Public Debt Governance, By Tarun Das

8/14/2019 Public Debt Governance, By Tarun Das

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UNITAR

Training and Capacity Building Programmes in

Legal Aspects of Debt and Financial Management

BEST PRACTICES Series No. 10

10

Governance of Public Debt:International Experiences and Best Practices


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United Nations Institute for Training and Research (UNITAR)

Best Practices Series No. 10

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___________________________________________________________________________________Governance of Public Debt - International Experiences and Best Practices

Copyright 2006 DFM/UNITAR

www.unitar.org/dfm3

Contents_____________________________________________________________________

Page

Introductory Note.. 4

Governance of Public Debt - International Experiences and Best

Practices

1. Introduction .. 5

2. Risk Management Framework for Public Debt . 5

3. Institutional and legal set-up for public debt management 8

4. Governance: Legal Framework and Accountability.. 16

5. World Bank Survey on Debt Management Practices 17

Selected References 21

Authors Profile .. 23


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Introductory Note___________________________________________________________________________________

his edition is the 10th. in a series of Best Practicespublications

compiled by UNITARs Training Programme in the Legal Aspects of

Debt and Financial Management. It is hoped that this documententitled Governance of Public Debt - International Experiences and

Best Practices will be useful especially to policy makers, senior

government officials, parliamentarians as well as debt managers, civil

society and other officials from Ministries of Finance, Justice, Attorney-

Generals Chambers and think tanks involved in institutional and

legal/regulatory issues relating to public borrowing and debt

management.

This document forms part of a broader effort by UNITARs Debt and

Financial Management Training Programme to sensitize public

professionals in external debt management issues.

These Best Practices have been contributed by Dr. Tarun Das, Economic

Adviser, Ministry of Finance (India) and UNITAR Resource Person. UNITAR

thanks him for his contribution and commitment to our training

programmes as well as research activities.

We hope that this document will be useful as well as challenging to its

readers.

Marcel A. Boisard

Assistant Secretary-General of the United Nations

Executive Director of UNITAR

Geneva, January 2006

T


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GOVERNANCE OF PUBLIC DEBT -

INTERNATIONAL EXPERIENCES AND

BEST PRACTICESby Dr. Tarun Das1, UNITAR Expert

1. Introduction

ublic debt management practices by leading debt offices bears

many valuable lessons for countries in the process of strengthening

their debt management capacity. As in other spheres, there is no

unique answer as to what constitute sound debt management practices at

all the times and at all countries. Selective discretion should be used while

ameliorating debt management practices based on international

experiences. More importantly, the country specific requirements should

be carefully analyzed so that the international best practices could begrafted effectively. A country should own its system and develop it over

the years.

2. Risk Management Framework for Public Debt

Efficient public debt management primarily aims at ensuring that

government borrowing needs are met efficiently, and the incremental

flows and stock of public debt from both budgetary and off-budgetary

sources are managed in consistency with the governments preferences for

cost and risk. An objective of minimising debt servicing cost, irrespectiveof risk, should not be an explicit objective. Risky debt structures,

characterised by excessive exposure to short-term or floating-rate debt or

debt denominated in or indexed to a single foreign currency can

1Dr. Tarun Das - Economic Adviser, Ministry of Finance (India), and Resource Person,UNITAR, Geneva.

This report expresses personal views of the author and should not be attributed to the views

of the Ministry of Finance, Government of India or the UNITAR. The author would like to

express his gratitude to the UNITAR for providing an opportunity to prepare this report and

the Ministry of Finance, Government of India for granting necessary permission for that.

P


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substantially deteriorate the fiscal position of the government, may put

constraints to access to both domestic and external capital and even

propagate financial market instability. This is particularly important when

the governments debt portfolio is large relative to the economys

economic size. Prudent debt management aimed at reducing both costs

and risks by establishing a low risk currency composition, intereststructure and maturity profile of the governments debt portfolio could

make a country less susceptible to financial risk and contagion effects.

Several OECD governments have accordingly set government debt

management objectives aimed at minimising debts servicing costs over

the medium and longer-term subject to a prudent level of portfolio risk. On

the other hand, debt management objectives of many emerging market

economies appear to cover their borrowing needs with least cost, lengthen

maturities and diversify funding sources wherever possible and less

attention is paid to managing market risks and refinancing risk.

