Definition: On-lending of borrowed funds

Category: External debt - IMF

An institutional unit within an economy might borrow funds from a nonresident(s) and then on-lend the funds to a second institutional unit within the economy. In such instances, the first institutional unit—that is, the institutional unit that borrowed from the nonresident(s)—should record an external debt liability, with any subsequent on-lending classified as a domestic claim/liability. The decisive consideration is whether the creditor has a claim on the debtor, and in this example the nonresident creditor has a claim on the first institutional unit.

If an institutional unit within an economy borrowed from a nonresident(s) and on-lent the funds to a nonresident, the unit should record both external debt and an external claim. The nonresident borrower would also record an external debt liability in that economy’s measure of external debt. http://ec.europa.eu/eurostat/ramon/statmanuals/files/external_debt_guide_2003_EN.pdf#page=227