World Bank Document

Definitions and data notes
Capital flows
extended by an agency of the exporting country's
government.
Components of capital flows. International move- * Grant. A current transfer of capital, goods, or
ments of capital may come from either official or services to a foreign country that results in no curprivate
sources. Official sources are (a) govern- rent or future obligation to make a like transfer
ments and governmental agencies (also called bilat- from the recipient country to the donor.
eral lenders) and (b) international organizations - Grant element. The extent to which a loan can
(called multilateral lenders). Private sources com- be considered a grant is determined by its grant
prise (a) commercial suppliers and manufacturers, element-the difference between the original face
which provide export credits for the purchase of value of the loan and the discounted present value
their goods, (b) commercial banks, which provide of debt service, as a percentage of the original face
export credits or cash loans, (c) other private inves- value. Thus a true grant has a grant element of 100
tors, who invest in foreign enterprises in which percent. A discount rate of 10 percent is conventhey
seek a lasting interest (direct investment) or tionally used in the calculation. The grant element
purchase stocks or bonds issued by foreign compa- is used to compare the concessionality of assisnies
or governments (portfolio investment), and tance provided under differing terms and condi-
(d) charitable organizations, which provide finan- tions.
cial aid, goods, and services as grants.
* Net flows of lending. Loan disbursements less
- Concessional flows. International lending on amortization of principal.
terms more favorable to the borrower than those * Nonconcessional flows. Lending on or near
obtainable through normal market transactions. In terms prevailing in private financial markets.
this text, concessional flows are defined as those * Official development assistance. Loans and grants
having a grant element of 25 percent or more. made on concessional financial terms from official
* Direct foreign investment. Investment made to sources, with the objective of promoting economic
acquire a lasting interest in an enterprise operating development and welfare. It includes the value of
in an economy other than that of the investor, the technical cooperation and assistance.
investor's purpose being to have an effective voice * Private nonguaranteed debt. Private nonguaranin
the management of the enterprise. teed loans are external obligations of private
* Equity financing. Investment that confers debtors that are not guaranteed for repayment by a
whole or partial ownership in an enterprise and public entity of the debtor country.
entitles the investor to share in the profits from its * Public and publicly guaranteed debt. Public loans
operation. International equity financing flows are external obligations of public debtors, indudmay
be included in either foreign direct or portfo- ing national governments, their agencies, and
lio investment. autonomous public bodies. Publicly guaranteed
* Export credits. Finance provided by lenders in a loans are external obligations of private debtors
given country for exports of specific goods or ser- that are guaranteed for repayment by a public
vices. Conventionally, one distinguishes between entity of the debtor country.
private and official export credits. Private export
credits consist of (a) supplier credits, which are Trade and finance
extended by the exporting company to the foreign
buyer and (b) buyer credits, which are extended by * Balance of payments. A systematic record of the
commercial banks in the exporting country on economic transactions between a nation's resibehalf
of the exporters. Official export credits are dents and nonresidents during a given period,
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