Download Strengthening Debt Management Practices: Lessons from Country

Strengthening Debt Management
Practices: Lessons from Country
Experiences and Issues Going
Forward
A Joint Paper Prepared by the World Bank and IMF
Phillip Anderson
World Bank Treasury
Background
• 2001 “Guidelines for Public Debt Management”
(Revised 2003)
• 2003 “Accompanying Document to the Guidelines
for Public Debt management”
• 2002 Launch 12 Country Pilot Program
• 2007 Publication of “Managing Public Debt: From
Diagnostics to Reform Implementation” and
“Developing Domestic Government Debt Market:
From Diagnostics to Reform Implementation”
• 2007 Joint Bank-Fund Board Paper
2
Risk reduced in many middle income
countries (MICs)
Study of sovereign debt in 18 emerging market
countries:
Reduced currency risk
• Average external debt fell to 10% GDP in 2004, from
16% in 1999
• Latin America and Emerging Europe: share of external
declined from 40% to 30% of total debt stock
Reduced rollover and interest rate risk
• 13 / 18 saw short term domestic debt decline as a
proportion of total domestic debt
• Latin America – medium-long term fixed-rate debt
increased from around 10% to 20% of domestic debt
(Asia over 80%)
• International bond issues– average maturity increased
from 8 – 13 years between 2001 and 2005
Source: IMF April 2006 Global Financial Stability Report
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Reduced share of external debt
Emerging Markets Sovereign Debt
External Sovereign Debt
Domestic Sovereign Debt
50.0
45.0
40.0
% of GDP
35.0
30.0
25.0
20.0
15.0
10.0
5.0
1998
Source: JPMorgan
1999
2000
2001
2002
2003
2004
2005
2006F
2007F
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Progress in debt management in MICs,
but challenges remain…
•
Developing medium-term debt management
strategies
•
Coordinating with other macroeconomic policies
•
Improving governance arrangements and
capacity
•
Developing the domestic government debt
market
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Low-income country (LIC) context
and challenges
•
Concessional flows generally more important than market
finance
•
Borrowing space created by HIPC/MDRI must be managed
carefully to avoid reaccumulation of unsustainable debt
•
Most countries remain at an early stage in defining
comprehensive medium-term debt management
strategies
•
Greater vulnerability and institutional and capacity
constraints
•
Fewer tools to manage risk
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Insights on designing and implementing
a reform program
•
Country ownership and commitment to reform
is a precondition
•
Comprehensive diagnostics necessary prior to
undertaking reform – including links with
macroeconomic framework
•
Embodying PDM reform in broader projects
can improve chances of success in
implementation
•
Coordination with other organizations and
governments have improved the quality of
PDM technical support
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The case of Kenya
•
Failure to sustain capacity building efforts
(1985-2003)
•
Turning point: Government request of World Bank
support (2003) and Anglo Leasing affair (2004)
•
Reform implementation (2004-)
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Staff increase from 5 to 24 officials
Organized according to FO, MO and BO functions
Domestic and external debt database has been migrated and
updated on CS-DRMS 2000+
Debt data reconciled against loan contract and validated
Back office and its internal procedures have been strengthened
A comprehensive Annual Debt Management Report has been
published, including an initial debt management strategy
Debt management department has its own website
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World Bank support for public debt
management
•
Treasury to continue focus of support for
MICs, PRMED to support LICs


•
Build on insights gained from the pilot program and
other country work
Work in close coordination with each other and with
department responsible for domestic debt market
development
Regular coordination with IMF and other
providers of assistance


Bank to focus on long term institutional
development, capacity building, and knowledge
transfer
IMF to focus on its role in helping countries prevent
macroeconomic and financial crises
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World Bank support in debt management
– work program
•
Support for MICs

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
•
Country work– engagements in 28 countries over
past 5 years (policy of cost recovery for follow-up
work)
Training, research and outreach
Due diligence and support for countries using IBRD
banking products
Support for LICs


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Program to measure debt management
performance through standardized PDM indicators
(DeMPA)
Jointly with the IMF, develop LIC capacity to design
and implement medium-term debt strategies
Training and outreach program to be developed
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