MANAGEMENT CONSULTANTS

Transcription

1 STORKEY & CO MANAGEMENT CONSULTANTS PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS [SAMPLE TEMPLATE] ACKNOWLEDGEMENT: These sample procedures are available for public use. It would be appreciated that if they are used in whole or in part that there is an acknowledgement that they were developed by Ian Storkey, Director of Storkey & Co Limited.

2 CONTENTS Section/Activity Processes Page No. 1 Introduction 4 2 Background 6 Public Debt Management Institutional Arrangements 6 Roles and Responsibilities of a Debt Management 6 Typical Loan Cycle 7 Structure for Documenting Processes/Workflows 8 Debt Management Operations Business Processes/Workflows 9 Business Process Maps 10 3 Debt Management Operations Business Processes/Workflows 11 Activity 1 Planning 11 Processes 1.1 Debt Strategy Borrowing Plan Debt Service Forecasting 16 Activity 2 External Loans 18 Processes 2.1 Contracting Mobilisation Servicing 28 Activity 3 Domestic Loans 30 Processes 3.1 Contracting Mobilisation Servicing 36 Activity 4 External Securities 39 Processes 4.1 Planning Issuance Servicing 44 Activity 5 Domestic Securities 47 Processes 5.1 Planning Cash Flow and Tenders Settlement of Issue Servicing Retail Securities 56 Activity 6 Reorganisation 59 Processes 6.1 Loans Securities Swaps 67 Activity 7 Analysis 71 Processes 7.1 Debt Sustainability Analysis Cost-Risk Analysis Cash Flow Planning Debt Service Monitoring 76 Activity 8 Reporting 77 Processes 8.1 Government Reporting World Bank Debtor Reporting System Accounting General Ledger Monitoring and Compliance Debt Statistical Bulletin 82 PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 2 OF 98

3 Section/Activity Processes Page No. 8.6 Quarterly/Monthly Debt Reports Form 18-K 85 Activity 9 Guarantees 86 Processes 9.1 Contracting Servicing 90 Activity 10 Onlending 91 Processes 10.1 Contracting Mobilisation Servicing 96 4 Annex Business Process Maps 98 PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 3 OF 98

4 1. INTRODUCTION Debt managers in many countries have difficulty in documenting the business processes for public debt management and often need guidance in terms of a template that can be used as a procedures manual. This template attempts to capture the actual business processes that are followed in a mix of advanced economies, Emerging Market Economies (EMEs) and developing countries covering both external (including contracting; disbursement; debt service and debt restructuring) and domestic debt. To develop a comprehensive generic model that captures best practices, the following countries or regions were examined in 2009 using a combination of desktop studies and field visits: Desktop Studies Eastern and Southern Africa: covering the Procedures Manual published by the Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI) India: covering central government external debt managed by Aid Accounts and Audit Division (AAAD) of the Ministry of Finance as documented in a draft procedures manual Indonesia: covering central government domestic debt managed by the Directorate General of Debt Management/Direktorat Jenderal Pengelolaan Utang (DJPU) of the Ministry of Finance as documented in draft standard operating procedures New Zealand: covering central government debt managed by the New Zealand Debt Management (NZDMO) of the New Zealand Treasury as documented from prior knowledge and discussions with officials from NZDMO Field Visits Brazil: covering central government debt managed by the National Treasury Secretariat (STN) of the Ministry of Finance Hungary: covering central government debt managed by the Government Debt Management Agency Pte Ltd (ÁKK) Nigeria: covering central government debt managed by the Debt Management (DMO) In addition, the business processes/workflows adhere to the principles of sound practice in public debt management that have been published in: Advances in Risk Management for Government Debt by the OECD (2005) Debt Management and Government Securities Markets in the 21 st Century by the OECD (2002) Debt Management Performance Assessment (DeMPA) tool by the World Bank PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 4 OF 98

5 Developing Government Bond Markets: A Handbook by the World Bank and IMF (2001) Developing the Domestic Government Debt Market: From Diagnostics to Reform Implementation by the World Bank (2007) Government Debt Management: New Trends and Challenges by Central Banking Publications (2006) Guidelines for Public Debt Management by the IMF and World Bank (2003) Managing Public Debt: From Diagnostics to Reform Implementation by the World Bank (2007) Manual on Effective Debt Management by the United Nations ESCAP (2006) Sound Practice in Government Debt Management by Graeme Wheeler (2004) Strengthening Debt Management Practices: Lessons from Country Experiences and Issues Going Forward by the World Bank and IMF (2007) Given the diversity of operational practices, institutional arrangements, and organisational and/or personnel structures for public debt management, the challenge was to develop a generic model that best captures this diversity. Therefore, in all processes/workflows the context has been set out so it is clear to understand the operational environment for that process/workflow. The following provides comprehensive public debt management documentation and flowcharts to clearly describe business processes, information flows, authorisation processes, functions and responsibilities within the different debt management institutions (covering front office, middle office and back office operations) as well as between the debt management institutions and external entities such as the Accountant General s, Central Bank and Ministry of Finance. PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 5 OF 98

6 2. BACKGROUND 2.1 PUBLIC DEBT MANAGEMENT INSTITUTIONAL ARRANGEMENTS Institutional arrangements for public debt management can range from a structure that is highly centralised in a debt management office (DMO) or equivalent to a decentralised structure with a number of entities across government responsible for public debt management operations. For example, a separate division of the Ministry of Finance could be responsible for external loan negotiations, the Accountant-General s responsible for debt service payment authorities, and the Central Bank may provide banking services, act as registrar for government securities, and undertake Treasury bill and bond auctions in the domestic market for government securities. Also, there could be a separate agency that is responsible for managing retail debt instruments such as savings bonds or equivalent and separate divisions of the Ministry of Finance responsible for project monitoring including administration of government onlending, and issuance/monitoring of government loan guarantees. Oversight of the DMO will normally be provided by an Advisory Board or Public Debt Committee or Council, which will meet either monthly or quarterly. An Advisory Board does not have responsibility for setting debt management policies and approving financing transactions as these will rest with the Minister of Finance. The Advisory Board will provide oversight to ensure that the DMO is adhering to international sound practice for public debt management and for the efficient operation of the DMO. As the Public Debt Committee or Council is likely to have the Minister of Finance as Chair or a member, it will be responsible for setting debt management policy and approving financing transactions. While the documentation of business processes/workflows is based on a DMO structure for ease and standardisation, the functions managed by the different entities can be substituted into the relevant public debt management operations. Moreover, the structure within a DMO can vary depending on the functions assigned to each division or section. While the DMO structure refers to operations that are the responsibility of the front office, middle office and back office, in practice there could be multiple entities under each of these classifications. The operational environment for each process/workflow will set out the institutional arrangements and organisational structure that has been documented and it may be necessary to modify these arrangements and structures to reflect the public debt management operations that are in place. 2.2 ROLES AND RESPONSIBILITIES OF A DEBT MANAGEMENT OFFICE The methodology used has developed a comprehensive business model for public debt management, which describes information flows, authorisation processes, functions and responsibilities within the different debt management institutions (covering front office, middle office and back office operations) as well as between the debt management institutions and external entities such as the Accountant General s, Central Bank and Ministry of Finance. It also incorporates the PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 6 OF 98

7 principles of sound practice in public debt management that has been published by the IMF and World Bank, Central Banking Publications, OECD and others. The business model has been structured around the following public debt management activities and structures: 2.3 TYPICAL LOAN CYCLE The life cycle of a loan as documented in the Debt Management Performance Assessment (DeMPA) tool has four phases: Planning: Legislation, managerial structure and policy setting, government debt strategy, and coordination mechanisms with macroeconomic policies are in place for the government to borrow and transact Contracting: Negotiating and contracting is undertaken within authorities, limits and in accordance with the debt strategy covering domestic borrowing, external borrowing (multilateral, bilateral and commercial/market), issuing loan guarantees, government onlending, and derivatives where applicable Servicing: Systems and procedures to record, monitor, settle, and account for all debt and debt-related transactions in a secure and controlled environment Reporting: External, internal and audit reporting to ensure transparency and accountability for debt management policy and operations The DeMPA tool is a useful methodology to ensure that the life cycle of a loan and other public debt management operations are fully covered in the business model and flowcharts. PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 7 OF 98

8 2.4 STRUCTURE FOR DOCUMENTING PROCESSES/WORKFLOWS Most of the DMOs in developing countries and emerging market economies have institutional structures and debt management operations that follow a product approach rather than an activity approach. This means that loans are often managed and processed by a unit that is separate from a unit responsible for securities, which are also managed and processed separately from other debt management operations such as government onlending and guarantees. As a result the documentation of business processes/workflows has been structured to match this approach. Therefore, the report is structured according to the following Debt Management Operations activities: 1. Planning 1.1 Debt Strategy 1.2 Borrowing Plan 1.3 Debt Service Forecasting 2. External Loans 2.1 Contracting 2.2 Mobilisation 2.3 Servicing 3 Domestic Loans 3.1 Contracting 3.2 Mobilisation 3.3 Servicing 4. External Securities 4.1 Planning 4.2 Issuance 4.3 Servicing 5. Domestic Securities 5.1 Planning Cash Flow and Tender Program 5.2 Settlement of Issue 5.3 Servicing 5.4 Retail Securities 6. Reorganisation 6.1 Loans 6.2 Securities 6.3 Swaps PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 8 OF 98

9 7. Analysis 7.1 Debt Sustainability Analysis 7.2 Cost-Risk Analysis 7.3 Cash Flow Planning 7.4 Debt Service Monitoring 8. Reporting 8.1 Government Reporting 8.2 World Bank Debtor Reporting System 8.3 Accounting General Ledger 8.4 Monitoring and Compliance 8.5 Debt Statistical Bulletin 8.6 Quarterly/Monthly Debt Reports 8.7 Form 18-K 9. Guarantees 9.1 Contracting 9.2 Servicing 10. Onlending 9.1 Contracting 9.2 Mobilisation 9.3 Servicing 2.5 DEBT MANAGEMENT OPERATIONS BUSINESS PROCESSES/WORKFLOWS The documentation of business processes/workflows draws on three elements: 1. International sound practice business model for public debt management. 2. Life cycle of a loan as defined by the Debt Management Performance Assessment (DeMPA) tool. 3. Business processes followed in a mix of advanced economies, EMEs and developing countries. Flowcharts have been developed to illustrate information flows based on the comprehensive business model for public debt management (prepared in Microsoft Visio using international standard flowchart templates) that cover: inputs and outputs action level by position, function (front, middle or back office) and process owner key controls and important validations/authorisations PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 9 OF 98

