Outputs From The LIC DSF Template



Welcome to Station 6! It will guide you through all the LIC DSF outputs that are automatically produced by the template once all the assumptions in the input sheets have been entered.




    

Baseline



Output 1. External and Public Baseline Tables

The "Output 1-1 - External DSA" sheet displays information under the baseline scenario of the external DSA.

The Output 1-2 - Public DSA sheet displays information under the baseline scenario of the Public DSA.




    

Baseline Stress Test Charts



Output 2. External and Public Stress Tests Charts

Output 2-1 - Stress_Charts_Ex shows relevant debt indicators for PPG external debt.

Output 3. External and Public Stress Tests Tables

The "Output 3-1 Stress-External" sheet displays the values of the debt burden indicators under the external DSA under the baseline, the historical scenario, and each of the stress test scenarios. The thresholds are also shown.


The "Output 3-2 Stress-Public" sheet displays the values of the debt burden indicators under the public DSA. Like in the external DSA table above, the baseline, the historical scenario, each of the stress test scenarios, and the thresholds are shown.



    

Sensitivity Analysis

Output 4. Realism Tools

The "Output 4-1 - Forecast Error" sheet displays the output of the realism tools discussed in Station 3. This output is to be included in the report.


The "Output 4-2 - Realism" sheet also displays the outputs of the realism tools discussed in Station 3. This output is to be included in the report.



    

Risk Rating & Other Outputs

The charts below are included in this station to show the complete set of outputs of the LIC DSF. The contents of the charts will be discussed in detail in subsequent stations.



Output 5. Moderate Risk and Market Financing Tools

The "Output 5-1 Moderate risk" sheet is only for LICs rated at moderate risk of external debt distress. Please see detailed explanations in Station 9.


The "Output 5-2 Market module" sheet shows the results of the market financing tool. This is only relevant for countries with market access. For reference, the panel charts show the external debt burden indicators under the market financing tailored stress test and the baseline scenario. Please see detailed explanations in Station 7.


Output 6. Probability Approach

The "Output 6" sheet is optional and only to be included if the probability approach is used.

The probability approach may be used when a country’s risk rating is on the border between two categories under the traditional (threshold) approach. This is meant to enhance a case for assigning the final risk rating after all other factors informing judgement.


Output 7. Final Risk Rating

The table below recalls how the mechanical external risk signal is determined based on the number of breaches under the baseline scenario (first column) and the stress scenarios (second column) for the four debt burden indicators. For further explanation, please see Station 9.

   Number of Breaches
Under the Baseline Scenario
  Number of Breaches
Under the Stress Scenario
 0  0
 0  1+
 1+  1+


The overall risk of public debt distress (low, moderate, or high) is derived based on joint information from the five debt burden indicators: the four from the external block, as explained above, plus the PV of total public debt-to-GDP, which is compared with its estimated indicative benchmark.

Single one-year breaches are automatically deemed away.

Final External Risk of Debt Distress

LOW RISK

Occurs when the PPG external debt has a low risk signal (none of the PPG external debt burden indicators breach their respective thresholds under the baseline or the most extreme stress test) and judgement based on country-specific knowledge is applied.

MODERATE RISK

Occurs when the PPG external debt has a moderate risk signal (none of the PPG external debt burden indicators breach their thresholds under the baseline, but at least one indicator breaches its threshold under the stress tests) and judgement based on country-specific knowledge is applied.

HIGH RISK

Occurs when any of the PPG external debt burden indicators breaches its threshold under the baseline and judgement based on country-specific knowledge is applied.

The final overall risk of public debt distress (low, moderate, or high) can also be different from the mechanical signals through judgement.

The external debt distress risk rating remains the primary DSF output, while the overall risk of public debt distress is considered supplementary information.

The "Output 7 - Risk Rating" sheet includes the final external and overall risk of debt distress ratings. It also provides granularity and insight into applications of judgement.



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