The Debt Management Facility for Low-Income Countries Doerte Doemeland Acting Program Manager DMF...
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Transcript of The Debt Management Facility for Low-Income Countries Doerte Doemeland Acting Program Manager DMF...
The Debt Management Facility for Low-Income Countries
Doerte DoemelandActing Program Manager DMF
Economic Policy and Debt DepartmentThe World Bank
Outline
I. The Debt Management Facility for LICs
II. Debt Management Performance Assessment (DeMPA)
III. Medium-Term Debt Management Strategy (MTDS)
IV. Other DMF activities
V. Conclusion
I. The DMF for LICs
4
What is the DMF?
• The Debt Management Facility (DMF) for low-income countries is a multi-donor trust fund, that
– provides grant-based technical assistance (over an initial four-year operational period),
– with a view to strengthen debt management capacity and institutions,
– via the supply of “global public goods” (knowledge tools) and the delivery of technical assistance, while facilitating knowledge sharing and enhancing coordination among different debt management providers.
5
What is the DMF?
• The DMF focuses on low-income and IDA-only countries.
• Its work program is demand-driven.
• Most activities financed under the DMF are implemented in collaboration with Implementing Partners, including CEMLA, Commonwealth Secretariat, DRI, DMFAS Programme of UNCTAD, MEFMI, Pôle Dette and WAIFEM.
• Systematic application of the Debt Management Performance Assessment (DeMPA);
• Country-led design of medium-term debt management strategies (MTDS) jointly with the IMF;
• Design of reform programs;
• Training events;
• Research and development of knowledge products;
• Peer learning initiatives, such as the Debt Management Practitioners’ Program and the Debt Managers’ Network.
Activities financed under the DMF
II. DeMPA
What is DeMPA ?Analytical tool with following attributes:
The Performance Indicators
Governance and Strategy Development
DPI-1 Legal Framework
DPI-2 Managerial Structure
DPI-3 Debt Management Strategy
DPI-4 Evaluation of Debt Management Operations
DPI-5 Audit
Coordination with Macroeconomic Policies
DPI-6 Coordination with Fiscal Policy
DPI-7 Coordination with Monetary Policy
Borrowing and Related Financing Activities
DPI-8 Domestic Borrowing
DPI-9 External Borrowing
DPI-10 Loan Guarantees, On-lending and Derivatives
Cash Flow Forecasting and Cash Balance Management
DPI-11 Cash Flow Forecasting and Cash Balance Management
Operational Risk Management
DPI-12 Debt Administration and Data Security
DPI-13 Segregation of Duties, Staff Capacity and Business Continuity
Debt Records and Reporting
DPI-14 Debt Records
DPI-15 Debt Reporting
Example of dimensions within PI
Dimension Score1. Effectiveness of forecasting the aggregate level of cash balances in government bank accounts. 2. Effectiveness of managing the aggregate cash balance in government bank account(s), including the integration with the domestic debt borrowing program. 3. Where the Principal DeM Entity or the DeM entities operate their own bank accounts, the frequency of reconciliation of these bank accounts .Overall Score
DPI - 11
DeMPA’s scoring method
Scoring method - (A to D)
i) Meet minimum requirement = Score C Important for effective debt management
ii) Absence of minimum requirement = Score D Signals an area of priority attention
iii) Sound practice = Score A (B intermediate for more granularity)
iv) Not rated – if process/system does not exist (e.g., derivatives)
Swaziland (RO)
Honduras (RO)
Moldova
CAR (RO)
FY07 (5)
Ghana
Burkina Faso (RO)
Mali (RO)
The Gambia (Pilot)
Albania (Pilot)
Nicaragua (Pilot)
Guyana (Pilot)
Sao Tome Principe(RO
Zambia
Rwanda (RO)
Guinea (RO)
Nigeria (RO)
Cameroon (RO)
Malawi (Pilot)
Mongolia
Bangladesh
Togo
Mozambique
Congo, Brazza (RO)
Solomon Islands
Cape Verde
Grenada
ST Kitts & Nevis
Uganda
Burundi
Liberia
Pakistan
FY08 (13)
FY09 (14)
DeMPA has been implemented in 32 countries so far
Congo, DRC
Cote d’Ivoire
Antigua and Barbuda
FY10
Pipeline
Ethiopia
Sierra Leone
Yemen
Samoa
Tonga
Technical Assistance Road Map
Possible follow-ups
Training/TA examples
Preliminary Results
III. MTDS
What is the MTDS?