10 In addition, the operational environment or context for each process/workflow is provided in order that the assumptions used to capture operational practices, institutional arrangements, and organisational and/or personnel structures for public debt management can be identified. Activities performed by entities outside the DMO are shaded (in green). The report will be used by ComSec to re-engineer CS-DRMS to closely mirror debt management business processes/workflows as documented in Section 3 below. 2.6 BUSINESS PROCESS MAPS The process maps for all activities are provided in Annex 1. These have been developed in Microsoft Visio using standard business workflow models. Where there are links to further process/workflows, these are clearly identified. The process maps show the key control points in each process, and are shaded to show activities and controls that outside the direct operations of the DMO. PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 10 OF 98

11 3. DEBT MANAGEMENT OPERATIONS BUSINESS PROCESSES/WORKFLOWS ACTIVITY 1: PLANNING Prior to contracting loans and issuance of securities, the DMO undertakes several debt planning activities. These include the preparation or update of a Medium Term Debt Strategy (MTDS), an annual borrowing plan including a domestic bond issuance program or calendar, and debt service forecast for incorporation in the Budget, Medium Term Fiscal and Expenditure Framework (MTFF/MTEF) and/or annual appropriation from Parliament or National Assembly. ACTIVITY 1.1 DEBT STRATEGY General Description The DMO prepares or updates a Medium Term Debt Strategy (MTDS) at the start of each fiscal year that is set within the context of the government s fiscal policy and budget framework. The strategy development process will involve key stakeholders across government and include consultation with the Central Bank for consistency with monetary policy. The strategy is reviewed by the Public Debt Committee and ultimately approved at the political level (for example, by the Cabinet/Council of Ministers). The MTDS will be published either within the budget as a separate chapter or as a stand-alone publication, which will be posted to the DMO website. The responsibility for the development of the MTDS will be with the middle office. The MTDS will include the following: objectives and guidelines for government debt management financing requirement of the government for the fiscal year including domestic and foreign currency borrowing requirements description of the market risks being managed (currency, interest-rate, and refinancing/rollover risks) and the historical context for the debt portfolio description of the future environment for debt management, including fiscal and debt projections, assumptions about interest and exchange rates, and constraints on portfolio choice including those relating to market development and the implementation of monetary policy description of the analysis undertaken to support the MTDS clarifying the assumptions used and limitations of the analysis recommended strategy and its rationale, including either: specified targets and ranges for key risk indicators of the portfolio and the financing program over the projected horizon or guidelines to indicate the direction in which certain key indicators are expressed to evolve PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 11 OF 98

12 Business Process/Workflow Preparation or Update of Medium Term Debt Strategy Environment/Context: As part of the government s fiscal policy and budget framework, the DMO is required to prepare or update a Medium Term Debt Strategy (MTDS) at the start of each fiscal year. This is normally a requirement of Public Debt or Public Finance legislation and requires that the MTDS is approved at the political level (Cabinet/ Council of Ministers) and submitted to Parliament/National Assembly. The MTDS will be submitted as a stand-alone document or included in the Budget and/or Medium Term Fiscal Strategy published annually by the government. The MTDS is prepared by the DMO in consultation with the Ministry of Finance, Central Bank, Ministry of Planning, Treasury and Accountant-General s (if these agencies exist) and made available to the public. Ministry of Finance or Treasury Project Implementing Unit Front Provide medium-term primary balance and cashflow projections to the DMO. Provide medium-term economic and financial projections and/or scenarios to the DMO. Provide project utilisation and expected schedule of loan disbursements, and pipeline for new project loans. Provide details of proposed new financing plan for the medium term (i.e., next 3 fiscal years): External financing: - multilateral - bilateral - commercial - market Domestic financing: - Treasury bills - Treasury bonds - retail instruments - commercial banks and Central Bank Projections: - primary balance - monthly cashflows - interest rates - exchange rates - inflation - GDP Scenarios: - baseline - optimistic - pessimistic/stress Forecast disbursements Govt financing requirement Forecast disbursements Draft borrowing plan with list of planned new borrowing PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 12 OF 98

13 Middle Head of Middle Consult with key stakeholders across government: Ministry of Finance, Central Bank, Ministry of Planning, Treasury and Accountant-General s. Undertake cost-risk analysis of public debt portfolio including new/future financing: using model(s) developed by the DMO (examples include Cost-at-Risk, Budget-at-Risk, Debt Service-at-Risk, Cashflowat-Risk, Value-at-Risk) calculating basic risk measures (currency mix, duration, modified duration, fixed/floating interest rate ratio, average time to refixing, redemption profile, average time to maturity, residual maturity, 1-year residual maturity, external debt to foreign exchange reserves ratio) and debt sustainability indicators. Prepare draft MTDS. Check and sign-off draft MTDS. Existing debt Draft borrowing plan Fiscal projections Economic & financial projections/scenarios Forecast disbursements Risk indicators Cost-risk analysis Scenario analysis Debt structure Portfolio benchmarks Portfolio limits Draft MTDS Draft MTDS Signed-off draft MTDS Head of DMO Authorise draft MTDS. Signed-off draft MTDS Public Debt Committee Cabinet/ Council of Ministers Review draft MTDS and recommend acceptance. Submit recommended MTDS to Cabinet/Council of Ministers for approval. Review recommended MTDS and approve. Authorised draft MTDS Authorised draft MTDS Recommended MTDS Recommended MTDS PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 13 OF 98

14 Approved MTDS Middle Arrange for MTDS to be translated (if necessary). Publish MTDS and post to DMO website (in pdf format). Approved MTDS Translated MTDS Published MTDS ACTIVITY 1.2 BORROWING PLAN General Description An annual borrowing or financing/mobilisation plan is formulated as part of the MTDS. The financing plan will set out guidelines for external and domestic borrowing including a domestic issuance program and/or auction calendar. The borrowing plan is produced by DMO in consultation with relevant stakeholders and submitted to the Public Debt Committee and/or Cabinet/Council of Ministers for approval. The borrowing plan and auction calendar will be published and updated during the fiscal year on a quarterly or monthly basis, and is the responsibility of the front office. Business Process/Workflow Preparation and Update of Borrowing Plan Environment/Context: The DMO will meet the government s financing requirements through external financing (multilateral, bilateral, commercial, and market) and domestic financing (Treasury bills, Treasury bonds, retail instruments and commercial borrowing from banks and/or Central Bank). The MTDS will set out an indicative financing strategy that will be subject to market conditions and project activities. The front office is responsible for monitoring market conditions and financing alternatives which are used to make decisions including the timing and structure of the domestic Treasury bill and bond tender programs. The DMO will submit the borrowing plan and auction calendar to the Public Debt Committee or Cabinet/ Council of Ministers for approval. The front office will make available to all market participants the borrowing plan and auction calendar. Ministry of Finance or Treasury Project Implementing Agency Provide medium-term primary balance and cashflow projections to the DMO. Provide project utilisation and expected schedule of loan disbursements, and pipeline for new project loans. Front Use medium-term primary balance Projections: - primary balance - monthly cashflows Forecast disbursements PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 14 OF 98

15 Head of Front Head of DMO Public Debt Committee or Cabinet/ Council of Ministers Middle and cashflow projections together with DMO and other financing transactions to determine government financing requirement. Prepare draft borrowing plan and auction calendar for the time horizon required (annual, quarterly and/or monthly) covering: External financing: - multilateral - bilateral - commercial - market Domestic financing: - Treasury bills - Treasury bonds - retail instruments - commercial banks and Central Bank Check and sign-off draft borrowing plan and auction calendar. Authorise borrowing plan and auction calendar. Review borrowing plan and auction calendar and approve. Arrange for borrowing plan and auction calendar to be translated (if Projections: - primary balance - monthly cashflows - disbursements Government financing requirement Draft borrowing plan: Auction calendar: - Treasury bill tenders - Treasury bond tenders Draft borrowing plan and auction calendar Signed-off borrowing plan and auction calendar Signed-off borrowing plan and auction calendar Authorised borrowing plan and auction calendar Borrowing plan and auction calendar Approved borrowing plan and auction calendar Approved borrowing PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 15 OF 98

16 necessary). plan and auction calendar Front Publish borrowing plan and auction calendar and post to DMO website (pdf format). Translated borrowing plan and auction calendar Approved/translated borrowing plan and auction calendar Published borrowing plan and auction calendar ACTIVITY 1.3 DEBT SERVICE FORECASTING General Description The DMO prepares a forecast of debt service costs for the fiscal year(s) including a schedule of debt service payments at the commencement of each fiscal year and updates periodically as required (i.e., supplementary budget, and semi-annually, quarterly or monthly updates). These forecasts will cover not only the current fiscal year but also the next two fiscal years if the government prepares a 3-year budget or medium term fiscal and expenditure framework. Forecasting of debt service payments on existing debt is normally undertaken by the back office, with economic and financial parameters provided by the Treasury or Ministry of Finance, new financing or borrowing provided by the front office, and project loan disbursements provided by project implementing units. The forecasts will be validated by the middle office that will also monitor debt service actual versus forecast throughout the fiscal year. The debt service forecasts will be signed off by the head of the DMO and submitted to the Treasury/Ministry of Finance. Business Process/Workflow Debt Service Forecast Preparation or Update Environment/Context: As part of the government s budget, the DMO is required to prepare debt service forecasts and a schedule of debt service payments at the start of each fiscal year. These will be based on the economic and fiscal parameters as set out in the budget and in accordance with the MTDS. The DMO will liaise closely with each project implementing office to obtain information on project utilisation, expected disbursements, and the pipeline for new project loans. An update will be prepared during the fiscal year for the supplementary budget and on request throughout the year by Treasury or Ministry of Finance PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 16 OF 98

