INTERNATIONAL DEVELOPMENT ASSOCIATION INTERNATIONAL MONETARY FUND NICARAGUA JOINT WORLD BANK-IMF DEBT SUSTAINABILITY ANALYSIS November 2020 Prepared Jointly by the staffs of the International Development Association (IDA) and the International Monetary Fund (IMF) Nicaragua: Joint Bank-Fund Debt Sustainability Analysis Risk of External Debt Distress: Moderate1 Overall Risk of Debt Distress: Moderate Granularity in the Risk Rating: Limited space to absorb shocks Application of Judgment: No Real GDP at -5.5 percent in 2020. Reduced exports, tourism, remittances, and FDI effect a Macroeconomic Projections: current account deterioration of more than 5½ percentage points of GDP in 2020. 2 Protracted negative effects in activity, exports, remittances and inflows are projected. Same as previous DSA with additional Financing Strategy: financing needs filled by RFI/RCF, other multilateral institutions (i.e. WB3 and IADB). Realism Tools Flagged: None Mechanical Risk Rating under the External Moderate DSA: Mechanical Risk Rating under the Public DSA: Moderate 1 Nicaragua’s Composite Indicator score is 2.94 which is based on October 2019 WEO and 2018 CPIA and the classification of debt-carrying capacity is medium. 2 Historical data for the current account balance has been revised with respect to the last Bank-IMF DSA (February 2020). 3 In response to the COVID-19 pandemic, the World Bank is making available, on humanitarian grounds, an emergency health loan of US$13.1 million, due for Board review in November 2020. Joint Bank-Fund Debt Sustainability Analysis4 Risks of external debt distress and overall risk of debt distress are both assessed as moderate with limited space to absorb shocks, which is unchanged relative to the previous DSA of February 2020. The baseline scenario assumes that the government adopts a multi-year fiscal consolidation plan with permanent measures of at least 3 percent of GDP and unwinds the temporary programs implemented in response to COVID-19. The reduction in the fiscal deficit over 2021–23 equals 3.6 percent of GDP that allows to lower the debt level over those years. Under the baseline scenario, external debt burden indicators, remain below the threshold. However, the present value (PV) of public and publicly guaranteed (PPG) external debt-to- GDP ratio breaches over an extended period under the most extreme shock scenario and contingent liability tailored shock which is related to the external cooperation with Venezuela. The overall risk of public debt distress is also assessed as moderate. The PV of public debt-to-GDP ratio is projected to be below the threshold under the baseline scenario, but it is projected to surpass the threshold under the most extreme shock scenario, notably lower GDP growth, and realization of contingent liability shock. Were external financing envisaged under the baseline not to materialize in the near and/or medium term, the authorities would be prepared to implement contingency measures to ensure debt sustainability. 4 Debt coverage is the same as in the previous DSA reported in February 2020. 