Table of Contents -- Foreword -- Acknowledgments -- Selected Abbreviations -- Overview and Policy Messages: The Development Potential of Surging Capital Flows -- The broad surge in private capital flows continues -- Global growth has propelled the surge in capital flows, but serious risks remain -- Capital flows are being transformed -- Net official flows continue to decline -- To ensure economic stability, developing countries must manage capital flows effectively -- Multilateral cooperation is key to resolving global financial imbalances -- Chapter 1 Prospects for the Global Economy -- Summary of the outlook -- Global growth -- Regional outlooks -- Commodity markets -- Inflation, interest rates, and global imbalances -- World trade -- Risks -- Avian influenza -- Notes -- References -- Chapter 2 The Growth and Transformation of Private Capital Flows -- Private debt market developments in 2005 -- Structural changes in emerging market debt -- Prospects for private capital flows -- Annex: Commercial Debt Restructuring -- Developments in 2005 and the first quarter of 2006 -- Notes -- References -- Chapter 3 Supporting Development through Aid and Debt Relief -- Recent trends and prospects for foreign aid -- Debt relief: improving and maintaining debt sustainability -- The challenge ahead: accessing external capital, while maintaining debt sustainability -- Annex: Debt Restructuring with Official Creditors -- Notes -- References -- Chapter 4 Financial Integration among Developing Countries -- The growth of South-South capital flows -- Foreign direct investment in the developing world -- South-South banking -- Developing-country stock exchanges -- Conclusion -- Chapter 4 Annexes -- Annex 1: Data on South-South capital flows -- Annex 2: Selected South-South M&A deals by southern multinationals in service sector, 2000-5.

Annex 3: Model of determinants of bank ownership -- Notes -- References -- Chapter 5 Challenges in Managing Capital Flows -- Two booms in capital flows-what has changed? -- The effect of the recent influx of capital flows on domestic investment and asset prices -- Lessons and policy agenda -- Annex: Capital Flows and Domestic Investment -- Notes -- References -- Statistical Appendix -- Tables -- 1 Net capital flows to developing countries, 1997-2005 -- 2 Net private capital flows to developing countries by region, 1998-2005 -- 1.1 The global outlook in summary -- 1.2 Estimated impact of three risk scenarios -- 1.3 Impact of a 400-basis-point increase in interest rates in selected developing countries -- 1.4 Impact of a further 30 hike in oil prices in selected developing countries -- 1.5 Impact of a 15 percent fall in non-oil commodity -- 1.6 Impact of a widening of bird-bird flu -- 1.7 Possible economic impacts of flu pandemic -- 1.8 A breakdown of economic impacts of a potential human-to-human pandemic -- 2.1 Net private debt flows to developing countries, 2002-5 -- 2.2 Gross market-based debt flows to developing countries, 2002-5 -- 2.3 Gross cross-border loan flows, 2005 -- 2.4 Countries' access to international capital markets by intermediaries, 2002-5 -- 2.5 Asset allocation of major international pension funds, 2004 -- 2.6 Net FDI flows to developing countries, 2000-5 -- 2.7 Selected announced privatization and M&A deals in developing countries, 2005 -- 2.8 International bonds and notes outstanding, by currency, 1999-2005 -- 3.1 Net ODA disbursements, 1990-2005 -- 3.2 ODA and debt relief grants in 2005 -- 3.3 Main components of bilateral ODA, 1990-2005 -- 3.4 Net ODA disbursements to the ten largest recipient countries -- 3.5 Donors' shares of ODA in 2005, projected 2010 -- 3.6 General government financial balances in 2004, projected 2005-7.

3.7 ODA as a percentage of fiscal expenditures and revenues in 2004, projected 2006 -- 3.8 Debt relief grants provided by DAC donor countries, by income and region of beneficiary, 1990-2005 -- 3.9 Debt-service reductions to be provided by the MDRI -- 3.10 Donors' commitment to refinance IDA for debt relief provided under the MDRI, selected years -- 3.11 Net present value of external debt relative to GNI and exports, 2004 -- 3.12 Credit ratings for decision-point HIPCs -- 3.13 Average annual real GDP growth, 1990-2005 -- 3.14 Indicators of external position of the 29 decision-point HIPCs, 1990-2005 -- 4.1 South-South FDI as a share of global FDI, 1999-2003 -- 4.2 Regional FDI by multinationals from selected countries -- 4.3 Selected southern multinationals in the oil-and-gas sector, 2004 -- 4.4 South-South cross-border syndicated lending, 1985-2005 -- 4.5 Source of foreign bank assets, by region -- 4.6 Performance indicators for northern and southern foreign banks, selected aggregates, 2000-4 -- 4.7 Stock exchanges in selected developing countries, December 2005 -- 5.1 Ratio of short-term debt to total debt in major borrowing countries, 1996-2004 -- 5.2 Profile of external financial policy for developing countries considered relatively open to capital movements -- 5.3 Current account aggregated by region, 1997-2005 -- 5.4 Sources of reserve accumulation, 1997-2005 -- 5.5 Changes in central bank balance sheets, 2001-5 -- 5.6 Foreign currency reserves and foreign assets as shares of total central bank assets in countries with high reserve accumulations, 2005 -- 5.7 Investment performance during the surge in capital flows, 2002-4 -- 5.8 Indicators of overheating in selected developing countries, 2002-4 -- 5.9 Stock market performance in emerging markets, 2002-5 -- 5A.1 Domestic investment and private capital flows -- Figures.