17 Ministry of Finance or Treasury Project Implementing Agency Head of Back Front Provide medium-term primary balance and cashflow projections to the DMO. Provide medium-term economic and financial projections and/or scenarios to the DMO. Provide project utilisation and expected schedule of loan disbursements, and pipeline for new project loans. Input exchange rate & interest rate projections and forecast disbursements into the debt recording system. Prepare debt service forecasts for existing debt using the forecasting tools or reports in the debt recording system. Check and sign-off debt service forecasts for existing debt. Provide details of proposed new borrowing plan for the medium term (i.e., next 3 fiscal years): External financing: - multilateral - bilateral - commercial - market Domestic financing: - Treasury bills - Treasury bonds - retail instruments - commercial banks and Central Bank Projections: - primary balance - monthly cashflows - interest rates - exchange rates - inflation - GDP - baseline scenario - worst case scenario Forecast disbursements Exchange rate and interest rate projections Forecast disbursements Existing debt data Debt service forecasts for existing debt Debt service forecasts for existing debt Debt service forecasts for existing debt checked Govt financing requirement Draft borrowing plan with list of planned new borrowing PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 17 OF 98

18 Middle Head of Middle Prepare debt service forecasts for new borrowing and incorporate forecasts of existing debt: annual forecast by currency and instrument monthly forecast by currency and instrument sensitivity to interest rates and exchange rates, and worst case scenario Check and sign-off debt service forecasts. Debt service forecasts for existing debt Draft financing plan Fiscal projections Economic & financial projections scenarios Debt service forecasts Debt service forecasts Debt service forecasts checked Head of DMO Authorise debt service forecasts. Debt service forecasts Middle Submit debt service forecasts to Ministry of Finance or Treasury for inclusion in the annual budget. Debt service forecasts authorised Debt service forecasts authorised Debt service forecasts submitted to Ministry of Finance or Treasury ACTIVITY 2: EXTERNAL LOANS External debt is primarily made up of loans raised from multilateral and bilateral lending agencies and commercial loans such as bank loans, supplier s credits and officially supported export credits. Most of the loans are used for project financing according to the government s infrastructure and development program. The loans result from initial discussions with the line ministry responsible for the project. These loans are normally contracted with the government, although some loans may be contracted directly with the government agency or SOE. In the case of loans contracted with the government, the loan proceeds can be disbursed to the project or on lent to a government agency or SOE responsible for the project that will be contracted and documented in an onlending agreement. A project monitoring or implementation unit will be established to manage the project including administration of loan disbursements and repayments. The implementing PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 18 OF 98

19 partners, funding agencies, line ministries, government agencies and Ministry of Finance will participate in an extensive process of pre-consultations to agree the structure and specifications of the project, funding sources, grant and loan components, and project financing terms, and conditions that will apply to ensure effectiveness of the loan to be submitted to the government for consideration. ACTIVITY 2.1 EXTERNAL LOAN CONTRACTING General Description External loan negotiations are led by the Ministry of Finance in collaboration with the DMO and other agencies if necessary (line ministries, Ministry of Justice or Attorney- General, Central Bank, etc). The DMO obtains a mandate from the government (Public Debt Committee or Minister of Finance) to negotiate the loan. The mandate will specify a set range for the key terms of the loan. The Ministry of Finance/DMO negotiate the terms and conditions of the loan, a legal opinion on the loan agreement is obtained from the government s legal team and from legal counsel and the loan agreement is signed by the Minister of Finance. The front office of the DMO will prepare a term sheet with the loan details and forward this together with the signed loan agreement to the back office for recording and processing the loan. Business Process/Workflow External Loan Contracting Environment/Context: The government will approve an infrastructure and development program including a list of projects that the government plans over the 3-5 year planning period. This program will list new projects that have been formulated by implementing partners, funding agencies, line ministries, government agencies and Ministry of Finance through an extensive process of consultation to agree on project specifications and conditions. The DMO will participate in negotiations with the funding agency to agree the loan terms and conditions and where necessary prepare an onlending agreement for the government agency or SOE (this process is documented under Activity 10: Onlending below). Implementing Partners Funding Agencies Line Ministries, Government Agencies, Ministry of Finance Front Extensive pre-consultations to agree the structure and specifications of the project, funding sources, grant and loan components, project financing terms, and conditions to apply for effectiveness of the loan. Review the funding agency loan proposal submitted by Ministry of Finance, line ministry or other Pre-consultation Loan proposal Loan proposal PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 19 OF 98

20 Head of Front Head of DMO Public Debt Committee or Minister of Finance Head of Front & Front Desk r Middle Legal r or Representative Front government agency. Prepare draft loan mandate report with indicative loan terms and conditions to send to Public Debt Committee or Minister of Finance for approval. Sign-off draft loan mandate report. Authorise loan mandate report. Submit to Public Debt Committee or Minister of Finance for approval. Approve loan mandate report. Participate in negotiations with the funding agency along with Ministry of Finance, line ministry and other government agencies. Negotiate terms and conditions of the loan. Negotiate and finalise legal documentation throughout the negotiation process. Obtain legal opinion on the loan from legal counsel to ensure that covenants and other conditions are met. Prepare loan agent s warrant/power of attorney (if Minister of Finance cannot sign) Finalise loan terms and conditions and conclude the loan agreement. Draft loan mandate report Draft loan mandate report Signed-off draft loan mandate report Signed-off draft loan mandate report Authorised loan mandate report Loan mandate report Approved loan mandate report Approved loan mandate report Negotiated loan terms and conditions Negotiated loan terms and conditions Legal documentation Legal opinion Legal documentation PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 20 OF 98

21 Head of Front Head of DMO Minister of Finance or Loan Agent Front Head of Front Sign-off loan agreement. Authorise loan agreement. Submit to Minister of Finance for signing. Sign loan agreement or sign loan agent s warrant/ with the authority to sign on behalf of the Minister of Finance. Loan Agent to sign on behalf of the Minister of Finance Prepare draft term sheet and press statement. Approve term sheet and press statement. Send copy of press statement to Minister of Finance s office for release. Legal opinion Draft loan agreement Draft loan agreement Signed-off loan agreement Signed-off loan agreement Authorised loan agreement Loan agreement Signed loan agreement Signed loan agreement Draft term sheet Draft press statement Draft term sheet Draft press statement Term sheet PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 21 OF 98

22 Front Project Implementing Agency Send term sheet and copy of the loan agreement to back office for input to debt recording system and processing. Send copy of the loan agreement to the Accountant-General s, Central Bank and project implementing agency (PIA). Ensure that the conditions precedent and effectiveness of the loan are met. Press statement released Term sheet Signed loan agreement Signed loan agreement and term sheet sent to back office Signed loan agreement sent to Accountant- General s, Central Bank and PIA Signed loan agreement ACTIVITY 2.2 EXTERNAL LOAN MOBILISATION General Description Once the contracting of loans has been concluded, the DMO will need to process all debt transactions including disbursements. Because different types of loans from multilateral and bilateral lending agencies can be disbursed in various ways, the task of compiling disbursement data can be complex. For instance, in the case of project loans, disbursement can take the form of advances to the borrowing entity, direct payment by the lender to suppliers of goods and services, or on the reimbursement basis after the borrower has already paid the suppliers. The timing of the disbursement under these methods is different. Under the advances approach, it is the periodic payments by the lender to the borrowing government that constitutes disbursement; under the direct payment approach, it is the moment when the lender pays the supplier; and under the reimbursement approach, it is when reimbursements are made to the borrowing government. The DMO must keep track of these transactions and reconcile its records at regular intervals with information maintained by the project implementing agencies. Once a multilateral or bilateral loan agreement has been signed, the funds to be provided from the funding agency are set out in the disbursement profile during the disbursement period. This process of flow of funds from the funding agencies to the beneficiaries is known as disbursement. All funding agencies have different requirements to be fulfilled for arranging withdrawal of proceeds. Disbursement of project loans can take the form of: Advances: advances to the borrowing entity disbursements are to be recorded when the lender advances funds to the borrower. PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 22 OF 98

23 Direct Payment: direct payment by the lender to suppliers of goods and services disbursements are to be recorded when the lender pays the supplier. Reimbursement: on a reimbursement basis after the borrower has already paid the suppliers disbursements are to be recorded when the lender makes reimbursements to the borrower In some cases, the DMO is the authorised agency that is responsible for arranging disbursements from the funding agencies following the prescribed policies and procedures in the respective loan agreements. This will involve the DMO processing the Claim submitted by the Project Implementing Agency, checking it for compliance with the loan agreement, and submission of the claim to the relevant funding agency. Also, all disbursements from the funding agencies to the beneficiaries will be routed through the DMO. The DMO needs to determine the date and amount of all disbursements. The back office gathers this information through receipt of disbursement notices from the Project Implementing Agency and/or the funding agency, or by accessing creditor websites (World Bank, African Development Bank, Asian Development Bank etc), contacting creditors directly, and/or contacting line Ministries. The Desk r will gather the information on the actual transactions and enter the data into the debt recording system. Business Process/Workflow Loan Entry Environment/Context: Following the signing of the loan agreement, the DMO back office will be responsible for inputting the loan details into the debt recording system. The loan details will be set out in the loan agreement and the term sheet prepared by the front office. The loan will be entered by a desk officer and checked by a supervisor. Supervisor Obtain term sheet and loan agreement from front office. Input loan details into debt recording system following data entry procedure manual. Check loan data entered into debt recording system from term sheet and loan agreement. Term sheet Loan agreement Updated debt recording system Term sheet Loan agreement Updated debt recording system Check of updated debt recording system PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 23 OF 98