2 Figure AI.1. Nicaragua: Indicators of Public and Publicly Guaranteed External Debt under Alternatives Scenarios, 2020–30 PV of debt-to GDP ratio PV of debt-to-exports ratio 60 200 180 50 160 40 140 120 30 100 80 20 60 10 40 Most extreme shock is Exports 20 Most extreme shock is Exports 0 0 2020 2022 2024 2026 2028 2030 2020 2022 2024 2026 2028 2030 Debt service-to-exports ratio Debt service-to-revenue ratio 16 20 18 14 16 12 14 10 12 8 10 8 6 6 4 4 2 2 Most extreme shock is Exports Most extreme shock is Exports 0 0 2020 2022 2024 2026 2028 2030 2020 2022 2024 2026 2028 2030 Baseline Historical scenario Most extreme shock 1/ Threshold 1 Debt contingent liability Customization of Default Settings Borrowing Assumptions for Stress Tests* Size Interactions Default User defined Shares of marginal debt No No External PPG MLT debt 100% Tailored Tests Terms of marginal debt Combined CLs No Avg. nominal interest rate on new borrowing in USD 3.5% 3.5% Natural Disasters No No USD Discount rate 5.0% 5.0% Commodity Prices 2/ No No Avg. maturity (incl. grace period) 20 20 Market Financing n.a. n.a. Avg. grace period 4 4 Note: "Yes" indicates any change to the size or * Note: All the additional financing needs generated by the shocks under the stress tests are interactions of the default settings for the stress tests. assumed to be covered by PPG external MLT debt in the external DSA. Default terms of marginal "n.a." indicates that the stress test does not apply. debt are based on baseline 10-year projections. Sources: National authorities and IMF staff calculations. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2030. Stress tests with one-off breaches are also presented (if any), while these one- off breaches are deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 2/ The magnitude of shocks used for the commodity price shock stress test are based on the commodity prices outlook prepared by the IMF research department. 3 S Figure AI.2. Nicaragua: Indicators of Public Debt Under Alternative Scenarios, 2020–30 PV of Debt-to-GDP Ratio 100 90 80 70 60 50 40 30 Most extreme shock is Growth 20 10 0 2020 2022 2024 2026 2028 2030 PV of Debt-to-Revenue Ratio Debt Service-to-Revenue Ratio 350 45 40 300 35 250 30 200 25 150 20 15 100 10 50 Most extreme shock is Growth Most extreme shock is Growth 5 0 0 2020 2022 2024 2026 2028 2030 2020 2022 2024 2026 2028 2030 Baseline Most extreme shock 1/ Public debt benchmark Historical scenario 1 Contingent liability scenario Borrowing Assumptions for Stress Tests* Default User defined Shares of marginal debt External PPG medium and long-term 55% 55% Domestic medium and long-term 45% 45% Domestic short-term 0% 0% Terms of marginal debt External MLT debt Avg. nominal interest rate on new borrowing in USD 3.5% 3.5% Avg. maturity (incl. grace period) 20 20 Avg. grace period 4 4 Domestic MLT debt Avg. real interest rate on new borrowing 1.5% 1.5% Avg. maturity (incl. grace period) 5 5 Avg. grace period 1 1 Domestic short-term debt Avg. real interest rate 0.0% 0.0% * Note: The public DSA allows for domestic financing to cover the additional financing needs generated by the shocks under the stress tests in the public DSA. Default terms of marginal debt are based on baseline 10-year projections. Sources: National authorities and IMF staff calculations. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2030. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 4 Figure AI.3. Nicaragua: Drivers of Debt Dynamics-Baseline Scenario External debt Gross Nominal PPG External Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) Current DSA 40 80 Residual 40 Previous DSA proj. 30 70 DSA-2015 Interquartile 30 range (25-75) Price and 60 exchange rate20 20 50 10 Real GDP growth Change in PPG 10 40 debt 3/ 0 30 Nominal 0 interest rate -10 20 Median -10 Current 10 -20 account + FDI -20 0 -30 Contribution of Distribution across LICs 2/ 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Change in unexpected PPG debt 3/ 5-year 5-year changes historical projected -30 change change Public debt Gross Nominal Public Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) Residual 20 Current DSA Previous DSA proj. 20 DSA-2015 Interquartile 80 Other debt 15 range (25-75) creating flows 15 70 10 Real Exchange 60 rate depreciation 10 50 5 Real GDP Change in debt 40 growth 5 0 30 Real interest rate 20 0 -5 Primary deficit 10 -10 -5 Median 0 5-year 5-year 2026 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2027 2028 2029 2030 Change in debt Distribution across LICs 2/ Contribution of historical projected -10 unexpected change change Sources: National authorities and IMF staff calculations. 1/ Difference between anticipated and actual contributions on debt ratios. 2/ Distribution across LICs for which LIC DSAs were produced. 3/ Given the relatively low private external debt for average low-income countries, a ppt change in PPG external debt should be largely explained by the drivers of the external debt dynamics equation. 5 Figure AI.4. Nicaragua: Realism Tools 3-Year Adjustment in Primary Balance Fiscal Adjustment and Possible Growth Paths 1/ (Percentage points of GDP) (Percent and Percentage points of GDP) 6 4 14 Distribution 1/ 3 Projected 3-yr adjustment 4 12 2 3-year PB adjustment greater than 2.5 In percentage points of GDP percentage points of GDP in approx. top 2 1 10 quartile 0 In percent 0 8 -1 -2 6 -2 -4 -3 4 -4 -6 2 -5 -8 -6 0 2014 2015 2016 2017 2018 2019 2020 2021 Baseline Multiplier = 0.2 Multiplier = 0.4 Multiplier = 0.6 Multiplier = 0.8 1/ Data cover Fund-supported programs for LICs (excluding emergency financing) 1/ Bars refer to annual projected fiscal adjustment (right-hand side scale) and lines show approved since 1990. The size of 3-year adjustment from program inception is found on possible real GDP growth paths under different fiscal multipliers (left-hand side scale). the horizontal axis; the percent of sample is found on the vertical axis. Public and Private Investment Rates Contribution to Real GDP growth (percent of GDP) (percent, 5-year average) 30 2 28 26 24 1 22 20 18 1 16 14 12 0 Historical Projected (Prev. DSA) Projected (Curr. DSA) 10 8 6 -1 4 2 0 -1 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Gov. Invest. - Prev. DSA Gov. Invest. - Curr. DSA Contribution of other factors Priv. Invest. - Prev. DSA Priv. Invest. - Curr. DSA Contribution of government capital Sources: National authorities and IMF staff calculations. 6 Figure AI.5. Nicaragua: Qualification of the Modern Category, 2020–30 1/ PV of debt-to GDP ratio PV of debt-to-exports ratio 45 200 40 180 Threshold 35 160 140 (1-X)*Threshold 30 120 25 (1-Y)*&Threshold 100 20 80 15 60 10 40 5 20 0 0 2020 2022 2024 2026 2028 2030 2020 2022 2024 2026 2028 2030 Debt service-to-exports ratio Debt service-to-revenue ratio 16 20 18 14 16 12 14 10 12 8 10 8 6 6 4 4 2 2 0 0 2020 2022 2024 2026 2028 2030 2020 2022 2024 2026 2028 2030 Threshold Baseline Limited space Some space Substantial space Sources: National authorities and IMF staff calculations. 1/ For the PV debt/GDP and PV debt/exports thresholds, x is 20 percent and y is 40 percent. For debt service/Exports and debt service/revenue thresholds, x is 12 percent and y is 35 percent. 