Although there is no unique solution to tackle various types of risk, general

risk management practices of the government aim at minimizing risk for

government bodies and public enterprises. These include development of

ideal benchmarks for public debt and monitor and manage credit riskexposures. Table-1 summarizes the strategic sovereign debt management

benchmarks that have been established in various countries.


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Table 1: Structure of strategic portfolio benchmark in selected

countries

PORTFOLIO BENCHMARKInterest rate Refinancing

Country

Domes-tic:

Foreign

Curren-

cy

(ratio)

Domestic/

Foreign

Currency

Benchmarks

Fix

Floating

(ratio)

Modified

Duration

(years)

Maximum

ceiling on debt

maturing in next

year

Belgium 95:5 Domestic 80:20 4.25 0.25 10-15%

Colombia 77:33 Foreign 85:15 3.5 10-15%

Domestic - 4 0.5 10-15%

Denmark

88:12*

Foreign - 2.5 0.5 20-25%

Finland 60:40 Foreign 85:15 3.6 -

Ireland 94:6 Domestic 67:33 3.7 Ceiling on all

debt with less

than 5 years to

maturity of 60%

Portugal 100:0 Domestic 60:40 3.0 20% in 12

months, 15% in

subsequent

years

Sweden 94:6 Domestic and

Foreign

50:50 3.4 0.4 30% in 12

months, 15% in

subsequent

years

Usually, governments are risk-averse in their sovereign debt management,

often because governments have strong political incentives to adopt the

risk appetite reflected by the median voter decision-making. Evidence

suggests that taxpayers or representative voters tend to be risk averse in

their decision-making and expect the government to have similar risk

appetite in managing its financial interests. Thus, while governments

generally have preference for more stable tax rates over time they tend to

be risk averse for their financial asset-liability management.


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3. Institutional and legal set-up for public debt management

The institutional setting for public debt management in different countries,

could be broadly classified into five categories i.e., (i) a full-fledged debt

office either in the mainstream Ministry of Finance; (ii) under the Ministry

of Finance as a separate entity like the Treasury or a Debt ManagementAgency; (iii) autonomous institution outside the Ministry; (iv) in the Central

bank; and (v) the debt office is dispersed between the Ministry of Finance

and the central bank.

The first four categories refer to a full-fledged debt office and could be

differentiated by the location and the degree of autonomy accorded to thedebt office. Table-2, which lists the institutional setting for public debt

offices in different countries, shows that the bulk of the debt offices are

located as a separate agency under the Ministry of Finance with sufficient

degree of operational independence (i.e. second category).

Table 2: Institutional Location of Sovereign Debt Management

Responsibility

Under the

Ministry of

Finance or

Treasury*

Located

within the

Central Bank

Located

elsewhere as an

autonomous

entity

Advanced

EconomiesAustralia Austria Belgium Canada Denmark Finland France Germany Greece Ireland Italy

Japan Netherlands New Zealand Portugal Spain Sweden Switzerland United Kingdom United States


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Emerging

Economies

Argentina1 Brazil 1 China1

Colombia Hungary India Korea 1 Mexico South Africa Thailand1 Turkey 1: Establishment of sovereign debt management offices is currently underway in these

countries.

*: In many countries, although debt offices are under the Ministry of Finance or Treasury,

the debt office is set up as an autonomous entity with sufficient operational independence.Source: Sound Practices in Sovereign Debt Management, FPS Department, The World

Bank, March 2000; OECD as mentioned in Risk Management of Sovereign Assets and

Liabilities, Working Paper, WP/97/166, IMF, December 1997 and national authorities.

In terms of the degree of independence accorded to the debt office, the

institutional setting for the above category resembles the third category,

i.e., where the debt office is located as an autonomous entity. Although, in

the first three cases, the debt office may be located under the Ministry of

Finance or as an autonomous agency, the central bank still retains some

agency services for debt management and in some cases undertake

foreign exchange operations for its foreign currency debt and cashmanagement. Denmark is the only country, where its central bank,

Nationalbanken houses the debt office for the government. In India, debt

management factions are shared by the central bank and the Ministry of

Finance. While the Reserve Bank of India acts as the manager on the

internal debt of the government, the Ministry of Finance is responsible for

the management of external debt.