17
A
D
E
CB
Initial P
lan phase 1Contingency 1
Initial Plan phase 2C
ontingency 1
Start
Final destinationNote: plans are made subject to constraints (navigation skills, weather conditions and forecast, ship size, etc.)
“Go with the tides and wind”
Why an MTDS?
Still, DeMPA results indicate that only 4 out of 27 assessed countries had a satisfactory medium-term strategy in place
The MTDS has so far been implemented in 6 countries
Cameroon (P)
Ghana (P)
Bangladesh (P)
Nicaragua (P)
Kenya
Moldova (P)
FY08 (4) FY09 (2)
Malawi
Tanzania
Zambia
Cape Verde
Nigeria
FY10 Pipeline
The Eight Steps of an MTDS
I. Identify objectives for public debt management and scope of the strategy
II. Analyze the cost and risk of the existing debtIII. Identify and analyze potential funding sourcesIV. Identify baseline projections and risks in key
policy areasV. Review key longer-term structural factorsVI. Assess and rank alternative strategies on the
basis of the cost-risk trade-offVII. Review candidate strategies with fiscal and
monetary policy authoritiesVIII. Submit and secure agreement on the MTDS
Step III. Identify and analyze potential funding sources
• Concessional vs. commercial external borrowing
• Access to international capital markets? At what cost?
• Potential demand for government paper?
Determine the range of strategies that might be feasible and desirable.
Step IV. Identify baseline projections and risks in key policy areas
Step V. Review longer-term structural factors
Objective is to identify :
• baseline projections of key fiscal, monetary policy, external, and market variables;
• the key risk to these projections;
• a set of comprehensive risk scenarios;
• any other factors that are relevant for an MTDS formulation.
Longer-term structural factors could include:
• Commodity dependence and associated vulnerability to development in commodity prices;
• Longer-term prospects of continued access to concessional finance.
Step VI. Assess and rank alternative debt management strategies on the basis of the
cost-risk trade off
• Identify set of relevant strategies;
• Assess, using the AT, the costs and risk of these alternative strategies.
S1
S2
S3S4
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20%
Risk (max Δ from baseline after shocks)
Cost (i/GDP)
IV. Other DMF Activities
Training in FY10
DeMPA
• One DeMPA training at the JVI
• One regional DeMPA workshop for country authorities in Asia
• One DeMPA Workshop at the World Bank
MTDS
• A training for trainers seminar for MTDS at the JVI
• One regional MTDS workshops in Africa
• One regional MTDS workshop in LAC
Other Outreach Events
• The Debt Management Practitioner’s Program which enables officials from debt management offices to join PRMED Bank Staff for 3-month assignments;
• The Debt Managers’ Network, designed to provide a platform for peer learning on technical issues, especially for African debt managers;
• The Annual Stakeholder’s Forum to bring together public and private sector stakeholders.
V. Conclusion
• Results from DeMPA missions clearly highlight large gaps in PDM frameworks and capacity in developing countries.
• Moreover, the current crisis underscores the urgency for improving PDM in many countries.
• Thanks to the DMF, the scaling up of World Bank’s technical assistance for strengthening PDM has come at the right time.
• Going forward, the World Bank will not only further leverage the dissemination of existing tools, but it will also continue to develop new tools and facilitate knowledge sharing with a view to foster coordination among debt management TA providers.
Conclusion