7 NICARAGUA Table AI.1. Nicaragua: External Debt Sustainability Framework, Baseline Scenario, 2017–40 (In Percent of GDP, unless otherwise specified) Actual Projections Average 8/ 2017 2018 2019 2020 2021 2022 2023 2024 2025 2030 2040 Historical Projections External debt (nominal) 1/ 78.5 82.3 86.4 95.7 97.3 96.1 95.4 94.7 93.4 76.9 51.6 77.4 90.1 Definition of external/domestic debt Residency-based of which: public and publicly guaranteed (PPG) 34.9 38.2 42.1 48.9 51.2 51.8 52.5 53.0 53.2 46.6 35.2 34.3 50.7 Is there a material difference between the two Yes criteria? Change in external debt 1.0 3.8 4.1 9.3 1.6 -1.1 -0.7 -0.7 -1.3 -3.4 -2.7 Identified net debt-creating flows -2.7 0.4 -6.3 3.5 -0.6 -3.4 -2.6 -2.5 -3.0 -3.3 -1.7 -2.2 -2.4 Non-interest current account deficit 5.1 -0.3 -8.4 -2.9 -2.5 -2.2 -1.6 -0.5 0.3 0.4 0.6 5.7 -0.7 Deficit in balance of goods and services 13.4 9.2 4.3 6.6 7.4 8.6 9.9 11.1 12.1 12.0 12.6 15.9 10.5 Exports 41.6 42.4 45.5 40.8 42.7 44.3 45.5 46.3 47.1 47.5 45.4 Imports 55.0 51.6 49.8 47.4 50.1 52.9 55.4 57.5 59.3 59.5 58.1 Debt Accumulation 4.5 25 Net current transfers (negative = inflow) -11.4 -12.3 -14.0 -11.1 -11.2 -11.8 -12.4 -12.6 -12.8 -12.7 -13.0 -12.5 -12.4 of which: official -1.0 -0.7 -0.6 -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 4.0 Other current account flows (negative = net inflow) 3.1 2.8 1.3 1.6 1.2 0.9 0.9 1.0 1.0 1.2 0.9 2.3 1.1 3.5 20 Net FDI (negative = inflow) -7.0 -5.8 -3.7 -1.0 -1.3 -1.4 -1.6 -2.2 -3.2 -3.3 -2.3 -6.8 -2.5 Endogenous debt dynamics 2/ -0.8 6.5 5.8 7.5 3.2 0.2 0.6 0.1 -0.1 -0.5 0.0 3.0 Contribution from nominal interest rate 2.0 2.2 2.4 2.4 2.8 2.8 2.4 1.8 1.8 1.8 1.6 15 Contribution from real GDP growth -3.5 3.3 3.3 5.1 0.5 -2.5 -1.9 -1.7 -1.9 -2.3 -1.5 2.5 Contribution from price and exchange rate changes 0.6 1.1 0.1 … … … … … … … … 2.0 Residual 3/ 3.7 3.5 10.4 5.8 2.2 2.2 1.9 1.8 1.7 -0.1 -1.0 4.3 1.5 10 of which: exceptional financing 0.0 0.0 0.0 -0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.5 1.0 5 Sustainability indicators PV of PPG external debt-to-GDP ratio ... ... 23.2 28.6 31.3 32.7 34.0 35.0 35.8 33.2 27.7 0.5 PV of PPG external debt-to-exports ratio ... ... 50.9 70.3 73.2 74.0 74.7 75.5 75.9 69.9 60.9 0.0 0 PPG debt service-to-exports ratio 14.4 15.5 1.5 5.2 5.4 5.7 6.2 6.3 6.7 7.6 8.2 2020 2022 2024 2026 2028 2030 PPG debt service-to-revenue ratio 21.2 23.7 2.2 7.5 7.8 8.3 9.3 9.6 10.4 11.6 11.5 Gross external financing need (Million of U.S. dollars) 1488.4 883.9 2.7 1140.6 1272.4 1328.1 1346.7 1329.9 1332.0 1436.8 1826.5 Rate of Debt Accumulation Grant-equivalent financing (% of GDP) Key macroeconomic assumptions Grant element of new borrowing (% right scale) Real GDP growth (in percent) 4.6 -4.0 -3.9 -5.5 -0.5 2.7 2.0 1.8 2.1 3.0 3.0 3.3 1.6 GDP deflator in US dollar terms (change in percent) -0.8 -1.3 -0.2 0.1 1.2 0.5 0.5 0.5 0.8 2.2 3.5 1.0 1.2 Effective interest rate (percent) 4/ 2.7 2.6 2.8 2.6 2.9 2.9 2.6 1.9 2.0 2.4 3.1 2.4 2.4 External debt (nominal) 1/ Growth of exports of G&S (US dollar terms, in percent) 10.6 -3.4 3.0 -15.3 5.5 7.0 5.4 4.2 4.6 4.6 6.2 7.7 3.4 of which: Private Growth of imports of G&S (US dollar terms, in percent) 3.9 -11.1 -7.4 -10.0 6.6 8.9 7.4 6.1 6.1 5.2 5.2 4.1 4.6 120 Grant element of new public sector borrowing (in percent) ... ... ... 18.6 14.0 15.2 14.7 17.6 17.6 14.8 6.0 ... 