International experience suggests that centralised debt offices in most

countries are located under the Ministry of Finance. This is because MOF in

general is in charge of dealing multilateral financial institutions and

bilateral donors. Within this institutional structure, in most of the advanced

countries, the debt offices are set up as an autonomous or separate entity

within a Treasury or as a statutory unit. This enables the debt office to

assume sufficient degree of operational independence Thus, for thirty

countries for which data is available, twenty-four have their debt offices

under the Treasury/ Ministry of Finance. This includes all the emerging

economies for which information is available.

The main argument for entrusting sovereign debt management

responsibility within the Ministry of Finance or Treasury is the proximity of

location, which enables the senior management within the Ministry of


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Finance to review and assess the performance of the entity more easily.

This issue of geographical proximity is particularly important when a full-

fledged centralised debt office is being set up and management

competencies are unproven.

Another factor, which prompted many governments to locate the debtoffice within the Ministry of Finance is that the public debt has budgetary

implications and co-ordination between budget making and the debt office

facilitates effective management of debt and fiscal deficit. This

arrangement thereby minimises chances of any conflict arising from the

budgetary process wherein the annual borrowing requirements are

determined and the management of such liabilities. The downside risk of

unsustainable borrowing has been obviated in most of the cases, by legalenactment of authorising annual borrowing with a preset limit (Tables 3

and 4) and practising policies of fiscal prudence.

Table 3: Institutional Arrangement of Debt Offices and Annual

Borrowing Authority or Debt Ceiling Limit

Institutional

Arrangement

Countries Limit on Annual

Borrowing

Authority

Debt Ceiling

Limit

Ministry of

Finance

Belgium

Canada

Finland

France

Germany

Greece

Hungary

India

Italy

Mexico

Morocco

New Zealand

United States

United Kingdom

Autonomous

Agency

Australia

Ireland

Portugal

Sweden

Central Bank

Denmark Source: Guidelines for Public Debt Management, SM/00/135, IMF.


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Table 4: Legal Framework for Debt Offices

Countries Limit for Domestic

Borrowing

Decides new limits

Ministry ofFinance

Belgium Limit on the cost of borrowing The Parliament

Canada Yes, Borrowing Authority Act The Parliament

Germany Yes, a limit is set by federal

legislative authorization

(Budget Law)

The Parliament

Greece No, except for the limit to T-

Bills

India Yes, a limit is set by Budget

Law

The Parliament

Japan Yes, a limit is set by Budget

Law

The Parliament

Mexico Yes, a limit is set according to

the Federal Budget

The Congress

Netherlands Implicit limit (budgeted

borrowing)

-

New Zealand No legal limit MOF may alter the

program

Switzerland No legal limit -

Turkey Only for govt. bonds the limit

is twice the budget deficit

For govt. bonds, the

Parliament

United Kingdom Limit by the funding remit -

Autonomous

Agency

Australia Yes, financial year budgetary

need

DMO and the

Treasurer

Austria Yes, the limit is set by the

Financial Law

The Parliament

Ireland No -

Sweden Limit only for foreign

exchange funding

-

Central Bank

Denmark Limit on the level of debt

outstanding

The Parliament

Source: OECD as mentioned in Risk Management of Sovereign Assets and Liabilities,

Working Paper, WP/97/166, IMF, December 1997.

Few debt offices (e.g., Australia, Austria, Ireland, Portugal and Sweden)

have also been set up as an autonomous debt agency or corporation

outside the Ministry of Finance giving it a distinct institutional presence.

This was established with legislation (e.g. Ireland and Portugal) or without


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legislation (e.g. Australia and Sweden). Very recently, Germany have

decided to take out the debt management functions from the Ministry of

Finance to an autonomous set up as a private corporation. The overriding

reason for creating an autonomous institution emanated from the concern

of conflicts in objective between fiscal policy and debt management. Thus,

an autonomous debt office would be less likely to engage in riskystrategies designed to maximise short-term political gains. Another

common concern has been the influence on interest rate. Thus, any

perception of insider trading or market manipulation would undermine the

credibility of the government, the debt office and the market. The risk of

debt management and cash management being downplayed by a large

institution like the Ministry of Finance could result in the commercial needs

of the business being inadequately funded.

