 2 shows, K2 exceeded its maximum value (275%) only in Kyrgyzstan: 309% in 2000 and 322% in 1999. In terms of this criterion, the position of the Central Asian countries being examined can be evaluated as follows:
■ best in Kazakhstan and Uzbekistan;
■ average in Tajikistan;
■ unfavorable (worst) in Kyrgyzstan.
Table 2 shows that K3 exceeded its maximum value (30%) in the following countries:
■ in Kazakhstan for 8 (2000-2007) of the 11 years under review, with values ranging from 32% in 2001 to 50% in 2007;
■ in Kyrgyzstan only once—in 2001 and only by 1%.
Uzbekistan and particularly Tajikistan held a favorable position.
I would like to clarify that Tajikistan's indices for K2 and K3 should not be considered an achievement, since, as noted above, this was associated with the imperfect method for calculating the values of these criteria.
In 1997-2005, the share of soft loans in GED (see Table 2) of the Central Asian countries changed as follows:
■ from 2% in 2005 to 6% in 1999 in Kazakhstan;
■ from 10% in 1997 to 38% in 2005 in Uzbekistan;
■ from 35% in 1997 to 81% in 2005 in Kyrgyzstan;
■ from 50% in 1998 and 79% in 2004 in Tajikistan.
It should be noted that there is no criterion for unequivocally evaluating the external debt position of countries in terms of share of soft loans in GED. Nevertheless, the above analysis makes it possible to draw the following conclusion (although it is open to dispute): the better the country's systemic position (macroeconomic, financial, and social), the lower the share of soft loans in its GED, and vice versa. The thing is that lenders (particularly multilateral) offer loans based to a certain extent on humane considerations.
So, the low share of soft loans in the GED of Kazakhstan and Uzbekistan indirectly shows the relatively better systemic position of these countries, while the high share in Tajikistan and Kyrgyzstan indicates an unfavorable position.
As is known, the external debt can be bilateral and multilateral. In the former case, the recipient country owes another country or its economic entity (bank, company, and so on), i.e., lenders, money. In the latter case, international (the World Bank, IMF) and regional (Asian and Islamic Development Banks, EBRD, European Investment Bank, and Eurasian Bank) financial and economic organizations act as lenders.
Debt is always considered a burden, but according to the principle of "choosing the lesser of two evils," a multilateral debt is preferable to a bilateral debt, since "the strategy of granting loans to a particular country both from governments and international organizations and from commercial structures has always been primarily determined first by political, then by economic, and only then by humane considerations... Confirmation of the political inclination of the IMF's actions, as of other institutions too, is the fact that after the collapse of the Soviet Union, the three Baltic states—Estonia, Latvia, and Lithuania—were the first (apart from Russia) to receive loans. For the first two years, their total amount was more than the aggregate of similar loans issued to Belarus, Moldova, Kazakhstan, and Kyrgyzstan, which in terms of most indices require external infusions more than others. Of course, we can say that the internal fiscal policy of the Baltic states was most conducive to the IMF demands. But there can be no doubt that the possibility of creating a buffer in the northeast of Russia was the main motive stimulating rapid organization of financial support from the IMF."36
"Informal groups of creditors, such as the Paris and London clubs, also have political overtones. There have been instances in the practice of these clubs when the insufficiency of critical macroeconomic criteria, which makes it impossible to directly reconsider external debt amounts, was covered by political decisions. This happened, for example, in May 1990 with Costa Rica, the successful completion of talks on reduction of the external debt with which was predetermined by the U.S.'s geopolitical interest. In 1994, a large part of Poland's debt was written off keeping in mind its important strategic position in Eastern Europe. Writing off Egypt's debt the same year was initiated by the peace with Israel."37
Well-known Russian economist A. Shokhin thinks that ".for us debts are a political problem and the conditions should be political."38 And although this statement applies to Russia, it is nevertheless very apt for the Central Asian countries too.
Keeping in mind the above, we suggest accepting the following principle: the higher the share of multilateral loans in the GED and, consequently, the lower the share of bilateral debts of the recipient country, the better, and vice versa.
The share ofmultilateral loans in the GED of the Central Asian countries (see Table 2) for 19972005 was as follows:
36 A.G. Sarkisiants, op. cit.
37 Ibidem.
38 Quoted from: V. Kudrov, "Rossiyskaia ekonomika na novykh putiakh," Voprosy ekonomiki, No. 2, 2002.
■ an increase from 29% in 1997 to 54% in 2004-2005 in Kyrgyzstan;
■ an increase from 5% in 1997 to 55% in 2004 in Tajikistan;
■ an increase from 7% in 1997 to 19% in 2005 in Uzbekistan;
■ a decrease from 24% in 1999 to 2% in 2005 in Kazakhstan.