16.8 Government revenues (excluding grants, in percent of GDP) 28.3 27.7 30.5 28.6 29.5 30.2 30.4 30.2 30.6 31.2 32.5 26.6 30.4 100 Aid flows (in Million of US dollars) 5/ 142.7 87.6 73.2 162.4 157.6 159.3 162.5 179.9 195.5 206.9 184.6 Grant-equivalent financing (in percent of GDP) 6/ ... ... ... 1.7 1.1 1.1 1.1 1.1 1.2 1.0 0.7 ... 1.2 Grant-equivalent financing (in percent of external financing) 6/ ... ... ... 25.1 23.5 24.6 25.0 27.6 27.1 25.4 18.4 80 ... 26.3 Nominal GDP (Million of US dollars) 13,786 13,064 12,535 11,850 11,937 12,319 12,627 12,916 13,287 16,940 28,808 STRICTLY CONFIDENTIAL Nominal dollar GDP growth 3.8 -5.2 -4.0 -5.5 0.7 3.2 2.5 2.3 2.9 5.3 6.6 4.3 2.8 60 Memorandum items: 40 PV of external debt 7/ ... ... 67.4 75.5 77.4 77.1 76.9 76.7 76.0 63.5 44.2 In percent of exports ... ... 148.2 185.2 181.3 174.2 169.1 165.4 161.1 133.7 97.2 20 Total external debt service-to-exports ratio 30.5 30.5 26.7 33.3 34.0 32.5 30.4 27.8 27.4 23.8 17.8 PV of PPG external debt (in Million of US dollars) 2906.5 3394.3 3731.9 4033.0 4292.6 4522.0 4756.5 5622.8 7970.7 0 (PVt-PVt-1)/GDPt-1 (in percent) 3.9 2.8 2.5 2.1 1.8 1.8 1.1 0.8 2020 2022 2024 2026 2028 2030 Non-interest current account deficit that stabilizes debt ratio 4.2 -4.1 -12.5 -12.3 -4.1 -1.1 -0.8 0.3 1.7 3.8 3.3 Sources: National authorities and IMF staff calculations. 0 1/ Includes both public and private sector external debt. 2/ Derived as [r - g - ρ(1+g) + Ɛα (1+r)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, ρ = growth rate of GDP deflator in U.S. dollar terms, Ɛ=nominal appreciation of the local currency, and α= share of local currency-denominated external debt in total external debt. PANAMA 3/ Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes. 4/ Current-year interest payments divided by previous period debt stock. 5/ Defined as grants, concessional loans, and debt relief. 6/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt). 7/ Assumes that PV of private sector debt is equivalent to its face value. 8/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 8 Table AI.2. Nicaragua: Public Sector Debt Sustainability Framework, Baseline Scenario, 2017–40 (In Percent of GDP, unless otherwise specified) Actual Projections Average 6/ 2017 2018 2019 2020 2021 2022 2023 2024 2025 2030 2040 Historical Projections Public sector debt 1/ 44.4 48.4 51.0 57.4 60.0 60.9 61.8 64.1 66.0 65.2 60.7 44.2 63.7 Residency- of which: external debt 34.9 38.2 42.1 48.9 51.2 51.8 52.5 53.0 53.2 46.6 35.2 34.3 50.7 Definition of external/domestic debt based of which: local-currency denominated Change in public sector debt 2.7 4.0 2.6 6.4 2.5 1.0 0.9 2.3 1.9 -0.7 -0.8 Is there a material difference Identified debt-creating flows 0.2 5.8 3.0 6.8 2.0 0.5 0.5 1.9 1.5 -0.9 -1.2 -0.4 1.0 Yes between the two criteria? Primary deficit 0.9 2.5 -0.2 4.7 3.4 1.9 0.9 2.2 2.3 1.0 0.9 0.6 2.1 Revenue and grants 29.4 28.3 31.1 29.2 30.1 30.7 31.0 30.7 31.1 31.7 33.0 28.0 30.9 of which: grants 1.0 0.7 0.6 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Public sector debt 1/ Primary (noninterest) expenditure 30.3 30.8 30.9 33.9 33.4 32.6 31.9 32.9 33.4 32.7 33.8 28.5 33.0 Automatic debt dynamics -0.7 3.4 2.8 3.2 0.3 -1.1 -0.4 -0.2 -0.7 -2.0 -2.1 Contribution from interest rate/growth differential -1.5 2.3 2.1 2.8 0.1 -1.8 -1.3 -1.2 -1.3 -1.9 -1.2 of which: local-currency denominated of which: contribution from average real interest rate 0.3 0.5 0.2 -0.2 -0.2 -0.3 -0.1 -0.1 0.0 0.1 0.6 of which: contribution from real GDP growth -1.8 1.8 2.0 3.0 0.3 -1.6 -1.2 -1.1 -1.3 -1.9 -1.8 of which: foreign-currency denominated Contribution from real exchange rate depreciation 0.8 1.1 0.7 ... ... ... ... ... ... ... ... 