1 Financial flows to developing countries, 1997-2005 -- 2 Benchmark spreads for emerging markets, 2001-6 -- 3 Capital outflows by private entities in the developing world, 1981-2005 -- 4 Net official lending and foreign aid grants to developing countries, 1980-2005 -- 5 Net official lending, 1997-2005 -- 1.1 Industrial production remains robust -- 1.2 Inflation in high-income countries -- 1.3 Developing-country growth remains robust -- 1.4 Regional growth trends -- 1.5 An end to the trend rise in oil prices? -- 1.6 Higher prices slow oil demand -- 1.7 A disappointing supply response -- 1.8 Spare production capacity remains low -- 1.9 Commodity prices -- 1.10 Moderate increases in inflation -- 1.11 Flattening yield curve -- 1.12 Changes in real effective exchange rate -- 1.13 Developing countries' current-account balances -- 1.14 Increased aid helped finance oil costs in 2004 -- 1.15 Reserves in some countries are falling rapidly or worrisomely low -- 1.16 Tensions associated with fast growth, the case of Turkey -- 1.17 Global imbalances -- 1.18 Interest rate spreads support the dollar -- 1.19 Funding the U.S. current account deficit -- 1.20 Healthy growth in world trade -- 1.21 Regional increases in market share -- 1.22 Increased product range explains most of Chinese export growth -- 1.23 Exports of developing countries have diversified -- 2.1 Net private debt flows to developing countries, 1991-2005 -- 2.2 Emerging market bond issuers by type, 2002-5 -- 2.3 Average spreads on new bond issues, 2001-5 -- 2.4 Bond market financing by risk category, 2002-5 -- 2.5 Concentration in bond and bank financing, 1993-2003 -- 2.6 Comparative cost of bond and bank financing, June 2004-December 2005 -- 2.7 Bank financing raised for core activities, 2002-5 -- 2.8 Bank credit for high-risk borrowers: rising rates but longer maturities, 2001-5.

2.9 IPO activities in emerging market countries 2001-5 -- 2.10 Investment climate and FDI -- 2.11 The concentration of FDI, 1995-2005 -- 2.12 Euro-denominated international bond issues, by region, 1999-2005 -- 2.13 Yields on U.S. and German 10-year government bonds, 1999-2005 -- 2.14 Comparison of euro-denominated and U.S. dollar-denominated emerging market sovereign bond issues -- 2.15 The global credit derivatives market in notional terms, 2001-5 -- 2.16 Credit derivative participants, 2004 -- 2.17 Five-year CDS and ASW spreads for selected countries, 2002-5 -- 2.18 Trends in domestic debt securities in emerging markets, by region, 1997-2005 -- 2.19 The size of the domestic bond market in selected countries -- 2.20 Bond market profile in selected countries, September 2005 -- 2.21 Performance of local-currency bonds (ELMI+) against major indexes, 2002-5 -- 2.22 Returns vs. volatility of selected bond indexes, 2000-5 -- 3.1 Net ODA to developing countries, 1990-2005 -- 3.2 Bilateral ODA loans and grants, 1990-2005 -- 3.3 Share of total ODA allocated to LDCs and other low-income countries, 1990-2004 -- 3.4 Net ODA as a percentage of GNI in DAC donor countries, 1990-2005 and projected 2006-10 -- 3.5 Debt-service payments and HIPC debt-service reduction for 28 "decision point" HIPCs -- 3.6 Debt-service reduction provided by the HIPC Initiative to 25 decision-point countries -- 3.7 Debt service paid by 25 decision-point HIPCs, 2000 versus 2005 -- 3.8 Debt-service reduction to be provided by the MDRI, 2006-45 -- 3.9 Debt-service reduction to be provided to 18 completion-point HIPCs under the MDRI, 2006-45 -- 3.10 Donors' commitment to refinance IDA for debt relief provided under the MDRI, 2006-45 -- 3.11 Debt burdens in 18 completion-point HIPCs, before and after the HIPC and MDRI debt relief.

3.12 Net official lending to 27 decision-point HIPCs as a percent of GDP, 1990-2004.