Keeping in mind the above-mentioned principle, the conclusion can be drawn that Kyrgyzstan, and to a certain extent Tajikistan, is in the best position in terms of this index, Kazakhstan has an average position, and Uzbekistan is in an unfavorable position.
It should be noted that the indices of the share of external debt per capita we calculated on the basis of sources39 and presented in Table 2 are ambiguous. According to other sources, their values for individual countries differ greatly from the first (see Table 3).
For example, according to The Economist, in 2007, Kazakhstan's external debt per capita amounted to almost $551, while according to our calculations made on the basis of the above sources, it amounted to $6,244. So there is an 11.3-fold difference between the indices obtained from two different sources.
Table 3*
Share of External Debt Per Capita of Kazakhstan and Uzbekistan according to The Economist in 2000-2011 ($)
^—Year Kazakhstan Uzbekistan
2000 299 122
2001 300 103
2002 316 148
2003 394 164
2004 516 159
2005 427 149
2006 562 138
2007 551 130
2008 680 103
2009 882 105
2010 1,189 110
2011 1,539 120
¡Г * Here the figures are rounded off. J
V J
39 See: Report on the External Debt of Tajikistan for 2007, Ministry of Finance of the Republic of Tajikistan, Dushanbe, 2008, 26 pp.; Report on the External Debt of Tajikistan for 2009, Ministry of Finance of the Republic of Tajikistan, Dushanbe, 2010, 28 pp.; Report on the External Debt of Tajikistan for 2010, Ministry of Finance of the Republic of Tajikistan, Dushanbe, 2011, 26 pp.; TransMONEE Data Base, Regional UNICEF Office for Central and Southeast Europe/ CIS Countries, 2011.
This difference reached 10.2-fold in 2008; 8.7-fold in 2006; 8.1-fold in 2009; 6.7-fold in 2005; 4.3-fold in 2004; 3.9-fold in 2003; 3.8-fold in 2002; 3.3-fold in 2001; and almost 2.8-fold in 2000.
The same also goes for Uzbekistan, although there are slight deviations in its indices. Our calculations for this country are higher than those presented by The Economist: 1.9-fold in 2001; almost 1.6-fold in 2000; and 1.4-fold in 2008-2009 (separately).
Keeping in mind that, first, The Economist only presented data for two of the five Central Asian countries (Kazakhstan and Uzbekistan) and, second, the ratio of external debt to GDP per capita is analyzed (the latter is presented in the TransMONEE Data Base40), our comments will be based on the data of Table 2.
The share of external debt per capita is not a criterion. So we will examine K3' as the next criterion (keeping in mind what was said above about the merits of the system of criteria for evaluating and analyzing the external debt position of countries), calculated as the ratio of external debt to per capita GDP.
Table 2 shows that K31 had the following tendencies toward change:
■ in 1997, from 0.24 in Kazakhstan and Uzbekistan (separately) to 1.52 in Tajikistan. The external debt, which comprised from 13% of per capita GDP, was a very moderate burden for the State Banks of Kazakhstan and Uzbekistan. In turn, Tajikistan's index (up to 152%) was an extremely heavy burden and could pose a significant threat to its financial and economic security. The same year, K31 in Kyrgyzstan amounted to 1.11;
■ in 1998, from 0.26 in Uzbekistan to 1.67 in Tajikistan, with intermediate values of 0.37 in Kazakhstan and 1.22 in Kyrgyzstan;
■ in 1999, from 0.37 in Kazakhstan and Uzbekistan separately to 1.63 in Tajikistan, with an intermediate value of 1.35 in Kyrgyzstan;
■ in 2000, from 0.34 in Uzbekistan to 1.34 in Kyrgyzstan, with intermediate values of 0.68 in Kazakhstan and 1.22 in Tajikistan;
■ in 2001, from 0.34 in Uzbekistan to 1.20 in Kyrgyzstan, with intermediate values of 0.72 in Kazakhstan and 1.11 in Tajikistan;
■ in 2002, from 0.32 in Uzbekistan to 1.29 in Kyrgyzstan, with intermediate values of 0.79 in Kazakhstan and 1.09 in Tajikistan;
■ in 2003, from 0.32 in Uzbekistan to 1.65 in Kyrgyzstan, with intermediate values of 0.92 in Kazakhstan and 0.99 in Tajikistan;
■ in 2004, from 0.29 in Uzbekistan to 1.28 in Kyrgyzstan, with intermediate values of 0.70 in Tajikistan and 1.21 in Kazakhstan;
■ in 2005, from 0.24 in Uzbekistan to 1.45 in Kazakhstan, with intermediate values of 0.73 in Tajikistan and 1.23 in Kyrgyzstan;
■ in 2006, from 0.20 in Uzbekistan to 2.25 in Kazakhstan, with intermediate values of 0.77 in Tajikistan and 1.40 in Kyrgyzstan;
■ in 2007, from 0.19 in Uzbekistan to 2.68 in Kazakhstan, with intermediate values of 0.69 in Tajikistan and 1.30 in Kyrgyzstan;
■ in 2008, from 0.18 in Uzbekistan to 2.92 in Kazakhstan, with intermediate values of 0.78 in Tajikistan and 1.59 in Kyrgyzstan;
■ in 2009, from 0.17 in Uzbekistan to 3.02 in Kazakhstan, with intermediate values of 0.92 in Tajikistan and 1.94 in Kyrgyzstan.