24 Disbursement Advances Environment/Context: The DMO will record disbursements when the lender advances funds to the borrowing entity. The back office gathers this information through receipt of disbursement notices from the Project Implementing Agency and/or the funding agency, or by accessing creditor websites (World Bank, African Development Bank, Asian Development Bank etc), contacting creditors directly, and/or contacting line Ministries. Supervisor Head of Back Accountant- General Receive loan disbursement advice from Project Implementing Agency and/or the funding agency, or by accessing creditor websites. Check disbursement for compliance with the loan agreement and funding agency policies and procedures. Input details of the disbursement into debt recording system. Prepare disbursement notice either generated from the debt recording system or manually setting out the receipt currency, amount, date and bank account. Check disbursement data entered into debt recording system against the loan disbursement advice. Check disbursement notice. Approve disbursement notice and send to the Accountant-General. Ensure disbursements have been paid to the borrowing entity. Input disbursement details to the government financial reporting Loan disbursement advice Updated debt recording system Disbursement notice Loan disbursement advice Disbursement notice Check of updated debt recording system Disbursement notice Disbursement notice Approved disbursement notice Disbursement notice Updated government PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 24 OF 98

25 system (IFMIS). financial reporting system Disbursement Direct Payments Environment/Context: The DMO will record disbursements when the lender pays the supplier of goods and services. The back office gathers this information through receipt of disbursement notices from the Project Implementing Agency and/or the funding agency, or by accessing creditor websites (World Bank, African Development Bank, Asian Development Bank etc), contacting creditors directly, and/or contacting line Ministries. Supervisor Head of Back Accountant- General Receive loan disbursement advice from Project Implementing Agency and/or the funding agency, or by accessing creditor websites. Check disbursement for compliance with the loan agreement and funding agency policies and procedures. Input details of the disbursement into debt recording system. Prepare disbursement notice either generated from the debt recording system or manually setting out the receipt currency, amount, date and bank account. Check disbursement data entered into debt recording system against the loan disbursement advice. Check disbursement notice. Approve disbursement notice and send to the Accountant-General. Ensure disbursements have been paid to the supplier of goods and services. Input disbursement details to the Loan disbursement advice Updated debt recording system Disbursement notice Loan disbursement advice Disbursement notice Check of updated debt recording system Disbursement notice Disbursement notice Approved disbursement notice Disbursement notice PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 25 OF 98

26 government financial reporting system (IFMIS). Updated government financial reporting system Disbursement Reimbursements Environment/Context: The DMO will record disbursements when the lender makes reimbursements to the borrower for payments already made to suppliers. The DMO may be required to prepare withdrawal or replenishment applications to send to the funding agency. The back office will check and process the application and gather the disbursement information through receipt of disbursement notices from the Project Implementing Agency and/or the funding agency, or by accessing creditor websites (World Bank, African Development Bank, Asian Development Bank etc), contacting creditors directly, and/or contacting line Ministries. Supervisor Head of Back Receive loan withdrawal or replenishment application from Project Implementing Agency. Check application for compliance with the loan agreement and funding agency policies and procedures. Prepare Withdrawal/Replenishment Application for submission to the relevant funding agency. Check Withdrawal/Replenishment Application to be submitted to the relevant funding agency. Approve Withdrawal/Replenishment Application to be submitted to the relevant funding agency. Send Withdrawal/Replenishment Application to the relevant funding Loan withdrawal or replenishment application Withdrawal/ Replenishment Application Withdrawal/ Replenishment Application Withdrawal/ Replenishment Application notice Withdrawal/ Replenishment Application Approved Withdrawal/ Replenishment Application Approved Withdrawal/ Replenishment PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 26 OF 98

27 Funding agency Supervisor Head of Back Accountant- General agency. Process Withdrawal/Replenishment Application. Make disbursement to the designated government bank account. Receive loan disbursement advice from Project Implementing Agency and/or the funding agency, or by accessing creditor websites. Check disbursement against Withdrawal/Replenishment Application and note any variance. Input details of the disbursement into debt recording system. Prepare disbursement notice either generated from the debt recording system or manually setting out the receipt currency, amount, date and bank account. Check disbursement data entered into debt recording system against the loan disbursement advice. Check disbursement notice. Approve disbursement notice and send to the Accountant-General. Ensure disbursements have been credited to the designated government bank account. Application Withdrawal/ Replenishment Application sent to funding agency Withdrawal/ Replenishment Application Disbursement Loan disbursement advice Updated debt recording system Disbursement notice Loan disbursement advice Disbursement notice Check of updated debt recording system Disbursement notice Disbursement notice Approved disbursement notice Disbursement notice PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 27 OF 98

28 Input disbursement details to the government financial reporting system (IFMIS). Updated government financial reporting system ACTIVITY 2.3 EXTERNAL LOAN SERVICING General Description Debt servicing activities cover the payment of principal, interest and expenses associated with all external loan obligations of the government. The payment process is initiated by back office which is responsible for the servicing of government debt obligations. Where an Integrated Financial Management Information System (IFMIS) is in place, this will be used by all government ministries and agencies, including the DMO, as the main tool for registering, monitoring and controlling their respective budget and financial execution transactions including all debt servicing activities. The Accountant-General is responsible for the execution of public debt payments, which are processed by the Central Bank through the relevant government bank accounts using the S.W.I.F.T. payment system. Payment advices are received from the funding agency and checked by the back office. If there is any discrepancy with debt information in the debt recording system, the desk officer will contact the funding agency or fiscal agent to reconcile the difference. A payment advice is prepared and either input/validated in IFMIS (if the DMO has direct access) or checked/authorised and sent to the Accountant- General for further processing. The Accountant-General will send the payment authority to the Central Bank in order that the payment can be made in the relevant currency and the local currency equivalent debited to the government account at the Central Bank. If the government purchases the foreign currency through a commercial bank, payment will be made in local currency to the commercial bank that will instructed to make payment in foreign currency to the designated bank account of the funding agency. Business Process/Workflow Payment Advice Environment/Context: The DMO will be responsible for receiving the payment notice from the funding agency or fiscal agent and checking this against the debt recording system. Payment advices will be prepared by the back office for submission to the Accountant-General who is responsible for preparing a payment order or authority to be issued to the Central Bank for making payment. Receive Payment Notice from the funding agency. Check Payment Notice against data in debt recording system. Prepare Payment Advice or enter Payment notice Payment advice PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 28 OF 98

29 Supervisor/ Head of Back Head of DMO payment into IFMIS. Check Payment Advice or payment set up in IFMIS. Approve Payment Advice or payment set up in IFMIS. Send Payment Advice to Accountant-General for further processing (IFMIS will alert Accountant-General of payment advice pending). Payment advice Payment advice Payment advice Approved payment advice Approved payment advice Approved payment advice sent to Accountant-General for further processing Payment Authority Accountant-General Environment/Context: The Accountant-General is responsible for preparing a payment authority or instruction to be issued to the Central Bank for making payment. Receive Payment Advice from DMO. Check Payment Advice against Budget approvals and internal controls. Prepare Payment Authority for the Central Bank. Payment advice Payment authority Supervisor Check Payment Authority. Payment authority Accountant- General Authorise Payment Authority. Check payment authority Payment authority Authorised payment authority PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 29 OF 98

30 Send Payment Authority to the Central Bank. Authorised payment authority Authorised payment authority sent to Central Bank Payment Processing Central Bank Environment/Context: The Central Bank is responsible for making payment to the funding agency or fiscal agent. There may be a standing order whereby the Central Bank can debit the designated government bank account and make payment in the settlement currency out of the foreign exchange reserves to the designated bank account. In some cases, there may be a foreign exchange transaction to cover the sale of local currency and purchase of the foreign currency. Supervisor Head of Back Receive Payment Authority from Accountant-General. Set up payment in S.W.I.F.T. Check payment in S.W.I.F.T. Authorise payment in S.W.I.F.T. Send confirmation to the DMO Back of payment details. Payment authority S.W.I.F.T. transfer set up S.W.I.F.T. transfer set up S.W.I.F.T. transfer checked S.W.I.F.T. transfer set up S.W.I.F.T. transfer authorised & processed S.W.I.F.T. transfer processed Confirmation to DMO ACTIVITY 3: DOMESTIC LOANS The government may borrow from domestic sources using loans or credit facilities arranged with a commercial bank and/or with the Central Bank under a ways and PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 30 OF 98

31 means advance and/or overdraft. The initial role of DMO will be to participate in negotiations normally led by the Ministry of Finance on the terms and conditions for each loan or credit facility and conclude the necessary legal documentation. The Central Bank ways and means advances and/or overdraft will be used by the Accountant-General to meet shortfalls in revenue or for short-term financing of expenditure commitments. Similar credit facilities may be arranged with a commercial bank. Loans or credit agreements contracted with commercial banks will be drawn and repaid according to the loan terms and conditions. Once the documentation is in place, the DMO will record all debt transactions and initiate payments of principal and interest required under the loan or credit agreement. The front office will prepare a terms sheet for each loan and credit facility. The back office will be responsible for input of the loans and credit facilities into the debt recording system and for settlement and payment processing. ACTIVITY 3.1 DOMESTIC LOAN CONTRACTING General Description Domestic loan and facility negotiations are led by the Ministry of Finance in collaboration with the DMO and other agencies if necessary (line ministries, Ministry of Justice or Attorney-General, Central Bank, etc). The DMO obtains a mandate from the government (Public Debt Committee or Minister of Finance) to negotiate the loan or facility. The mandate will specify a set range for the key terms of the loan. The Ministry of Finance/DMO negotiate the terms and conditions of the loan or facility, a legal opinion on the loan agreement is obtained from the government s legal team and from legal counsel and the loan agreement is signed by the Minister of Finance. The front office of the DMO will prepare a term sheet with the loan or facility details and forward this together with the signed loan agreement to the back office for recording and processing the loan or facility. Business Process/Workflow Domestic Loan Contracting Environment/Context: The government arranges a loan or credit facility with a commercial bank and/or from the Central Bank (ways and means advance and/or overdraft). The DMO will participate in negotiations with the commercial bank or Central Bank to agree the loan or credit facility terms and conditions. Commercial Bank or Central Bank, Ministry of Finance Front Pre-consultations to agree the terms and conditions of the loan or credit facility. Review the loan or credit facility proposal prepared by Ministry of Pre-consultation Loan or credit facility proposal Loan or credit facility PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 31 OF 98

