Gross Financing Needs — dk

Computes gross financing needs (GFN) as a share of GDP over a projection horizon. GFN represents the total amount of new borrowing a government requires each year to cover its primary deficit, interest payments, and maturing debt:

Usage

dk_gfn(debt, interest_rate, maturity_profile, primary_balance, horizon = 5)

Arguments

debt: Numeric scalar. Initial debt-to-GDP ratio.
interest_rate: Numeric scalar or vector of length horizon. Effective nominal interest rate on government debt.
maturity_profile: Numeric vector or scalar. If a vector, gives the share of GDP maturing in each year of the horizon. If a scalar, interpreted as the average maturity in years; debt is assumed to mature uniformly at debt / maturity_profile per year.
primary_balance: Numeric scalar or vector of length horizon. Primary balance as a share of GDP (positive = surplus).
horizon: Integer scalar. Projection horizon in years. Default 5.

Value

A data.frame with columns:

year: Year index (1 to horizon).
primary_deficit: Primary deficit (negative of primary balance).
interest_payments: Interest payments as a share of GDP.
maturing_debt: Maturing debt as a share of GDP.
gfn: Total gross financing needs as a share of GDP.

Details

$$GFN_t = -pb_t + r_t \cdot d_t + m_t$$

where $pb$ is the primary balance (positive = surplus), $r$ is the effective interest rate, $d$ is debt-to-GDP, and $m$ is maturing debt as a share of GDP.

References

International Monetary Fund (2013). Staff Guidance Note for Public Debt Sustainability Analysis in Market-Access Countries. IMF Policy Paper.

Examples

# Scalar average maturity of 7 years
dk_gfn(debt = 0.90, interest_rate = 0.03,
       maturity_profile = 7, primary_balance = -0.02)
#>   year primary_deficit interest_payments maturing_debt       gfn
#> 1    1            0.02        0.02700000     0.1285714 0.1755714
#> 2    2            0.02        0.02841000     0.1285714 0.1769814
#> 3    3            0.02        0.02986230     0.1285714 0.1784337
#> 4    4            0.02        0.03135817     0.1285714 0.1799296
#> 5    5            0.02        0.03289891     0.1285714 0.1814703

# Explicit maturity profile
dk_gfn(debt = 0.90, interest_rate = 0.03,
       maturity_profile = c(0.15, 0.12, 0.10, 0.08, 0.05),
       primary_balance = -0.02)
#>   year primary_deficit interest_payments maturing_debt       gfn
#> 1    1            0.02        0.02700000          0.15 0.1970000
#> 2    2            0.02        0.02841000          0.12 0.1684100
#> 3    3            0.02        0.02986230          0.10 0.1498623
#> 4    4            0.02        0.03135817          0.08 0.1313582
#> 5    5            0.02        0.03289891          0.05 0.1028989