1 See: TransMONEE Data Base, Regional UNICEF Office for Central and Southeast Europe/CIS Countries, 2011.
So in the period being examined (13 years), Uzbekistan was in the most favorable position in terms of K31 for 11 years; Kazakhstan and Kyrgyzstan were in an unfavorable position for 5years, and Tajikistan for 3 years.
Conclusion
According to the results of the evaluation of the external debt position of the Central Asian countries over a thirteen-year period (1997-2009), the following conclusions can be drawn:
(1) the external debt burden that arose as the result of counterproductive financial-economic and other activity could infringe on the interests of future generations and cause a financial-economic crisis;
(2) the Central Asian countries paid very little attention in the past to the problem of the external debt and ways to resolve it;
(3) the existing system of criteria for evaluating the external debt position of countries is imperfect; EE is taken into account in the denominator of three out of the four criteria, and the larger it is, the better the countries' position looks. In so doing, the commodity structure of EE is not taken into consideration, which for Tajikistan, for example, is primarily raw materials (cotton fiber) with a prevalence of products with a low level of processing (primary aluminum). So the author has offered an alternative system of criteria that allows for a reliable evaluation of the external debt position of the countries;
(4) during the 13 years under review, Tajikistan occupied a preferable position in terms of GED index for 10 years, while Kazakhstan was in an unfavorable position for 11 years;
(5) over the period under analysis, there was a decrease in GED rates in Uzbekistan for 6years compared to previous years, in Tajikistan for 3 years, and in Kyrgyzstan for 2years. Unfortunately, there was an increase in GED in all 13 years in Kazakhstan, for 10 years in Kyr-gyzstan, for 9 years in Tajikistan, and for 6 years in Uzbekistan;
(6) throughout all 13 years, K exceeded its maximum value in Kyrgyzstan, for 10years in Kazakhstan, for 7years in Tajikistan, and only in 2002 in Uzbekistan. So in terms of this criterion, Uzbekistan occupied a preferable position, Tajikistan an average position, and Kyr-gyzstan the worst position;
(7) Kazakhstan, Uzbekistan, and Tajikistan held an average position in terms of K However, the average position of Tajikistan and most likely of the other countries examined should not be considered encouraging, since the imperfect method for calculating the values of this criterion should be kept in mind;
(8) for 10 of the 13 years under review, K3 exceeded its maximum value in Kazakhstan, and only in 2001 in Kyrgyzstan;
(9) the higher the share of multilateral loans in GED and, consequently, the lower the share of bilateral loans of the recipient country, the better, and vice versa. According to this conclusion, Kyrgyzstan is in the best position, and Tajikistan, Kazakhstan, and Uzbekistan hold an average position;
(10) for 2 of the 13 years, Uzbekistan occupied a preferable position with respect to K3', for 5 years, Kazakhstan and Kyrgyzstan were in an unfavorable position, and for 3 years, Tajikistan was also in an unfavorable position.
Keeping in mind the above conclusion, the comparative external debt position of the Central Asian countries is presented in Table 4.
Table 4
Comparative External Debt Position of the Central Asian Countries
Kazakhstan
Unfavorable
Unfavorable
Unfavorable
Average
Unfavorable
Average
Unfavorable
Kyrgyzstan Average Average
Unfavo- Unfavo- Lower Prefe- Unfavorable rable than rable rable average
Tajikistan
Preferable
Higher
than
average
Lower
than
average
Average Average Average
Unfavorable
Uzbekistan
V
Average
Preferable
Higher
than
average
Average Average Average
Higher
than
average
So the Central Asian countries ranked as follows in terms of their comparative debt position during the period under review:
■ first, Uzbekistan: in terms of GED rate—preferable; K and K31—higher than average; and in all the other indices—average;
■ second, Tajikistan: in terms of GED index—preferable; GED rate—higher than average; K, K, and share of multilateral and bilateral debts—average; K—lower than average; and K31— unfavorable;
■ third, Kyrgyzstan: in terms of share of multilateral and bilateral debts—preferable; GED index and rate—average; K3—lower than average; K1, K2, and K31—unfavorable;
■ fourth, last, Kazakhstan: in terms of K2 and share of multilateral and bilateral debts—average; and in all the other indices—unfavorable.
