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 for Nicaragua . The baseline scenario assumes that the government adopts a multi-year fiscal consolidation plan with permanent measures of at least three percent of gross domestic product (GDP) and unwinds the temporary programs implemented in response to Coronavirus (COVID-19). The reduction in the fiscal deficit over 2021–2023 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.
Details
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Document Date
2020/11/01
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Document Type
Board Report
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Report Number
154889
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Volume No
1
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Total Volume(s)
1
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Country
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Region
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Disclosure Date
2020/12/09
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Disclosure Status
Disclosed
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Doc Name
Nicaragua - Joint World Bank-IMF Debt Sustainability Analysis
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Keywords
real gdp; debt service; contingent liability; contingent liabilities; commodity price; alternative scenarios; primary balance; natural disaster; national authority; public debt; nominal interest rate; debt-creating flow; real interest rate; grace period; export ratio; Public and Publicly Guaranteed; dollar term; public sector debt; primary deficit; debt sustainability analysis; financing need; real exchange rate depreciation; total external debt; exchange rate change; current account deficit; risk of debt; external financing; short-term debt; current account balance; private external debt; private investment rate; external debt sustainability; domestic debt; baseline scenario; commodity price shock; Effective interest rate; public sector borrowing; change in arrears; private sector debt; exchange rate projections; macroeconomic and fiscal; debt relief; external debt burden
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Citation
Nicaragua - Joint World Bank-IMF Debt Sustainability Analysis (English). Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/626171607563476386/Nicaragua-Joint-World-Bank-IMF-Debt-Sustainability-Analysis