80 Other identified debt-creating flows 0.0 0.0 0.3 -1.1 -1.6 -0.2 0.0 0.0 0.0 0.0 0.0 0.0 -0.3 70 Privatization receipts (negative) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 60 Recognition of contingent liabilities (e.g., bank recapitalization) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 50 Debt relief (HIPC and other) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 40 Other debt creating or reducing flow (please specify) 0.0 0.0 0.3 -1.1 -1.6 -0.2 0.0 0.0 0.0 0.0 0.0 30 Residual 2.5 -1.8 -0.4 0.1 0.7 1.2 1.2 1.3 1.0 0.2 -0.4 0.8 0.6 20 10 Sustainability indicators 0 PV of public debt-to-GDP ratio 2/ ... ... 32.6 37.6 40.5 42.4 43.8 46.6 49.1 52.0 53.4 2019 2021 2023 2025 2027 2029 PV of public debt-to-revenue and grants ratio … … 104.6 129.0 134.8 137.8 141.5 151.6 157.8 163.9 161.8 Debt service-to-revenue and grants ratio 3/ 10.0 8.4 9.7 14.3 13.8 16.1 15.3 16.3 18.4 25.9 14.9 Gross financing need 4/ 3.8 4.8 2.8 8.8 7.5 6.8 5.6 7.2 8.0 9.2 5.8 of which: held by residents Key macroeconomic and fiscal assumptions of which: held by non-residents Real GDP growth (in percent) 4.6 -4.0 -3.9 -5.5 -0.5 2.7 2.0 1.8 2.1 3.0 3.0 3.3 1.6 80 Average nominal interest rate on external debt (in percent) 2.0 1.9 1.8 1.2 1.2 1.3 1.8 1.9 1.9 2.1 3.1 1.6 1.8 70 Average real interest rate on domestic debt (in percent) 4.4 3.7 2.3 2.8 2.8 2.6 2.7 2.6 2.1 1.6 1.4 2.0 2.2 60 Real exchange rate depreciation (in percent, + indicates depreciation) 2.1 2.4 1.5 … ... ... ... ... ... ... ... 0.3 ... 50 Inflation rate (GDP deflator, in percent) 4.1 3.6 4.7 3.9 4.3 3.5 3.5 3.5 3.5 3.5 3.5 6.0 3.6 40 Growth of real primary spending (deflated by GDP deflator, in percent) 5.5 -2.2 -3.5 3.4 -1.8 0.2 -0.3 5.1 3.5 2.5 3.4 5.0 2.1 30 Primary deficit that stabilizes the debt-to-GDP ratio 5/ -1.8 -1.6 -2.8 -1.8 0.8 0.9 0.0 -0.2 0.3 1.7 1.6 -2.0 0.8 20 PV of contingent liabilities (not included in public sector debt) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10 0 2020 2022 2024 2026 2028 2030 Sources: National authorities and IMF staff calculations. 1/ Coverage of debt: The central government plus social security, central bank, government-guaranteed debt. Definition of external debt is Residency-based. 2/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rates projections. 3/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt. 4/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows. 5/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question. 6/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 9 Table AI.3. Nicaragua: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 2020–30 (In Percent) Projections 1/ 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 PV of debt-to GDP ratio Baseline 29 31 33 34 35 36 36 35 35 34 33 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 29 33 36 38 40 42 43 44 45 46 46 A2. Alternative Scenario: ALBA debt contingent liability scenario 29 31 42 43 45 45 45 44 43 42 40 B. Bound Tests B1. Real GDP growth 29 33 37 39 40 41 40 40 39 38 38 B2. Primary balance 29 30 32 33 34 35 35 35 34 33 33 B3. Exports 29 36 45 47 48 49 49 47 46 44 43 B4. Other flows 3/ 29 33 37 38 