| Globalization | Poverty | Development | Sustainability |
| 5.1 Credit, investment, and
expenditure About the data The indicators in the table measure the relative size of states and markets in national economies. There is no ideal size for states, and size alone does not capture their full effect on markets. Large states may support prosperous and effective markets; small states may be predatory toward markets. The resources of a large state may be used to correct genuine market failures—or merely to subsidize state enterprises making goods or providing services that the private sector might have produced more efficiently. A large share of private domestic investment in total investment may reflect a highly competitive and efficient private sector—or one that is subsidized and protected. Thus, like other indicators in this book, the indicators here provide an important but incomplete picture of what they measure—in this case the roles of states and markets. Because data on subnational units of government—state, provincial, and municipal—are not readily available, the size of the public sector is measured here by the size of the central government. While the central government is usually the largest economic agent in a country and typically accounts for most public sector revenues, expenditures, and deficits, in some countries—especially large ones— state, provincial, and local governments are important participants in the economy. In addition, "central government" activities can vary depending on the accounting practice followed. In most countries central government finance data are consolidated into one overall account, but in others only budgetary central government accounts are available, which often omit the operations of state-owned enterprises (see Primary data documentation). When direct estimates of private gross domestic fixed investment are not available, such investment is estimated as the difference between total gross domestic investment and consolidated public investment. Total investment may be estimated directly from surveys of enterprises and administrative records or indirectly using the commodity flow method. Consolidated measures of public investment may omit important subnational units of government. In addition, public investment data may include financial as well as physical capital investment. As the difference between two estimated quantities, private investment may be undervalued or overvalued and subject to large errors over time. (See the notes to table 4.9 for further discussion on measuring domestic investment.) Statistics on foreign direct investment are based on balance of payments data reported by the International Monetary Fund (IMF), supplemented by data on net foreign direct investment reported by the Organisation for Economic Co-operation and Development and official national sources. The data suffer from deficiencies relating to definitions, coverage, and cross-country comparability. (See the notes to table 6.8 for a detailed discussion of data on foreign direct investment.) Data on domestic credit to the private sector are taken from the banking survey of the IMF’s International Financial Statistics or, when the broader aggregate is not available, from its monetary survey. The monetary survey includes monetary authorities (the central bank) and deposit money banks. In addition to these, the banking survey includes other banking institutions such as savings and loan institutions, finance companies, and development banks. In some cases credit to the private sector may include credit to state-owned or partially state-owned enterprises. • Private investment covers gross outlays by the private sector (including private nonprofit agencies) on additions to its fixed domestic assets. Gross domestic fixed investment includes similar outlays by the public sector. No allowance is made for the depreciation of assets. • Foreign direct investment is net inflows of investment to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor. It is the sum of equity capital, reinvestment of earnings, other long-term capital, and short-term capital as shown in the balance of payments. Gross domestic investment (used in the denominator) is gross domestic fixed investment plus net changes in stocks inventories. • Credit to private sector refers to financial resources provided to the private sector—such as through loans, purchases of nonequity securities, and trade credits and other accounts receivable—that establish a claim for repayment. For some countries these claims include credit to public enterprises. • Private nonguaranteed debt consists of external obligations of private debtors that are not guaranteed for repayment by a public entity. Total external debt is the sum of public and publicly guaranteed long-term debt, private nonguaranteed long-term debt, IMF credit, and short-term debt. • Central government expenditure comprises the expenditures of all government offices, departments, establishments, and other bodies that are agencies or instruments of the central authority of a country. It includes both current and capital (development) expenditures. Private investment data are from the International Finance Corporation’s Trends in Private Investment in Developing Countries 1997 and World Bank estimates. Data on foreign direct investment are based on estimates compiled by the IMF in the Balance of Payments Statistics Yearbook, supplemented by World Bank staff estimates. Data on domestic credit are from the IMF’s International Financial Statistics, and data on government expenditure are from the IMF’s Government Finance Statistics Yearbook. External debt figures are from the World Bank’s Debtor Reporting System as reported in Global Development Finance 1998. THE WORLD BANK METHODOLOGY: ----- On External Debt ----- On WORLD DEVELOPMENT INDICATORS Trends in long-term development Key indicators for other economies Credit, investment and expenditures |