The degree of autonomy in such debt offices, vary from country to country(Table-5). Although the debt offices are autonomous in nature, most of

them either report to the Minister of Finance or to the Parliament. Thus,

while the formulation of debt policy like level of the debt, limits on

domestic and foreign-currency borrowing is a political decision and

therefore should rest with the government, the actual management of

sovereign debt can be extracted from the political domain by assigning

such responsibility to an autonomous institution. Under this arrangement,

the Ministry of Finance, based on its objectives, risk preferences and

macroeconomic and institutional constraints of the country, defines the

medium-term strategy for debt management; while the debt office

implements that strategy and administers the issuance of domestic and

foreign currency debt.

Table 5: Degree of Autonomy for Debt Offices

Countries Degree of Autonomy

Ministry of

Finance

Belgium Not independent

Canada -

Germany Independent except for independent matters

Greece -

Japan Dependent

Mexico Independent within the broad objectives of the

Development Plan

Netherlands Independent

New Zealand No specific independence

Switzerland Independent, except for restriction on some type of

institution

Turkey Independent under normal circumstances

United Kingdom Independent within limits set by the remit


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Autonomous

Agency

Australia Highly independent

Austria Highly independent

Ireland Independent in some broad guidelines drawn by the

MOFSweden Independent except for foreign exchange

Central Bank

Denmark Borrowing program is approved by the MOFSource: OECD as mentioned in Risk Management of Sovereign Assets and Liabilities,

Working Paper, WP/97/166, IMF, December 1997.

The issue of conflict in objectives between debt management and

monetary management has led to many central banks transfer its debt

management responsibility back to the government or to an autonomous

agency outside the Ministry of Finance. In view of the potential conflicts inobjectives between debt management, monetary policy and exchange rate

management, Austria, Hungary and United Kingdom have recently shifted

their debt management responsibility out of the central bank. In New

Zealand, all debt management functions carried out by the central bank, as

agent of the debt office, have been conducted without reference to

monetary policy considerations since 1988. Moreover, in South Africa, after

a thorough review of debt policy, the central bank, which until recently,

has been the governments agent for marketing its debt instruments, was

made accountable to the Department of Finance on all matters related to

debt management. Funding activities undertaken by the central bank on

behalf of the government were ring-fenced from monetary policyoperations.

Denmark is the only exception, where in 1991 the Danish government

decided to regroup assets and liabilities management under the central

banks authority. The rationale behind the decision was to improve the

coordination of the management of the public debt and the foreign

exchange reserves, and to reduce the net exposure of the government to

exchange rate risk. Some governments recognise the fact that the central

bank has more staff with market transaction experience. The efficiency

advantage has led to some central banks (United Kingdom and Brazil)

undertake the governments foreign currency borrowing. For countries,

which have already established their debt offices, the central bank, still

retains some debt management functions like book-keeping, registry

services etc under an agency agreement between the Ministry of Finance

and the central bank. For some countries, cash management and foreign

exchange transactions related to foreign currency debt are also

undertaken by the central bank.

For the fifth category of debt offices, public debt management

responsibilities are typically split, with the Ministry of finance in charge of

the public external debt management and the central bank is responsible


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for domestic debt management. Table-2 shows the split nature of debt

management responsibilities for some emerging market economies till

recently. Among the emerging market economies, some countries like

Colombia, Hungary, Mexico and South Africa have already established a

full-fledged debt office under the Ministry of Finance. Further more, some

countries like Argentina, Brazil, China and Thailand have started initiativesto set up a debt office under the Ministry of Finance. To establish a public

debt office, the starting point for all these countries has been to strengthen

the capacity building of the debt office by establishing a middle office.

Management of External Debt

As regards external debt, most of the countries donot allow Subnational or

provincial governments to borrow directly from the external sources(Table-6). Only the Central government borrows from multilateral and

bilateral sources and then on lends money to the states and localgovernments.

