About the Report

The year 2005 was a landmark in global development finance. Private capital flows to developing countries reached a record net level of $483 billion, much of them going to middle–income countries that took advantage of the surge to improve their external debt profile and build official reserves of foreign exchange.  For the poorer countries, which have limited access to market-based external finance, the development community stepped up efforts to enhance aid flows and to reduce debt burdens through new multilateral debt-relief initiatives endorsed by the G-8 group of industrial countries in July 2005. Global Development Finance 2006 highlights this unique opportunity to bolster development efforts and place development finance on a stable footing.

The global economy grew by 3.2 percent in 2005, with the growth rate in the developing world exceeding 5 percent for the third year running. While prospects are good for continued robust economic growth in developing countries, risks and vulnerabilities persist—including the possibilities of an abrupt and disorderly correction of global financial imbalances, external shocks leading to further sharp hikes in oil prices, and a buildup of borrowing by countries of lower creditworthiness. As the world economy moves toward a multipolar international monetary system, multilateral cooperation on international monetary relations and exchange rates have become essential for addressing the current imbalances. Developing countries have much at stake.  Policy makers in emerging market economies should give priority to strengthening institutions and promoting policies and mechanisms that will improve their ability to navigate in a world economy of increasingly integrated and interdependent global financial and production systems.

Favorable financing conditions and robust growth coincide with increasing financial integration among developing countries with South–South flows of capital, now growing more rapidly than North–South flows, mirroring trends in trade flows. Although South–South capital flows remain relatively small, they have the potential to change the landscape of development finance over the next few years, particularly if growth in these countries continues to outpace that in advanced countries.
Global Development Finance 2006, I: Analysis and Outlook is the World Bank’s annual review of recent trends in and prospects for financial flows to developing countries.  It discusses the structural transformation and mainstreaming of emerging debt markets, the increased importance of the euro, the fast-growing phenomenon of credit default swap transactions on emerging sovereign and corporate names, and the greater reliance in developing countries on local –currency financing. It also highlights the difficult challenge that many emerging market economies and oil exporters now face in managing the large inflows of foreign exchange generated from capital flows and trade transactions.

“Prospects for the Global Economy” is an online companion to Global Development Finance. It provides information on the global economic outlook, detailed regional forecasts, and additional features such as interactive graphs, analytical tools, and access to underlying data. This online publication is available in English, French, and Spanish.

Global Development Finance 2006, II: Summary and Country Tables includes a comprehensive set of tables with statistical data for 136 countries that report debt under the World Bank Debtor Reporting System, as well as summary data for regions and income groups. It contains data on total external debt stocks and flows, aggregates, and key debt ratios, and provides a detailed, country-by-country picture of debt. Global Development Finance 2006 debt data are also available in electronic format: GDF Online (an electronic subscription database) and the GDF CD-ROM. Each of these electronic databases provides access to 217 historical time series indicators from 1970 to 2004, and country group estimates for 2005.

The Little Book on External Debt is a new publication that provides a quick reference to key debt data in aggregate and individual country tables prepared for the convenience of users.
With analysis and data extending from short-term bank lending to long-term bond issuance in both local and foreign currency, Global Development Finance 2006 is unique in its breadth of coverage of the trends and issues of fundamental importance to the financing of  the developing world, including coverage of capital originating from developing countries themselves. The report is an indispensable resource for governments, economists, investors, financial consultants, academics, bankers, and the entire development community.