32 Head of Front Head of DMO Public Debt Committee or Minister of Finance Head of Front & Front Desk r Middle Legal r or Representative Finance. Prepare draft loan or credit facility mandate report with loan or credit facility terms and conditions to send to Public Debt Committee or Minister of Finance for approval. Sign-off draft loan or credit facility mandate report. Authorise loan or credit facility mandate report. Submit to Public Debt Committee or Minister of Finance for approval. Approve loan or credit facility mandate report. Participate in negotiations with the commercial bank or Central Bank along with Ministry of Finance. Negotiate terms and conditions of the loan or credit facility. Negotiate and finalise legal documentation throughout the negotiation process. Obtain legal opinion on the loan or credit facility from legal counsel to ensure that covenants and other conditions are met. Prepare loan agent s warrant/power proposal Draft loan or credit facility mandate report Draft loan or credit facility mandate report Signed-off draft loan or credit facility mandate report Signed-off draft loan or credit facility mandate report Authorised loan or credit facility mandate report Loan or credit facility mandate report Approved loan or credit facility mandate report Approved loan or credit facility mandate report Negotiated loan or credit facility terms and conditions Negotiated loan or credit facility terms and conditions Legal documentation Legal opinion PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 32 OF 98

33 Front Head of Front Head of DMO Minister of Finance or Loan Agent Front of attorney (if Minister of Finance cannot sign) Finalise loan or credit facility terms and conditions and conclude the loan or credit facility agreement. Sign-off loan or credit facility agreement. Authorise loan or credit facility agreement. Submit to Minister of Finance for signing. Sign loan or credit facility agreement or sign loan agent s warrant/power of attorney with the authority to sign on behalf of the Minister of Finance. Loan Agent to sign on behalf of the Minister of Finance Prepare draft term sheet and press statement. Legal documentation Legal opinion Draft loan or credit facility agreement Draft loan or credit facility agreement Signed-off loan or credit facility agreement Signed-off loan or credit facility agreement Authorised loan or credit facility agreement Loan or credit facility agreement Signed loan or credit facility agreement Signed loan or credit PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 33 OF 98

34 Head of Front Front Approve term sheet and press statement. Send copy of press statement to Minister of Finance s office for release. Send term sheet and copy of the loan or credit facility agreement to back office for input to debt recording system and processing. Send copy of the loan or credit facility agreement to the Accountant-General s, Central Bank and project implementing agency (PIA). facility agreement Draft term sheet Draft press statement Draft term sheet Draft press statement Term sheet Press statement released Term sheet Signed loan or credit facility agreement Signed loan or credit facility agreement and term sheet sent to back office Signed loan or credit facility agreement sent to Accountant- General s, Central Bank and PIA ACTIVITY 3.2 DOMESTIC LOAN MOBILISATION General Description Once the contracting of a loan or credit facility has been concluded, the DMO will need to record the loan or credit facility and any initial debt transactions to ensure that confirmation and settlement activities are completed. These activities will include the processing of each drawdown from the loan and/or credit facility. For the ways and means advances with the Central Bank, there will normally be standing order with the Central Bank to credit/debit the designated government bank account upon authorisation from the Accountant-General. The DMO will record the credits and debits for tracking debt service costs and the outstanding balance of the ways and means advance and overdraft if such an arrangement is also in place to incorporate in the total domestic debt outstanding. PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 34 OF 98

35 Business Process/Workflow Loan or Credit Facility Entry Environment/Context: Following the signing of the loan or credit facility agreement, the DMO back office will be responsible for inputting the loan details into the debt recording system. The loan or credit facility details will be set out in the loan or credit facility agreement and the term sheet prepared by the front office. The loan or credit facility will be entered by a desk officer and checked by a supervisor. Supervisor Obtain term sheet and loan or credit facility agreement from front office. Input loan or credit facility details into debt recording system following data entry procedure manual. Check loan or credit facility data entered into debt recording system from term sheet and loan agreement. Term sheet Loan or credit facility agreement Updated debt recording system Term sheet Loan or credit facility agreement Updated debt recording system Check of updated debt recording system Drawdown or Advance Environment/Context: The DMO will record a drawdown or advance from the loan or credit facility. The back office gathers this information through receipt of drawdown or advance notices from the commercial bank and/or Central Bank, or from the Accountant- General. Receive drawdown or advance advice from commercial bank, Central Bank or Accountant-General. Check drawdown or advance for compliance with the loan or credit facility agreement. Input details of the drawdown or advance into debt recording system. Prepare drawdown or advance Drawdown or advance advice Updated debt recording system Drawdown or advance notice PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 35 OF 98

36 Supervisor Head of Back Accountant- General notice either generated from the debt recording system or manually setting out the receipt currency, amount, date and bank account. Check drawdown or advance data entered into debt recording system against the loan drawdown or advance advice. Check drawdown or advance notice. Approve drawdown or advance notice and send to the Accountant- General. Ensure drawdown or advance has been paid to the correct bank account. Input drawdown or advance details to the government financial reporting system (IFMIS). Drawdown or advance advice Drawdown or advance notice Check of updated debt recording system Disbursement notice Drawdown or advance notice Approved disbursement notice Drawdown or advance notice Updated government financial reporting system ACTIVITY 3.3 DOMESTIC LOAN SERVICING General Description Debt servicing activities cover the payment of principal, interest and expenses associated with all domestic loan and credit facility obligations of the government. The payment process is initiated by back office which is responsible for the servicing of government debt obligations. Where an Integrated Financial Management Information System (IFMIS) is in place, this will be used by all government ministries and agencies, including the DMO, as the main tool for registering, monitoring and controlling their respective budget and financial execution transactions including all debt servicing activities. The Accountant-General is responsible for the execution of public debt payments, which are processed by the Central Bank through the relevant government bank accounts using internal transfers to/from the Central Bank and the S.W.I.F.T. payment system for payments to/from the commercial bank(s). Payment advices are received from the Central Bank or commercial bank and checked by the back office. If there is any discrepancy with debt information in the PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 36 OF 98

37 debt recording system, the desk officer will contact the Central Bank or commercial bank to reconcile the difference. A payment demand is prepared and either input/ validated in IFMIS (if the DMO has direct access) or checked/authorised and sent to the Accountant-General for further processing. The Accountant-General will send the payment instruction to the Central Bank in order that an internal transfer can be made from the government account at the Central Bank or payment made to the designated account at the commercial bank. Business Process/Workflow Payment Advice Environment/Context: The DMO will be responsible for receiving the payment notice from the Central Bank of commercial bank and checking this against the debt recording system. Payment advices will be prepared by the back office for submission to the Accountant-General who is responsible for preparing a payment order or authority to be issued to the Central Bank for making payment. Supervisor/ Head of Back Head of DMO Receive Payment Notice from Central Bank or commercial bank. Check Payment Notice against data in debt recording system. Prepare Payment Advice or enter payment into IFMIS. Check Payment Advice or payment set up in IFMIS. Approve Payment Advice or payment set up in IFMIS. Send Payment Advice to Accountant-General for further processing (IFMIS will alert Accountant-General of payment advice pending). Payment notice Payment advice Payment advice Payment advice Payment advice Approved payment advice Approved payment advice Approved payment advice sent to Accountant-General for further processing PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 37 OF 98

38 Payment Authority Accountant-General Environment/Context: The Accountant-General is responsible for preparing a payment authority or instruction to be issued to the Central Bank for making payment. Receive Payment Advice from DMO. Check Payment Advice against Budget approvals and internal controls. Prepare Payment Authority for the Central Bank. Payment advice Payment authority Supervisor Check Payment Authority. Payment authority Accountant- General Authorise Payment Authority. Send Payment Authority to the Central Bank. Check payment authority Payment authority Authorised payment authority Authorised payment authority Authorised payment authority sent to Central Bank Payment Processing Central Bank Environment/Context: The Central Bank is responsible for making payment to the Registry. There may be a standing order whereby the Central Bank can debit the designated government bank account and credit the bank account of the registry. Supervisor Receive Payment Authority from Accountant-General. Set up transfer from government account to the Registry. Check transfer from government account to the Registry Payment authority Bank transfer set up Bank transfer set up PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 38 OF 98

39 Head of Back Authorise transfer from government account to the Registry. Send confirmation to the DMO Back of payment details. Bank transfer checked Bank transfer set up Bank transfer authorised & processed Bank transfer processed Confirmation to DMO ACTIVITY 4: EXTERNAL SECURITIES The government may from time-to-time when market conditions are attractive issue securities in the international markets (i.e., global, euro or domestic bonds such as Yankee, Samurai or Bulldog bonds). These securities could be used to on-lend for infrastructure or other projects or used for budgetary support and/or target foreign investors to purchase government securities. A key objective for the DMO will be to broaden the investor base by encouraging foreign investors to purchase government securities. ACTIVITY 4.1 EXTERNAL SECURITIES PLANNING General Description Negotiations will be led by the DMO and will involve extensive consultation with international financial institutions (primarily investment banks and commercial banks) either directly or through a competitive tender process to obtain the best terms and conditions for the issue. Pre-issue preparation may include a road show that includes meetings with the financial intermediaries that are expected to be involved in the bond issue, rating agencies and investors. The consultation process will endeavour to identify demand for the securities and use a process referred to as price discovery to determine the expected cost or spread relative to the appropriate market benchmark. Negotiations will also include the selection and contracting of the fiscal and paying agent(s), legal agents, and printer of the notes (particularly important if bearer bonds are to be printed). The front office will be responsible for all planning activities, in consultation with the Middle. PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 39 OF 98