Table 6: Institutional Framework for Foreign Currency Debt

Management in Emerging Economies

Countries Central Govt. State & Local

Govt.

State Owned

Enterprises

China MOF Not allowed SOEs

India MOF Not allowed SOEs

Indonesia MOF Not allowed

Korea MOF Own

responsibility

SOEs

Singapore None

Thailand DMO under MOF None MOF

Argentina MOF Own

responsibility

Chile MOF Not allowed MOF

Colombia MOF State Govts./MOF SOEs/MOF

Mexico MOF State Owned

banks

MOF

Peru DMO under MOF DMO under MOF MOF

Venezuela MOF Not allowed Not allowed

Czech Republic None MOF SOEs

Hungary DMO under MOF None

Poland MOF Own

responsibility

Russia MOF Regional agencies

Israel MOF Own

responsibility

SOEs

South Africa DMO under MOF Not allowed MOFSource: Managing foreign debt and liquidity risks in emerging economies: an overview,

John Hawkins and Philip Turner, as excerpted in Managing Foreign Debt and Liquidity

Risks, BIS Policy Papers, No. 8, September 2000.


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Nearly all of the autonomous debt management offices have adopted an

organizational structure similar to that in leading corporate treasury and

investment banks. They divide functional responsibilities for managing

transactions into different offices within the debt management organization

and established procedures to ensure internal control and accountability.

Sound governance considerations suggest that debt management functionsshould be organized as separate units given their different objectives,

responsibilities and staffing needs. Usual practice is to establish a

separate front, middle, back and head offices.

(i) The Front office

The front office is responsible for the efficient execution of all

portfolio transactions and negotiations with lenders consistent with

the portfolio management policy of the agency. These transactions

may include short- and medium-term borrowing in domestic andforeign currencies, management of trading positions and hedging

transactions, the investment of foreign currency liquidity and any

excess cash balances associated with the government's daily

departmental cash management. Within the front office, individual

portfolio managers are assigned different functional responsibilities

(e.g., foreign currency borrowing, liquidity management, domestic

currency funding) on an instrument, market, or currency basis.

(ii) The Middle office

The middle office (or risk management office) is responsible forestablishing a risk management framework for the debt office and

for monitoring compliance against the portfolio and risk

management policies, which form part of asset-liability

management. It is also responsible for identification, measurement

and monitoring of debt and risk, establishment of benchmarks,

dissemination of data and policy formulation for both short and

medium term and public and private debt.

(iii) Back Office

It is responsible for accounting, auditing, data consolidation and the

dealing office functions for debt servicing.

(iv) Head Office

It is the final authority to approve all public debt- both domestic and

external.


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4. Governance: Legal Framework and Accountability

Sound governance practices are an integral part of sovereign debt

management. In order to establish appropriate accountability for

managing the sovereign debt portfolio, most governments have in placelegislation pertaining to powers to borrow, invest, issue guarantees andundertake transactions on behalf of the government (Tables 3 and 4). This

overcomes the need to request specific authorisations from the Parliament

or the constitutional authority for individual transactions, which can

introduce and a range of political factors into the decision-making and

considerable delay the execution of transactions. For e.g., a study by IBRD

suggests that more than three-fourth of the member countries surveyed, on

an average, took more than a week to obtain approval to execute a foreign

borrowing transaction. This implies that such countries, in their endeavour

to manage the debt portfolio, can only operate with a lag to achieve atransaction in case there are any desirable market movements in the

international financial market. Such impediments, in a volatile international

financial market, could ultimately prove to be imprudent decision finally

when the transaction is entered into or entail a loss in terms of opportunity

cost for not being able to execute a transaction at the opportune moment.

The authority to issue new debt is normally stipulated in the form of either

borrowing authority legislation with a pre-set limit or a debt ceiling.

Legal arrangements are supported by delegation of appropriate authority

to debt managers. A common feature of this type of legislation is that the

authority for borrowing or financial transaction decision rests with theMinister of Finance or Treasury and requires the Ministry to be

accountable for these decisions to the Parliament. The Minister, in turn,

delegates the decision-making authority to the head of the debt office. All

delegations pass through the head of the debt agency to portfolio

managers and any other staff with responsibility. For example, in Portugal,

a statue specifies responsibilities, administrative and supervision

framework, delegation of powers, distribution of tasks and the overall

financial structure.