39 40 40 39 38 37 36 B5. Depreciation 29 39 37 39 40 41 41 40 40 39 39 B6. Combination of B1-B5 29 37 40 42 43 44 44 43 42 41 40 C. Tailored Tests C1. Combined contingent liabilities 29 34 35 37 38 39 40 39 39 38 37 C2. Natural disaster 29 35 37 39 41 42 43 43 42 42 42 C3. Commodity price 29 31 33 34 35 36 36 35 35 34 33 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 40 40 40 40 40 40 40 40 40 40 40 PV of debt-to-exports ratio Baseline 70 73 74 75 76 76 76 74 72 71 70 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 70 76 81 84 86 88 91 93 94 96 98 A2. Alternative Scenario: ALBA debt contingent liability scenario 70 73 95 95 96 96 97 94 90 87 85 B. Bound Tests B1. Real GDP growth 70 73 74 75 76 76 76 74 72 71 70 B2. Primary balance 70 71 73 73 74 75 75 73 71 70 69 B3. Exports 70 91 122 123 124 125 124 120 115 112 109 B4. Other flows 3/ 70 78 83 84 85 85 85 83 80 78 76 B5. Depreciation 70 73 67 67 68 69 69 67 66 65 64 B6. Combination of B1-B5 70 86 83 92 93 94 93 91 88 86 84 C. Tailored Tests C1. Combined contingent liabilities 70 80 80 81 83 84 85 83 81 80 79 C2. Natural disaster 70 84 85 87 89 91 93 92 90 90 90 C3. Commodity price 70 73 74 75 76 76 76 74 72 71 70 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 180 180 180 180 180 180 180 180 180 180 180 Debt service-to-exports ratio Baseline 5 5 6 6 6 7 8 8 8 8 8 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 5 5 6 6 6 7 8 9 9 9 9 A2. Alternative Scenario: ALBA debt contingent liability scenario 5 5 6 7 7 8 8 10 9 9 9 B. Bound Tests B1. Real GDP growth 5 5 6 6 6 7 8 8 8 8 8 B2. Primary balance 5 5 6 6 6 7 7 8 7 7 8 B3. Exports 5 6 7 9 9 9 11 13 12 12 12 B4. Other flows 3/ 5 5 6 7 7 7 8 9 8 8 8 B5. Depreciation 5 5 6 6 6 6 7 7 7 7 7 B6. Combination of B1-B5 5 6 7 7 7 8 9 10 9 9 9 C. Tailored Tests C1. Combined contingent liabilities 5 5 6 6 7 7 8 8 8 8 8 C2. Natural disaster 5 6 6 7 7 7 8 9 8 8 9 C3. Commodity price 5 5 6 6 6 7 8 8 8 8 8 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 15 15 15 15 15 15 15 15 15 15 15 Debt service-to-revenue ratio Baseline 7 8 8 9 10 10 12 12 12 12 12 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 7 8 8 9 10 10 12 13 13 14 14 A2. Alternative Scenario: ALBA debt contingent liability scenario 7 8 8 10 11 12 13 15 15 14 14 B. Bound Tests 7 8 8 10 11 12 13 15 15 14 14 B1. Real GDP growth 7 8 9 11 11 12 13 14 13 13 13 B2. Primary balance 7 8 8 9 10 10 11 12 12 12 11 B3. Exports 7 8 9 11 11 12 14 16 16 15 15 B4. Other flows 3/ 7 8 9 10 10 11 13 13 13 13 13 B5. Depreciation 7 10 10 11 12 13 14 14 13 14 13 B6. Combination of B1-B5 7 8 10 11 11 12 14 15 14 14 14 C. Tailored Tests C1. Combined contingent liabilities 7 8 9 10 10 11 12 13 12 12 12 C2. Natural disaster 7 8 9 10 10 11 12 13 13 13 13 C3. Commodity price 7 8 8 9 10 10 12 12 12 12 12 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 18 18 18 18 18 18 18 18 18 18 18 Sources: National authorities and IMF staff calculations. 1/ A bold value indicates a breach of the threshold. 