Helping Low-Income Countries Avoid Debt Distress: Debt Sustainability—Outreach and Training

1. Helping Low-Income Countries Avoid Debt Distress:Debt Sustainability—Outreach and Training MDB Meeting on Debt Issues July 10, 2008

2. Overview • Objectives of the DSF • Outreach and Training • Conclusions

3. Objectives of the DSF • DSF-based lending and borrowing can help prevent the accumulation of unsustainable debts • For borrowers, DSAs can be a cornerstone for • Elaborating medium-term debt strategies • Designing fiscal frameworks and public expenditure plans in support of sustainable progress toward the country’s development goals • Facilitating the needed coordination of fiscal, monetary, and debt management policies • The DSF helps inform creditors’ lending decisions • This is particularly important for LICs given the scarcity of information and market price signals

4. Outreach and Training • The effectiveness of the DSF ultimately depends on its broader use by borrowers and creditors • The DSF is a tool for better communication and coordination between creditors and borrowers, and among creditors • DSAs can be seen as public good, providing information when it is missing • Outreach and training is key to achieving this goal • It can take the form of sensibilization seminars, technical workshops, hands on training, technical assistance, etc.

5. Outreach to Creditors • Both the Bank and the Fund have actively undertaken outreach efforts on the DSF with nearly all major multilateral and bilateral creditors to LICs • Outreach opportunities to commercial creditors have been pursued as well

6. Outreach to Creditors • As a result of the outreach, an increasing number of creditors are incorporating elements of the DSF into their financing terms • Multilateral creditors: • As of now, the AfDB, the IaDB, the AsDB and IFAD incorporate elements of the DSF into their own financing terms • Given the importance of these creditors, these decisions could have an important impact on the debt outlook in many LICs • Bilateral creditors: • Many DAC creditors explicitly use the DSF to guide their lending terms • The dialogue with the OECD Working Group on Export Credits and Guarantees has led to their adoption, in January 2008, of a set of lending guidelines that adhere to IDA and IMF concessionality requirements for LICs • The Fund and the Bank have also begun engaging in discussions with the main emerging creditors with a view to improving in mutual understanding and information sharing • A G 20 study group is working on debt sustainability and the MDGs

7. Training • On the debtor side, outreach has been conducted through Article IV and other missions and efforts to involve the authorities in the DSA production • The Bank and the Fund, in partnership with regional capacity building institutions, have organized training workshops on the DSF • Training events have been organized in partnership with CEMLA, MEFMI, Pôle Dette and WAIFEM • Regional technical assistance centers have organized national workshops in collaboration with other providers in response to increasing demand • Since 2005, workshops have been organized in Africa, Asia and Latin America • During the workshops, participants benefited from presentations covering the DSF foundations and the tools developed by the Bank and the Fund to help prepare DSAs • The workshops also included extensive hands-on training, including through the preparation and discussion of case-studies • Country officials (in one case MDB staff) from all post-CP HIPCs (and LICs across all the regions) attended these workshops • As a result, countries are in a better position to analyze the long-term impact of alternative financing strategies using the DSF

8. Looking Ahead • Despite the significant progress achieved, sustained efforts are required to achieve or maintain debt sustainability • There is scope to further improve coordination around the DSF • The quality and timeliness of information at the debtor level and sharing of debt data, including among creditors, needs to be enhanced • Debtor-reported information, which is the main source of data for DSAs, still suffers from weaknesses in many LICs (reliability, comprehensiveness, and timeliness issues) • The rapidly expanding number of creditors to low-income countries and the lack of information on associated amounts and terms of financing increases the risk of excessive lending • Thus, continued efforts to reach out to creditors and encourage sustainable lending, and to debtors to help improve the quality and timeliness of data, is key • The Fund and the Bank are working on a reporting framework for MDBs that would cover both debt relief and new flows

9. Conclusions • Outreach on the DSF so far had a significant impact • But more needs to be done to improve coordination and the quality and timeliness of data • We would be happy to address any MDB needs in the area of DSF training • We count on MDB collaboration to improve the quality of information

10. Thank you cbeddies@imf.org Completed LIC DSAs http://www.imf.org/dsa; http://www.worldbank.org/debt