40 Business Process/Workflow Planning for Issuance of Securities Environment/Context: The DMO issues securities in the international markets. These securities will be either global, euro or bonds issued in domestic markets such as Yankee bonds in the US, Samurai bonds in Japan or Bulldog bonds in the UK. The DMO may issue these bonds directly or under a Euro-Medium Term Note (EMTN) program. These bonds could be used for infrastructure or other development projects, budgetary support, or to increase the level of foreign exchange reserves. Front Head of Front Head of DMO Public Debt Committee or Minister of Finance Head of Front & Front Desk Review market conditions (interest rates, swap rates, spreads, other issuers in the market). Obtain and review proposals from financial institutions with indicative bond terms and conditions. Prepare draft bond mandate report with market and currency, size of issue, indicative pricing terms, lead manager(s), key syndicate members, legal agents, fiscal agent, and other relevant details. Sign-off draft bond mandate report. Authorise bond mandate report. Submit to Public Debt Committee or Minister of Finance for approval. Approve bond mandate report. Undertake pre-issue activities such as: organise and conduct road Market conditions Financial institution proposals Draft bond mandate report Draft bond mandate report Signed-off draft bond mandate report Signed-off draft bond mandate report Authorised bond mandate report Bond mandate report Approved bond mandate report Approved bond mandate report PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 40 OF 98

41 r show finalise lead manager(s) and members of the syndicate consult with lead manager(s) to identify issue size, price/spread, and timing of issue consult with other government issuers and players in the market Negotiate with lead manager(s). Consult with Middle to ensure compliance with DMO s policies, limits and other requirements. Finalise terms and conditions of the bonds and timing/arrangements for issue. Pre-issue marketing and consultation Finalised bond terms and conditions ACTIVITY 4.2 EXTERNAL SECURITIES ISSUANCE General Description The DMO will be responsible for setting the timing and price/spread for the launch of the bond issue in consultation with the lead manager(s). If the authority provides for an oversubscription, the DMO may agree to increase the size of the issue. Once the bond issue is launched, the front office will monitor the success of the issue including investor placement (institutional and geographical). The middle office will ensure that all legal and security documentation is completed. The back office will be responsible for ensuring that the net proceeds from the bond issue which are the responsibility of the lead manager are credited to the designated government bank account and the bond is recorded in the debt recording system. Business Process/Workflow Issue of Securities in International Markets Environment/Context: After the DMO has completed the issuance of securities in international markets, the back office will be responsible for ensuring that the net proceeds are paid into the designated government account. The back office will also be responsible for ensuring that the debt recording system captures these transactions and the Accountant-General is notified of the issuance. Settlement will be through the government accounts at the Central Bank. The middle office will be responsible for concluding all legal and security documentation. PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 41 OF 98

42 Head of Front & Front Desk r Middle Legal r or Representative Front Head of Front Agree to timing and price/spread of bond to be issued and proceed with launch of bond issue. Contact rating agencies to obtain a bond rating for the issue. Negotiate and finalise legal documentation covering: Information memorandum, offering circular or loan agreement Fiscal and paying agency agreement Letter of service power of attorney (if Minister of Finance cannot sign) Printing of bearer/registered notes Obtain legal opinion on the bonds from legal counsel to ensure that covenants and other conditions are met. Send legal agreements to front office for sign-off. Review legal agreement from middle office. Sign-off legal agreements. Pre-issue marketing and consultation Finalised bond terms and conditions Bond issue Finalised bond terms and conditions & bond issue Legal documentation Legal opinion Legal documentation Legal opinion Reviewed legal documentation Reviewed legal documentation Signed-off legal PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 42 OF 98

43 Head of DMO Minister of Finance or Loan Agent Front Head of Front Front Authorised legal agreements. Submit to Minister of Finance for signing. Sign legal agreements or sign loan agent s warrant/ with the authority to sign on behalf of the Minister of Finance. Loan Agent to sign on behalf of Minister of Finance. Prepare draft term sheet and press statement. Approve term sheet and press statement. Send copy of press statement to Minister of Finance s office for release. Send term sheet to back office for input to debt recording system and processing. Send copy of the legal agreements to the Accountant-General s and Central Bank. Obtain term sheet from front office. Input details from term sheet of the issuance of securities into debt recording system. documentation Signed-off legal documentation Authorised legal documentation Legal documentation Signed legal documentation Signed legal documentation Draft term sheet Draft press statement Draft term sheet Draft press statement Term sheet Press statement released Term sheet Press statement Signed legal agreements and term sheet sent to back office, Accountant- General s and Central Bank Term sheet Updated debt recording system PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 43 OF 98

44 Supervisor Head of Back Accountant- General Central Bank Prepare issuance notice either generated from the debt recording system or manually setting out the payment/ receipt currency, amount, date and bank account. Check securities data entered into debt recording system against the term sheet provided by the front office. Check issuance notice. Approve issuance notice and send to Accountant-General. Ensure net proceeds of issuance are credited to the designated government bank account. Input issuance details to the government financial reporting system (IFMIS). Credit designated government bank account with the net proceeds of issuance. Issuance notice Term sheet Updated debt recording system Issuance notice Check of updated debt recording system Issuance notice Issuance notice Approved issuance notice sent to Accountant-General Issuance notice Credit of net issuance to designated government bank account Updated government financial reporting system Issuance notice Credit designated government bank account with the net proceeds ACTIVITY 4.3 EXTERNAL SECURITIES SERVICING General Description Debt servicing activities cover the payment of principal, interest and expenses associated with all the bond obligations of the government. The payment process is initiated by back office, which is responsible for the servicing of government debt PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 44 OF 98

45 obligations. Where an Integrated Financial Management Information System (IFMIS) is in place, this will be used by all government ministries and agencies, including the DMO, as the main tool for registering, monitoring and controlling their respective budget and financial execution transactions including all debt servicing activities. The Accountant-General is responsible for the execution of public debt payments, which are processed by the Central Bank through the relevant government bank accounts using the S.W.I.F.T. payment system. Payment advices are received from the fiscal and paying agent and checked by the back office. If there is any discrepancy with debt information in the debt recording system, the desk officer will contact the funding agency or fiscal agent to reconcile the difference. A payment advice is prepared and either input/validated in IFMIS (if the DMO has direct access) or checked/authorised and sent to the Accountant-General for further processing. The Accountant-General will send the payment authority to the Central Bank in order that the payment can be made in the relevant currency and the local currency equivalent debited to the government account at the Central Bank. If the government purchases the foreign currency through a commercial bank, payment will be made in local currency to the commercial bank that will be instructed to make payment in foreign currency to the designated bank account of the funding agency. Business Process/Workflow Payment Advice Environment/Context: The DMO will be responsible for receiving the payment notice from the funding agency or fiscal agent and checking this against the debt recording system. Payment advices will be prepared by the back office for submission to the Accountant-General who is responsible for preparing a payment order or authority to be issued to the Central Bank for making payment. Supervisor/ Head of Back Head of DMO Receive Payment Notice from the Fiscal and Paying Agent. Check Payment Advice against data in debt recording system. Prepare Payment Advice or enter payment into IFMIS. Check Payment Advice or payment set up in IFMIS. Approve Payment Advice or payment set up in IFMIS. Payment notice Payment advice Payment advice Payment advice Payment advice Approved payment PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 45 OF 98

46 Send Payment Advice to Accountant-General for further processing (IFMIS will alert Accountant-General of payment advice pending). advice Approved payment advice Approved payment advice sent to Accountant-General for further processing Payment Authority Accountant-General Environment/Context: The Accountant-General is responsible for preparing a payment authority or instruction to be issued to the Central Bank for making payment. Receive Payment Advice from DMO. Check Payment Advice against Budget approvals and internal controls. Prepare Payment Authority for the Central Bank. Payment advice Payment authority Supervisor Check Payment Authority. Payment authority Accountant- General Authorise Payment Authority. Send Payment Authority to the Central Bank. Check payment authority Payment authority Authorised payment authority Authorised payment authority Authorised payment authority sent to Central Bank PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 46 OF 98

47 Payment Processing Central Bank Environment/Context: The Central Bank is responsible for making payment to the Fiscal and Paying Agent. There may be a standing order whereby the Central Bank can debit the designated government bank account and make payment in the settlement currency out of the foreign exchange reserves to the designated bank account. In some cases, there may be a foreign exchange transaction to cover the sale of local currency and purchase of the foreign currency. Supervisor Head of Back Receive Payment Authority from Accountant-General. Set up payment in S.W.I.F.T. Check payment in S.W.I.F.T. Authorise payment in S.W.I.F.T. Send confirmation to the DMO Back of payment details. Payment authority S.W.I.F.T. transfer set up S.W.I.F.T. transfer set up S.W.I.F.T. transfer checked S.W.I.F.T. transfer set up S.W.I.F.T. transfer authorised & processed S.W.I.F.T. transfer processed Confirmation to DMO ACTIVITY 5: DOMESTIC SECURITIES Development of the domestic market for government securities is a key government debt management objective. In order to minimise cost and risk over the medium term, the DMO will ensure that their policies and operations are consistent with the development of an efficient government securities market. This will provide the government with a mechanism to finance its expenditures in a way that alleviates the need to rely fully on external debt and possibly the Central Bank to finance budget deficits. Moreover, by promoting the development of a deep and liquid market for domestic government securities, DMO in conjunction with the Central Bank, supervisors and regulators of financial institutions, and market participants, can achieve lower debt service costs over the medium- to long-term as the liquidity premium embedded in the yields on government debt wane. In addition, the yields on government securities will serve as a benchmark in pricing other financial assets, PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 47 OF 98