2/ Variables include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows. 3/ Includes official and private transfers and FDI. 10 Table AI.4. Nicaragua: Sensitivity Analysis for Key Indicators of Public Debt, 2020–30 Projections 1/ 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 PV of debt-to GDP ratio Baseline 29 31 33 34 35 36 36 35 35 34 33 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 29 33 36 38 40 42 43 44 45 46 46 A2. Alternative Scenario: ALBA debt contingent liability scenario 29 31 42 43 45 45 45 44 43 42 40 B. Bound Tests B1. Real GDP growth 29 33 37 39 40 41 40 40 39 38 38 B2. Primary balance 29 30 32 33 34 35 35 35 34 33 33 B3. Exports 29 36 45 47 48 49 49 47 46 44 43 B4. Other flows 3/ 29 33 37 38 39 40 40 39 38 37 36 B5. Depreciation 29 39 37 39 40 41 41 40 40 39 39 B6. Combination of B1-B5 29 37 40 42 43 44 44 43 42 41 40 C. Tailored Tests C1. Combined contingent liabilities 29 34 35 37 38 39 40 39 39 38 37 C2. Natural disaster 29 35 37 39 41 42 43 43 42 42 42 C3. Commodity price 29 31 33 34 35 36 36 35 35 34 33 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 40 40 40 40 40 40 40 40 40 40 40 PV of debt-to-exports ratio Baseline 70 73 74 75 76 76 76 74 72 71 70 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 70 76 81 84 86 88 91 93 94 96 98 A2. Alternative Scenario: ALBA debt contingent liability scenario 70 73 95 95 96 96 97 94 90 87 85 B. Bound Tests B1. Real GDP growth 70 73 74 75 76 76 76 74 72 71 70 B2. Primary balance 70 71 73 73 74 75 75 73 71 70 69 B3. Exports 70 91 122 123 124 125 124 120 115 112 109 B4. Other flows 3/ 70 78 83 84 85 85 85 83 80 78 76 B5. Depreciation 70 73 67 67 68 69 69 67 66 65 64 B6. Combination of B1-B5 70 86 83 92 93 94 93 91 88 86 84 C. Tailored Tests C1. Combined contingent liabilities 70 80 80 81 83 84 85 83 81 80 79 C2. Natural disaster 70 84 85 87 89 91 93 92 90 90 90 C3. Commodity price 70 73 74 75 76 76 76 74 72 71 70 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 180 180 180 180 180 180 180 180 180 180 180 Debt service-to-exports ratio Baseline 5 5 6 6 6 7 8 8 8 8 8 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 5 5 6 6 6 7 8 9 9 9 9 A2. Alternative Scenario: ALBA debt contingent liability scenario 5 5 6 7 7 8 8 10 9 9 9 B. Bound Tests B1. Real GDP growth 5 5 6 6 6 7 8 8 8 8 8 B2. Primary balance 5 5 6 6 6 7 7 8 7 7 8 B3. Exports 5 6 7 9 9 9 11 13 12 12 12 B4. Other flows 3/ 5 5 6 7 7 7 8 9 8 8 8 B5. Depreciation 5 5 6 6 6 6 7 7 7 7 7 B6. Combination of B1-B5 5 6 7 7 7 8 9 10 9 9 9 C. Tailored Tests C1. Combined contingent liabilities 5 5 6 6 7 7 8 8 8 8 8 C2. Natural disaster 5 6 6 7 7 7 8 9 8 8 9 C3. Commodity price 5 5 6 6 6 7 8 8 8 8 8 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 15 15 15 15 15 15 15 15 15 15 15 Debt service-to-revenue ratio Baseline 7 8 8 9 10 10 12 12 12 12 12 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 7 8 8 9 10 10 12 13 13 14 14 A2. Alternative Scenario: ALBA debt contingent liability scenario 7 8 8 10 11 12 13 15 15 14 14 B. Bound Tests 7 8 8 10 11 12 13 15 15 14 14 B1. Real GDP growth 7 8 9 11 11 12 13 14 13 13 13 B2. Primary balance 7 8 8 9 10 10 11 12 12 12 11 B3. Exports 7 8 9 11 11 12 14 16 16 15 15 B4. Other flows 3/ 7 8 9 10 10 11 13 13 13 13 13 B5. Depreciation 7 10 10 11 12 13 14 14 13 14 13 B6. Combination of B1-B5 7 8 10 11 11 12 14 15 14 14 14 C. Tailored Tests C1. Combined contingent liabilities 7 8 9 10 10 11 12 13 12 12 12 C2. Natural disaster 7 8 9 10 10 11 12 13 13 13 13 C3. Commodity price 7 8 8 9 10 10 12 12 12 12 12 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 18 18 18 18 18 18 18 18 18 18 18 Sources: National authorities and IMF staff calculations. 1/ A bold value indicates a breach of the threshold. 2/ Variables include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows. 3/ Includes official and private transfers and FDI. 11