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Improving public debt management

Many Governments seek to further strengthen their capacity to appropriately manage public debt and ensure borrowing in the interest of maintaining sustainable debt levels. The Monterrey Consensus recognized that technical assistance for external debt management and debt tracking can play an important role and should be strengthened, and the Addis Agenda encouraged continuation of such efforts. 
 
Public debt management serves to meet public financing needs while minimizing borrowing costs and managing risks, and can also support the development of domestic markets. Changes in the composition of debt discussed above have increased the complexity of debt management. The fast-paced evolution of financial markets and developing countries’ use of increasingly diverse financing instruments and borrowing sources warrant continuous efforts to strengthen debt management capacity. Different tools are available to provide support in this regard, including diagnostic tools such as the Debt Sustainability Framework (DSF), the Debt Management and Performance Assessment (DeMPA), the Medium Term Debt Strategy (MTDS) tool and recording and reporting systems such as the Commonwealth Secretariat CS_DRMS and UNCTAD’s Debt Management and Financial Analysis System (DMFAS). These tools will need to be kept under review and adapted in response to changing needs. 
 
Assessments through existing diagnostic tools such as DeMPA have identified gaps and challenges in public debt management capacity. An IMF/ World Bank analysis of DeMPA results between 2009 and 2012 identified a number of common challenges across countries, including operational risk management and cash flow management, governance, performance of public debt management audits, development of a robust debt management strategy, and assessments of cost-risk trade-offs of existing debt portfolios. Cross-country comparisons by the World Bank found that many aspects of sovereign debt management assessed across countries through DeMPA do not comply with minimum standards of sound practice – particularly in the areas of cash flow management, forecasting and coordination with debt management, and in operational risk management.  
Technical assistance

The IMF and the World Bank have provided a range of public debt management technical assistance and training to over 50 developing countries during the past fiscal year (July 2014 – June 2016), with the help of generous financial support of several bilateral donors.

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For example, the technical assistance under the joint IMF-World Bank donor-funded Debt Management Facility II (DMF II) supported a total of 35 missions, including 15 Debt Management Performance Assessment (DeMPA) missions to Cabo Verde, Democratic Republic of Congo, Grenada, India (Assam and Rajasthan, Kyrgyz Republic, Liberia, Nigeria (Niger State), Pakistan (Punjab), Papua New Guinea, Rwanda, Sri Lanka, Tajikistan, Togo and Zimbabwe; 7 Reform Plan TA missions to Cabo Verde, Federation of Bosnia and Herzegovina (subnational), the Gambia, Ghana (two missions), Nicaragua and Uganda; 12 Medium-Term Debt Management Strategy (MTDS) TA missions to Benin, Cote d'Ivoire, the Gambia, Kenya, Kyrgyz Republic, Maldives, Niger, Nigeria, Tanzania, Uganda, Vietnam and Zambia; and 3 Domestic Debt-Market Development TA missions to Mongolia, Nicaragua and Tanzania (see Debt Management Facility Annual Report 2016).

The training covered primarily the areas of developing a MTDS and conducting debt sustainability analysis, the latter mainly through the joint IMF/World Bank debt sustainability framework (DSF). The training was conducted both regionally and bilaterally and over 400 government officials — the majority (60 per cent) from Sub-Saharan Africa —benefitted from face-to-face training workshops. In addition, MTDS and DSF training was also provided to officials from developing countries through the publicly available IMF online debt sustainability analysis (DSAx) course, which also included, for the first time, an offering in French. Donors have noted progress made so far and the impact on improving debt management capacity in recipient countries and strengthening their debt functions. In fiscal year 2017, the IMF and World Bank plan to continue providing the public debt management technical assistance and training with broadly similar composition of activities.

Downstream debt management
Downstream debt management comprises all the activities related to debt data recording and validation, debt operations, and debt reporting and statistics. UNCTAD, through its DMFAS Programme, and the Commonwealth Secretariat (COMSEC), continued to provide support to countries using their respective debt management systems, working in cooperation with other international technical assistance providers such as the World Bank and the IMF, and regional providers. 
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UNCTAD's DMFAS Programme provided downstream debt management capacity support to 86 institutions (Ministries of Finance or Central Banks) in 57 countries in the period. It continued to help to strengthen capacity to handle the day-to-day management of public liabilities and produce reliable debt data for policymaking purposes through capacity-building and advisory services, and the provision of the DMFAS software and related support services. It trained 750 debt officers from 30 institutions in 24 countries, delivered almost 90 training workshops and organized 7 study tours to promote South-South cooperation. It also participated in 10 events organized by other technical assistance providers, including the IMF and the World Bank.

In relation to progress achieved by countries in downstream debt management, concrete and sustainable results in 2016 included improved external and domestic debt data recording, and enhanced reporting and improved debt analysis capacities in line with the recording and reporting components of the Public Financial Management value chain as defined under the Public Expenditure and Financial Accountability (PEFA) Programme. By the end of 2016, 82 percent of DMFAS-user countries had developed comprehensive and reliable debt databases in respect of government and government-guaranteed external debt, and sixty-two percent of DMFAS 6 user countries whose debt management office is responsible for monitoring domestic debt were using DMFAS to manage their entire domestic debt portfolio. In relation to improved capacity for effective debt reporting, 35 DMFAS-user countries were regularly publishing a debt statistics bulletin and 19 countries had produced a debt portfolio report. Moreover, 98 percent of DMFAS client countries effectively reported to the World Bank through the Debtor Reporting System and 65 per cent were participating in the IMF–World Bank’s quarterly external debt statistics database (QEDS).

In 2016, the trend continued of  increasing demand by countries for support in establishing links between the DMFAS and other governmental software (for example, software used for budgeting, cash management and aid management) or within complex integrated financial management systems as part of the overall public financial management efforts of countries.