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Phillip Anderson World Bank Treasury

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)

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Phillip Anderson World Bank Treasury

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  1. Strengthening Debt Management Practices: Lessons from Country Experiences and Issues Going ForwardA Joint Paper Prepared by the World Bank and IMF Phillip Anderson World Bank Treasury

  2. 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

  3. 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

  4. Reduced share of external debt

  5. 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

  6. 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

  7. 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

  8. 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-) • 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

  9. 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

  10. World Bank support in debt management – work program • Support for MICs • 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 • 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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