Objectives for government debt management are clearly specified,

publicly disclosed and included in legislation, wherever possible in order

to reduce uncertainty as to the governments willingness to trade-off cost

and risk. Unclear objectives can often lead to poor decisions on how to

manage the existing debt resulting in a potentially risky and expensive

portfolio. Lack of clarity might also create uncertainty within the financial

community leading to a higher risk premia.

The above arrangements are supplemented with establishment of a risk

management framework. The strategic benchmarks for portfolio

management of the sovereign debt, in terms of the currency, interest and

maturity mix, produced by the debt office needs to be approved by the


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Minister of Finance on an annual basis. For countries where the debt

agency is outside the Ministry of Finance or Treasury, the

recommendations made to the Minister of Finance are made by the

Ministry of Finance in conjunction with the debt office. This requires a

counterpart unit in the Ministry of Finance, which is usually compact, to

supplement the recommendations of the debt office while approving thestrategic benchmarks. Once the benchmarks are approved, the debt office

would be independent to operate for achieving such strategic

benchmarks. For few debt offices pursuing active portfolio management,

tactical trading limits are imposed on the portfolio manager.

The legislation also ensures that there is appropriate auditing of the

financial transactions undertaken by the debt office to ensure that they

comply with generally accepted accounting practices and the portfolio

management policies of the debt office. There is in general comprehensive

reporting of financial performance to the Finance Minister and/orParliament.

Irrespective of the institutional structure of the debt office, legal

arrangements clearly specify the organisational set-up for debt

management. Authorizing an outside body of advisors (constituting of a

board of directors etc.) is used frequently to provide quality advice on

debt management on a regular basis to the head of the debt office and the

Finance Minister. Thus, autonomous debt agencies in countries like

Sweden and Portugal, are managed by boards, appointed by the

government and chaired by the head of the debt office. Advisory boards

with mainly non-governmental members work with the autonomous debtagency in Ireland. In countries like Belgium, Colombia, Hungary and South

Africa where the debt office is located within the Ministry of Finance,

committees staffed mainly from the Finance Ministry, other government

agencies and the central bank, meet regularly with the government debt

managers to discuss broader government debt and asset management

issues. On the other hand, for the debt office in New Zealand, which is

located in the Treasury, the Advisory Board comprises mainly of non-

governmental members to establish greater transparency in the decision-

making and supervision process.

5. World Bank Survey on Sovereign Debt Management

While organizing the Second Forum on Sovereign Debt Management in

November 1999, World Bank conducted a survey on sovereign debt

management practices in the countries participating in the Forum. Theresults of the survey summarized in Table-7 are revealing and self-

explanatory. Some of the survey results are at variance with that analyzed

in the preceding sections. This is because the survey results are based on

the replies given by the respondents, and majority of the participants did


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not send any reply. Therefore, the analysis is only indicative and may not

be true for the universe.

Table 7: World Bank Survey on Second Sovereign Debt Management

Forum

Items Percentage in

total

respondents

1. Public Debt management objectives and priorities

(a) To minimize financial costs and risks 38(b)To raise funds for financing government budget 26(c) Management of debt 15(d)

Development of financial markets 9(e) Others 13

2. Establishment of benchmarks for risk

management

(a) Countries establishing guidelines for riskmanagement

45

(b)Countries establishing benchmarks for foreigncurrency debt

24

(c) Countries establishing benchmarks for portfolioperformance

21

(d) Countries establishing benchmarks for domesticdebt

13

3. Risk management guidelines

(a) Limits on currency risk 35(b)To avoid excessive short-term debt /smooth

maturity profile

29

(c) Incur debt in least volatile currency 24(d) Limits on debt with floating interest rate 18(e) To maintain debt matching reserves 12(f) Others 18

4. Analytical techniques for undertaking risk analysis

(a) Not using any analytical techniques 32(b) Value-at-Risk (VAR)/ Cost-at-Risk (CAR) 23(c) Debt sustainability indicators 16(d) Others 29