48 thereby serving as a catalyst for the development of deep and liquid financial markets more generally. The DMO s operations in the primary market will be transparent and predictable. Regardless of the mechanism used to raise funds, borrowing costs are typically minimised and the market functions most efficiently when the DMO s operations are transparent for example, by publishing borrowing plans or an auction calendar well in advance and acting consistently when issuing new securities and when the government creates a level playing field for investors. The terms and conditions of new issues will be publicly disclosed and clearly understood by investors. Also DMO will maintain an ongoing dialogue with market participants and monitor market developments so that it is in a position to react quickly when circumstances require. Debt issuance will use market-based mechanisms, such as competitive tenders, tap issues, or syndications. This involves auctions of government securities, although tap issues and syndications can be used if the DMO does not need to raise funds on a regular basis. The DMO may use primary dealers for distributing and fostering deep and liquid markets in this case the incentives and obligations, as well as eligibility criteria to become a primary dealer, are well defined and disclosed. In developing the supply of government securities, the key elements for the DMO to establish an efficient primary market include: establishing clear objectives for security issuance and debt management developing basic projections of the government s liquidity needs creating safe and efficient channels for the distribution of securities (e.g., auctions and possible use of primary dealers) targeted to investor needs progressively extending the maturity of government securities consolidating the number of debt issues and creating standardised securities with conventional maturities with a view to eventually provide market benchmarks moving to a predictable and transparent debt issuance program, with preannounced issuance calendars and greater disclosure of funding needs and auction outcomes The Budget and Annual Appropriation from Parliament/National Assembly will set out the authority for the DMO to issue securities in the domestic market. The Central Bank may act as the agent for the DMO in running the tender of Treasury bills and bonds. Each tender will be overseen by an auction committee that will decide the cut-off and allocation of successful bids. ACTIVITY 5.1 DOMESTIC SECURITIES PLANNING CASH FLOW AND TENDERS General Description The development and maintenance of a predictable and transparent debt issuance program requires good planning. The MTDS and annual borrowing plan will establish the auction calendar for government Treasury bills and bonds. Throughout the fiscal year, the DMO will obtain regular forecasts of government expenditure PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 48 OF 98

49 and revenues and the aggregate end-of-day cash balance in the government account(s) from the Ministry of Finance (Accountant-General or Treasury) by month, week and day to enable the debt managers to plan the level of issuance, particularly the issuance of Treasury bills to meet the government's liquidity and cash requirements resulting from shortfalls in expenditure and/or revenue. For the issuance of government securities, DMO will announce details of the Government s domestic debt programme and auction calendar in media statements issued at the time of the Government's Budget and periodically during the year (quarterly or monthly). This gives an outline of planned Treasury bond and bill issuance for the financial year, quarter and/or month, and includes a schedule of Treasury bond tenders (auction calendar). The schedule will set out tender dates and the announcement dates for the tenor and amount of the bonds to be auctioned. The announcement will be at the start of the auction calendar period (annual, quarterly, monthly). The front office will monitor market conditions (interest rates, swap rates, spreads, other issuers in the market, etc), maintain an investor relations program to test demand with investors, and consult with primary dealers and market makers before announcing the actual maturities and amounts of each tender. The Treasury or a Cash Management Committee will meet weekly or monthly to determine the government s cash position, which the DMO will use in setting the level of Treasury bills for issuance or buyback. Details of individual tenders will be released normally at least one week prior to the auction. On Treasury bond and bill tender dates, bids are sent to DMO or the agent (Central Bank) either electronically through the auction bidding system or manually. A multiple price or uniform/single price auction will be used to allocate bids according to the market conventions. DMO or the agent will collate all bids and allocate to successful bidders. Non-competitive bids will be included. An auction committee will be responsible for agreeing the allocation and sign-off of the auction. The head of the DMO will authorise the tender. Tender results will generally be announced via electronic media and the DMO and/or Central Bank website within a set time period after the close of bidding. Confirmations are sent to successful bidders. Settlement for Treasury bills and bonds will be according to market convention. It is preferable to minimise the time period between the auction and settlement dates so as to reduce the price-risk of the market moving significantly over this period, which may adversely affect the price/value for the successful bidders. International best practice would be to settle the next business day from the tender date (T+1) although this can be slightly longer for Treasury bonds (T+2 or 3). However, for many countries, the undeveloped state of the domestic auction and settlement systems will impose a longer settlement period, possibly up to T+5 in some cases. In some cases, the DMO may issue securities using a tap issuance method where Treasury bills and bonds will be available for purchase or tender during a tap window. In this case, the process will be similar to tender where marker players can place bids directly with the DMO or agent and bids will be accepted if they meet the pricing parameter sets for the tap issue. The advantage to the DMO is that these can be announced with a short notice period and can be useful for meeting shortterm funding shortfalls. The process/workflow is assumed to follow that for a tender. PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 49 OF 98

50 The front office will generate a term sheets setting out details of the tender results and submit to the back office for input in to the debt recording system and for settlement and payment processing. Business Process/Workflow Issue of Treasury Bills or Bonds by Tender Environment/Context: The DMO will obtain information on the aggregate cash position held across government bank accounts and cashflow forecasts for the next week/month/ quarter. The DMO will use tenders as the primary method for domestic debt issuance, through the issuance of Treasury bills and fixed rate, floating rate, and indexed-linked Treasury bonds following a pre-released auction calendar. Detailed terms and conditions of the Treasury bills and bonds will be set out in an Information Memorandum and the process to be followed by all market participants will be documented in the Operating Procedures published by the DMO and/or the agent (i.e., Central Bank). The DMO will use primary dealers and/or market makers to undertake the tenders. Treasury or Cash Management Committee Front Head of Front Meet weekly or monthly to review and update the aggregate cash position held across government bank accounts and cashflow forecasts for the next week/month/ quarter. Prepare and send report on government s cash position and cashflow forecasts for the next week/month/quarter to DMO. Obtain government s cash position and cashflow forecasts from Treasury or Cash Management Committee. Monitor market conditions (interest rates, swap rates, spreads, other issuers in the market), maintain an investor relations program to test demand with investors, and consult with primary dealers and market makers. Prepare Treasury bill or bond tender announcement. Review and sign-off Treasury bill or bond tender announcement. Cash position in government bank accounts Cashflow forecasts Cashflow report for DMO Government cash position and cashflow forecasts Market consultation: - primary dealers and/or market makers - investors Draft Treasury bill or bond tender announcement Draft Treasury bill or bond tender announcement PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 50 OF 98

51 Head of DMO Front Front Head of Front Head of DMO Auction Committee Approve Treasury bill or bond tender announcement. Publish Treasury bill or bond tender announcement and post to DMO and/or Central Bank website. Receive bids for Treasury bills or bonds from tender through electronic bidding system or manually (via Central Bank as agent if applicable). Collate bids for Treasury bill or bond tender including non-competitive bids and prepare allocation report. Review and sign-off Treasury bill or bond tender allocation report. Authorise Treasury bill or bond tender allocation report for submission to the Auction Committee. Approve Treasury bill or bond tender allocation report. Signed-off Treasury bill or bond tender announcement Signed-off Treasury bill or bond tender announcement Approved Treasury bill or bond tender announcement Approved Treasury bill or bond tender announcement Published Treasury bill or bond tender announcement Bids from tender Auction bidding system Draft auction allocation report Draft auction allocation report Signed-off draft auction allocation report Signed-off draft auction allocation report Authorised auction allocation report Authorised auction allocation report PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 51 OF 98

52 Front Head of Front Front Publish Treasury bill or bond tender results and post to DMO and/or Central Bank website. Prepare term sheet. Approve term sheet. Send term sheet to back office for input to debt recording system and processing. Approved auction allocation report Approved auction allocation report Published auction results Auction term sheet Auction term sheet Approved auction term sheet Approved auction term sheet Auction result and term sheet sent to back office ACTIVITY 5.2 DOMESTIC SECURITIES SETTLEMENT OF ISSUE General Description Following the conclusion of the issuance of domestic government securities, the settlement of net proceeds is credited to the designated government account directly by the Central Bank. Business Process/Workflow Settlement of Issue of Domestic Securities Environment/Context: The DMO will use the Central Bank as the agent for issuance of domestic securities such as Treasury bills and bonds. The Central Bank will also be the clearing house and registry for these securities. Once a tender or issue activity has been completed, the Central Bank will be responsible for ensuring that the net proceeds are paid into the designated government account and the registry system updated to capture these debt activities. The DMO back office will be responsible for ensuring that the debt recording system also captures these transactions and the Accountant-General is notified of these activities. Obtain term sheet from front office. PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 52 OF 98

53 Supervisor Head of Back Accountant- General Central Bank Input details from term sheet of the issue of securities into debt recording system. Prepare issuance notice either generated from the debt recording system or manually setting out the receipt currency, amount, date and bank account. Check securities data entered into debt recording system against the term sheet provided by the front office. Check issuance notice. Approve issuance notice and send to Accountant-General. Ensure net proceeds of issuance are credited to the designated government bank account. Input issuance details to the government financial reporting system (IFMIS). Credit designated government bank account with the net proceeds of issuance under standing orders or settlement instructions. Term sheet Updated debt recording system Issuance notice Term sheet Updated debt recording system Issuance notice Check of updated debt recording system Issuance notice Issuance notice Approved issuance notice sent to Accountant-General Issuance notice Credit net issuance to designated government bank account Updated government financial reporting system Standing orders or settlement instructions Credit designated government bank account with the net proceeds PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 53 OF 98

54 ACTIVITY 5.3 DOMESTIC SECURITIES SERVICING Debt servicing activities cover the payment of principal, interest and expenses associated with all the debt obligations of the government. The payment process is initiated by back office which is responsible for the servicing of government debt obligations. Where an Integrated Financial Management Information System (IFMIS) is in place, this will be used by all government ministries and agencies, including the DMO, as the main tool for registering, monitoring and controlling their respective budget and financial execution transactions including all debt servicing activities. The Accountant-General is responsible for the execution of public debt payments, which are processed by the Central Bank through the relevant government bank accounts using the S.W.I.F.T. payment system. General Description Payment advices are received from the Registry for Government Securities and checked by the back office. If there is any discrepancy with debt information in the debt recording system, the desk officer will contact the Registry to reconcile the difference. A payment demand is prepared and either input/validated in IFMIS (if the DMO has direct access) or checked/authorised and sent to the Accountant- General for further processing. The Accountant-General will send the payment instruction to the Central Bank in order that a transfer can be made from the government account at the Central Bank to the Registry for payment to the holders of the securities. Business Process/Workflow Payment Advice Environment/Context: The DMO will be responsible for receiving the payment notice from the registry and checking this against the debt recording system. Payment advices will be prepared by the back office for submission to the Accountant-General who is responsible for preparing a payment order or authority to be issued to the Central Bank for making payment. Supervisor/ Head of Back Head of DMO Receive Payment Notice from the Registry for Government Securities. Check Payment Notice against data in debt recording system. Prepare Payment Advice or enter payment into IFMIS. Check Payment Advice or payment set up in IFMIS. Approve Payment Advice or payment set up in IFMIS. Payment notice Payment advice Payment advice Payment advice Payment advice PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 54 OF 98

