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External Public Debt

Portugal's external public debt was on a steeply rising trend from 1976 onward, reaching nearly US$18.5 billion at the end of 1987, its peak dollar magnitude. After that year, early repayments of principal slightly reduced outstanding debt to slightly over US$18.4 billion in 1990. As the proceeds from privatization of nationalized enterprises were applied to debt reduction, Portugal's external public obligations would continue to diminish.

Debt-service indicators revealed much about the relative burden of Portugal's foreign indebtedness, as well as the capacity of the economy to service this debt (see table 10, Appendix). More relevant than the dollar value of the debt was the ratio of public external debt to GDP, which increased inexorably from 1980 to 1985 (from more than 36 percent to more than 80 percent, its highest level) and then abruptly fell to just under 29 percent in 1990. Total debt service (scheduled amortization and interest payments) as a share of current account credits (foreign exchange income from exporting goods and services, as well as from unilateral remittances) rose from over 15 percent in 1980 to 37 percent in 1985 and thereafter fell to 16.7 percent in 1990. Portugal's success in reducing its relative external debt-servicing burden by about half between 1985 and 1990 was largely the result of burgeoning export receipts, notably manufactured goods and tourism income, although growing emigrant worker remittances and transfers from the EC also played a role.

The interest/GDP ratio, which measures the net burden on the Portuguese economy, more than doubled from 3 percent in 1980 to 6.5 percent in 1985 before falling back to 2.9 percent in 1990. The external debt/reserves indicator, which compares Portugal's foreign/public obligations (mainly the stock of long- and medium-term debt) with its gross foreign assets (mainly liquid foreign exchange holdings of the Bank of Portugal and the Treasury, with gold valued at market prices) almost tripled between 1980 and 1985, when the country's external debt exceeded its official reserves by 67 percent. As a consequence of the rapid buildup of Portugal's official reserves from 1985 onward, the external debt/reserves indicator was reduced to just over 72 percent in 1990. This massive accumulation of foreign assets at the disposal of official institutions reflected not only Portugal's export drive, but also its success in attracting direct investments from its EC partners.

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The Organisation for Economic Co-operation and Development (OECD) annual economic surveys give an authoritative and readily available exposition of the country's economy with a strong policy orientation. The quarterly Country Report: Portugal and the annual Country Profile: Portugal from the Economist Intelligence Unit (EIU) provide current economic coverage, and Mark Hudson's Portugal to 1993: Investing in a European Future, also published by EIU, is particularly useful for analysis of Portugal's economy in the context of that country's accession to the EC. For additional current information on Portugal's private and public sector economic activities, special supplements of the Economist and Financial Times, both published in London, offer well-written coverage for the nonspecialist. From time to time, Euromoney publishes special reports on up-to-date banking and financial developments in Portugal. The Bank of Portugal's annual reports provide detailed information, including copious statistical tables, on the Portuguese economy.

Valentina Xavier Pintado's Structure and Growth of the Portuguese Economy, published by the European Free Trade Association, is the definitive study of the economy during the early Salazar period. Eric N. Baklanoff's The Economic Transformation of Spain and Portugal is a comparative analysis of accelerating economic growth in the two Iberian countries in response to the new, more open, market-oriented economic policies initiated in 1959 by the Franco and Salazar regimes.

Among the more useful books on the postrevolutionary period in English are Rodney J. Morrison's Portugal: Revolutionary Change in an Open Economy; the World Bank's Portugal: Current and Prospective Trends, a report based on the findings of a mission to Portugal in 1978; and Portugal: Ancient Country, Young Democracy, edited by Kenneth Maxwell and Michael H. Haltzel. This edited work, published by the Wilson Center Press in 1990, includes three chapters on the economy.

Two comparative technical studies that illuminate Portugal's integration with the European Community include Juergen B. Donges, The Second Enlargement of the European Community and European Integration and the Iberian Economies, edited by George N. Yannopolous. (For further information and complete citations, see Bibliography.)

Data as of January 1993

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Portugal Table of Contents