5. Constraints for establishing benchmarks

(a) Lack of debt management policy 23(b)Lack of debt management expertise 23(c) No access to financial markets 13(d) Lack of debt monitoring 10(e) Difficult economic environment 10(f) Others 21


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6. Use of derivatives to hedge currency and interest

rate risks

(a) Currency swaps 31(b) Interest rate swaps 24(c) Use of exchange commodity futures and options 7

7. Constraints for using derivatives

(a) Lack of technical knowledge 71(b)Undeveloped financial markets 17(c) Legal constraints 12

8. Institutions managing the foreign currency debt

(a) Ministry of Finance 51(b) Jointly by the Ministry of Finance and the Central

Bank

30

(c) Central Bank 11(d) Independent Debt Office 9

9. Coordination of both public and private debt(a) Ministry of Finance 35(b) Jointly by the Ministry of Finance (MOF) and the

Central Bank (CB)

24

(c) Partly by MOF and partly and independently by theCentral Bank

24

(d) Debt Management Committee 1810. Highest authority for approval of foreign

currency debt

Dom.

debt

Ext.Debt

(a) Finance minister/ Governor of the CentralBank

72 49

(b)Parliament 6 21(c) Interministerial board 8 12(d) President/ Prime Minister 6 9(e) DG of independent authority 8 9

11. Average time taken for approval of external debt

(a) One day or less 10(b)Less than a week 13(c) More than a week, but less than three months 65(d) More than three months 13

12. Management of Contingent liabilities

(a) Sub-national entities are allowed to raise their ownfunding abroad

69

(b)Central govt provides explicit guarantees for IBRDloans

68

(c) Central govt bears fully the exchange rate risk forIBRD loans

41

(d) Central govt shares partially the exchange rate risk 1113. Efficiency of Middle Office

(a) Use of Market Information system (MIS) 76(b) Access to internet 91


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(c) No Middle Office Unit 43(d) Distinct Middle Office Unit 43(e) Middle Office placed under the direction of the

Front Office

3

14. Main constraints for external debt management

(a) Lack of proper organizational structure 31(b)Macroeconomic risk 14(c) Lack of technical staff in the middle office 12(d) Lack of technical staff in the back office 6(e) Lack of legal framework 6(f) Limited local debt market 6

Source: Fred Jensen (2000) as given in World Bank (2000)


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Selected References

Das, Tarun (1999a) East Asian Economic Crisis and Lessons for ExternalDebt Management, pp.77-95, in External Debt Management, ed. by A.

Vasudevan, April 1999, RBI, Mumbai, India.

_______ (1999b) Fiscal Policies for Management of External Capital Flows,

pp. 194-207, in Corporate External Debt Management, edited by JawaharMulraj, December 1999, CRISIL, Bombay.

_______ (2000) Sovereign Debt Management in India, pp.561-579, inSovereign Debt Management Forum: Compilation of Presentations,

November 2000,World Bank, Washington D.C.

_______With Raj Kumar, Anil Bisen and M. R. Nair (2002) ContingentLiability Management- A Study on India, pp.1-84, Commonwealth

Secretariat, London

_______ (2003) Management of Public Debt in India, pp.85-110, in

Guidelines for Public Debt Management: Accompanying Document andSelected Case Studies, 2003, IMF and the World Bank, Washington

D.C.

_______ (2004) Financing International Cooperation- A Case Study forIndia, pp.1-46, Office of Development Studies. March 2004, UNDP, UN

Plaza, New York.

________ (2005a) Sustainable external debt management- International

Best Practices, pp.1-46, paper prepared for UN-ESCAP, Bangkok,

September 2005.

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Profile of the Author:

Dr. Tarun Das has 35 years experience as DevelopmentEconomist with specialization in public finance,

budgetary, fiscal and monetary policies, economics of

poverty and inequality, policy planning, projectappraisal, management of external debt, balance of

payments, India's relations with the World Bank, IMF,

ADB, UNCTAD, WTO, Commonwealth secretariat and

ESCAP. " Dr. Das is a Gold Medallist in Economics from

Calcutta University and holds a Ph.D. Degree in Economics as

Commonwealth Scholar from the University of East Anglia, England.

