What this covers: where domestic public debt figures come from, the coverage and instruments behind them, and what sets domestic debt apart from external debt in low- and middle-income countries.

Sources

Domestic public debt figures for low- and middle-income countries come from several sources, each covering a different set of countries and parts of the public sector.

• The World Bank and IMF Quarterly Public Sector Debt database splits public debt by domestic and external creditors and by domestic and foreign currency, by instrument, and by maturity, for each level from budgetary central government to the whole public sector. It covers about 100 economies, many of them high-income, and countries report to it by choice, so its coverage of low- and middle-income countries is partial.
• The IMF World Economic Outlook reports general government gross debt for nearly every country, encompassing both domestic and external debt. Subtracting external public debt provides a rough domestic figure. The two differ in coverage, so the result can be distorted and even negative.
• The IMF Global Debt Database reports general and central government debt alongside household and corporate debt for about 190 economies, which places public debt within a country's total debt.
• The World Bank's World Development Indicators report central government debt, lumping domestic and foreign debt together, with sparse coverage of low-income countries.
• The BIS debt securities statistics split securities into domestic and international by market of issue. They cover securities only and few low-income countries.
• Ministries of finance and debt management offices publish debt bulletins with domestic debt by instrument and holder. The World Bank's International Debt Report draws on them alongside the Quarterly Public Sector Debt database.

Coverage and instruments

Domestic debt is held mainly as Treasury bills and bonds, loans from domestic banks, and advances from the central bank. Public sector debt statistics define debt in four widening tiers. The narrowest is debt securities and loans. The second adds special drawing rights, currency, and deposits, the third adds other accounts payable, which include arrears to suppliers, and the widest adds insurance, pension, and standardised guarantee schemes. Two figures for the same government differ when one includes arrears and the other only includes securities and loans, and they also differ by the level of government covered, similar to external debt.

How domestic debt differs

Domestic debt in low- and middle-income countries is mostly in local currency, which removes exchange-rate risk. It carries shorter maturities and higher interest rates than concessional external loans. It therefore falls due more often and must be rolled over at current rates. Because it costs more, its share of a government's interest bill is larger than its share of the government's debt. Domestic banks hold much of it, which ties the solvency of the government and banks together and can crowd out lending to the private sector. When the central bank lends to the government, it creates the money it lends, which links domestic debt to inflation.

Domestic debt restructuring follows national law and falls outside the G20 Common Framework, which covers official bilateral creditors. Ghana's domestic debt exchange of 2022 and 2023 and Sri Lanka's domestic debt operation of 2023 each ran separately from that country's external debt restructuring. In both, the losses fell on domestic banks and pension funds, so the terms were set with the stability of the financial system in view.