Dr. Das was the Country Co-coordinator for the IMF Government FinanceStatistics (GFS) and the Special Data Dissemination Standards (SDDS),

Country Coordinator for the World Bank's Global Development Finance

GDF), in charge of the Commonwealth Secretariat Debt Recording andManagement System for India and the World Bank IDF Project on Public

Debt Management. Dr. Das is empanelled as an Expert for the Government

Finance Statistics (GFS) for the Technical Assistance Assignment under IMF

(see Annex).

Since 1989, Dr. Das has been working as Economic Adviser in the Ministryof Finance, Government of India. He also worked as Adviser in the

Planning Commission (1987-1988), Chief Economist, Ministry of Steel and

Mines (1984-1986), and the Chief (Economic Division) in the Bureau of

Industrial Costs and Prices (1982-1984).

Dr. Das was a part of High Level government delegations to the WorldBank, IMF, ADB, WTO, UNCTAD, ESCAP and UN Commission for

Sustainable Development (UN-CSD).

Dr. Das worked as Government Director in the Board of the IndustrialInvestment Bank of India (1993-1995), Allahabad Bank (1996-1998),

Corporation Bank (1999-2001) and Bank of Maharashtra (2002-2004), and

Member in various government committees on Public Finance, Fiscal

Policies, Balance of Payments, External Debt and Environment.

Dr. Das has worked as Consultant to the World Bank (Washington), AsianDevelopment Bank (Manila), Economic Commission for Africa (Addis

Ababa), ESCAP (United Nations, Bangkok), UNDP (New York), and

International Labour Office (Geneva).

Dr. Das possesses diversity in skills in teaching, training, research, policyplanning and modeling. He has published various papers in international

journals on fiscal policies, external finance, management of public debt

and contingent liabilities, poverty and inequality, transport economics,

foreign investment, technology transfer and privatisation policies.


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UNITARUNITAR is an autonomous body within the United Nations which was established in 1965 to

enhance the effectiveness of the UN through appropriate training and research. UNITARs

programmes in the legal aspects of debt, financial management and negotiation are

among a wide range of training activities in the field of social and economic development

and international affairs carried out, generally, at the request of governments, multilateral

organizations, and development cooperation agencies. UNITAR also carries out results-

oriented research, in particular research on and for training, and develops pedagogical

materials including distance learning training packages.

UNITARs Training and Capacity Building Programmes in the Legal Aspects of Debt,

Financial Management and Negotiation are conducted for the benefit of over 35

partner countries mainly from sub-Saharan Africa and Vietnam. These programmes aim at

meeting the priority training needs of senior and middle-level government officials

through a wide range of seminars, workshops, and training of trainers workshops. In

parallel to training activities, the programme also assists in strengthening local capacities

of governmental and academic institutions through distance learning training packages,

up-to-date publications as well as networking activities.

During 2006, the programme will focus on :

Training government officials through short-duration regional seminars andworkshops on various aspects of debt, financial management and negotiation ;

Developing On-line Training Courses (in parallel with its traditional regionaltraining) with a view to tapping a wider audience and reducing cost of training perparticipant ;

Strengthening existing ties with regional training centres and offering jointcourses with partners in the field ;

Creating awareness among senior government officials of the importance of thelegal aspects in the borrowing process and of putting together a multidisciplinary

team for loan management and public administration;

Providing in-depth training and skills development for accountants, economists,financial experts and lawyers coming from government ministries and

departments involved in negotiation, financial management and public

administration ; and

Developing and disseminating training packages and best practice materialsdirectly related to the practicalities of legal aspects of debt and financial

management, with a view to strengthening existing human resources and

institutional capacities at the national level.

A description of UNITARs latest activities and training programmes in the area of debt

and financial management is available on its website at :www.unitar.org/dfm.

Street Address: Postal Address: Tel: +41 22 917 1234

Chemin des Anemones 11 -13 UNITAR Fax: +41 22 917 8047

CH-1219 Chatelaine Palais des Nations

GENEVA CH-1211 GENEVA 10 E-mail: [email protected] SWITZERLAND Website:

http//:www.unitar.org/dfm

Public Debt Governance, By Tarun Das

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