55 Send Payment Advice to Accountant-General for further processing (IFMIS will alert Accountant-General of payment advice pending). Approved payment advice Approved payment advice Approved payment advice sent to Accountant-General for further processing Payment Authority Accountant-General Environment/Context: The Accountant-General is responsible for preparing a payment authority or instruction to be issued to the Central Bank for making payment. Receive Payment Advice from DMO. Check Payment Advice against Budget approvals and internal controls. Prepare Payment Authority for the Central Bank. Payment advice Payment authority Supervisor Check Payment Authority. Payment authority Accountant- General Authorise Payment Authority. Send Payment Authority to the Central Bank. Check payment authority Payment authority Authorised payment authority Authorised payment authority Authorised payment authority sent to Central Bank PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 55 OF 98

56 Payment Processing Central Bank Environment/Context: The Central Bank is responsible for making payment to the Registry. There may be a standing order whereby the Central Bank can debit the designated government bank account and credit the bank account of the registry. Supervisor Head of Back Receive Payment Authority from Accountant-General. Set up transfer from government account to the Registry. Check transfer from government account to the Registry Authorise transfer from government account to the Registry. Send confirmation to the DMO Back of payment details. Payment authority Bank transfer set up Bank transfer set up Bank transfer checked Bank transfer set up Bank transfer authorised & processed Bank transfer processed Confirmation to DMO ACTIVITY 5.4 RETAIL SECURITIES The issuance of retail debt instruments will normally be through agents such as the Central Bank, commercial banks, post offices, regional treasury offices, and other retail outlets with or without the payment of a commission. The retail instruments will include standard retail or savings bonds (short, medium or long-term; fixed, floating or indexed-linked; tradable or non-tradable), savings certificates, savings deposits, lottery bonds, premium bonds, step-up bonds or other instruments that are structured to compete with other retail savings instruments offered by financial institutions operating in the domestic market. The role of the DMO is normally limited to setting the interest rates and other terms and conditions of the retail instruments, obtain data from the registry of retail debt issued, and service the retail debt obligations. General Description The DMO will operate a retail program where debt instruments are available to retail investors through distribution agencies such as the Central Bank, commercial banks, post offices, and/or regional treasury offices. The DMO will be responsible to setting the terms and conditions of each retail security and for setting the interest rates that require periodic adjustment due to changing market yields. Each agent will be responsible for registering the securities or debt instruments issued, forwarding the PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 56 OF 98

57 issuance proceeds to the designated government bank account, and sending the registration form to the Central Bank for processing in the registry system. Business Process/Workflow Retail Instruments Environment/Context: The DMO operates a retail program to issue a range of instruments using agents such as the Central Bank, commercial banks, post offices, regional treasury offices, and other retail outlets with or without the payment of a commission. Interest rates for these securities will be constantly reviewed by the front office and updated regularly, depending on market movements, the yields on government securities in the primary and secondary market, and using a calculation methodology. The DMO back office will be responsible for ensuring that the debt recording system captures all retail debt transactions and details of these transactions are forwarded to the Accountant-General for recording in the government financial reporting system. Front Head of Front Front Review current prices/yields on Treasury bills and bonds from the primary/secondary market. Revise prices or interest rates for securities available for sale to retail investors using the calculation methodology. Approve revised prices or interest rates for securities available for sale to retail investors. Publish revised prices or interest rates for securities available for sale to retail investors and post to DMO website. Obtain retail debt activity data from the Registry system (as an electronic data file). Transfer data file or input retail debt activity data into debt recording Current prices/yields on Treasury bills and bonds Revised prices/yields on retail instruments Revised prices/yields on retail instruments Approved revision to prices/yields on retail instruments Approved revision to prices/yields on retail instruments Published revision to prices/yields on retail instruments Retail debt data file Updated debt recording system PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 57 OF 98

58 Supervisor Head of Back Accountant- General Central Bank system. Prepare retail issuance notice for the Accountant-General either generated from the debt recording system or manually setting out the receipt currency, amount, date and bank account. Check retail debt activity data entered into debt recording system. Check retail issuance notice for the Accountant-General. Approve retail issuance notice and send to Accountant-General for processing. Ensure retail issuance proceeds have been credited to the designated government bank account. Input retail issuance details to the government financial reporting system (IFMIS). Credit designated government bank account with the net proceeds of issuance under standing orders or settlement instructions. Retail issuance notice Retail debt data file Updated debt recording system Retail issuance notice Check of updated debt recording system Retail issuance notice Retail issuance notice Approved retail issuance notice sent to Accountant-General Retail issuance notice Credit of net issuance to designated government bank account Updated government financial reporting system Standing orders or settlement instructions Credit designated government bank account with the net proceeds PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 58 OF 98

59 ACTIVITY 6: REORGANISATION The DMO may undertake reorganisation of loans that could be creditor or borrower driven. Creditor driven will include Paris and London Club restructuring. Borrower driven will include prepayment of high cost loans or restructuring of existing loans using different instruments such as the Asian Development Bank and World Bank hedging products. The DMO may carry out operations involving restructured public debt securities, involving buybacks or exchanges for other debt (domestic and external). The major objective of these debt management operations is to reduce the outstanding debt and debt burden, by lengthening maturities, adjusting the public debt profile and encouraging specific operations. The DMO may also enter into currency and/or interest rate swaps, normally at the time of issuance, to obtain lower cost of funds in the preferred currency. ACTIVITY 6.1 REORGANISATION LOANS General Description External loan reorganisation negotiations are led by the Ministry of Finance in collaboration with the DMO and other agencies if necessary (Ministry of Justice or Attorney-General, Central Bank, etc). The DMO obtains a mandate from the government (Public Debt Committee or Minister of Finance) to negotiate the reorganisation of the loans, whether these are initiated by the creditor (Paris Club, London Club or bilateral) or the borrower (pre-payment). The mandate will specify a set range for the key terms of the reorganisation or prepayment. The Ministry of Finance/DMO negotiate the terms and conditions of the reorganisation (prepayment will be set out in the loan agreement), and in the case of reorganisation, a legal opinion on the new loan agreement is obtained from the government s legal team and from legal counsel and the new loan agreement is signed by the Minister of Finance. The front office of the DMO will prepare a term sheet with the new loan details or prepayment details and forward this together with the signed loan agreement to the back office for recording and processing the loan. Business Process/Workflow Debt Restructuring Environment/Context: The DMO will participate in negotiations with Ministry of Finance to agree the reorganisation loan terms and conditions with the creditor. After the DMO has completed negotiations and the reorganisation loan agreement has been signed, the back office will be responsible for ensuring that any financial transactions that are required are settled through the designated government account or to the nominated settlement account. The back office will also be responsible for ensuring that the debt recording system captures these transactions (including prepayments) and the Accountant-General is notified of the debt reorganisation. PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 59 OF 98

60 Creditor, Ministry of Finance, DMO Front Head of Front Head of DMO Public Debt Committee or Minister of Finance Head of Front & Front Desk r Middle Legal r or Extensive pre-consultations to agree the reorganisation terms and conditions. Prepare draft loan reorganisation mandate report with indicative reorganisation loan terms and conditions to send to Public Debt Committee or Minister of Finance for approval. Sign-off draft reorganisation loan mandate report. Authorise reorganisation loan mandate report. Submit to Public Debt Committee or Minister of Finance for approval. Approve reorganisation loan mandate report. Participate in negotiations with the creditor along with Ministry of Finance and other government agencies if necessary. Negotiate terms and conditions of the new loan. Negotiate and finalise legal documentation throughout the Pre-consultation Reorganisation loan proposal Reorganisation loan proposal Draft reorganisation loan mandate report Draft reorganisation loan mandate report Signed-off draft reorganisation loan mandate report Signed-off draft reorganisation loan mandate report Authorised reorganisation loan mandate report Reorganisation loan mandate report Approved reorganisation loan mandate report Approved reorganisation loan mandate report Negotiated new loan terms and conditions Negotiated new loan PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 60 OF 98

61 Representative Front Head of Front Head of DMO Minister of Finance or Loan Agent negotiation process. Obtain legal opinion on the loan from legal counsel to ensure that covenants and other conditions are met. Prepare loan agent s warrant/power of attorney (if Minister of Finance cannot sign) Finalise loan terms and conditions and conclude the new loan agreement. Sign-off new loan agreement. Authorise new loan agreement. Submit to Minister of Finance for signing. Sign loan agreement or sign loan agent s warrant/ with the authority to sign on behalf of the Minister of Finance. Loan Agent to sign on behalf of the terms and conditions Legal documentation Legal opinion Legal documentation Legal opinion Draft new loan agreement Draft new loan agreement Signed-off new loan agreement Signed-off new loan agreement Authorised new loan agreement Loan agreement PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 61 OF 98

62 Front Head of Front Front Supervisor/ Head of Back Head of DMO Minister of Finance Prepare draft term sheet and press statement. Approve term sheet and press statement. Send copy of press statement to Minister of Finance s office for release. Send term sheet and copy of the loan agreement to back office for input to debt recording system and processing. Send copy of the loan agreement to the Accountant-General s, Central Bank and project implementing agency (PIA). Obtain term sheet and loan agreement from front office. Input debt reorganisation loan details into debt recording system following data entry procedure manual. Prepare settlement instructions/ payment advice. Check debt reorganisation data entered into debt recording system. Check settlement instructions/ payment advice. Approve settlement instructions/ payment advice and send to Signed loan agreement Signed loan agreement Draft term sheet Draft press statement Draft term sheet Draft press statement Term sheet Press statement released Term sheet Signed loan agreement Signed loan agreement and term sheet sent to back office Signed loan agreement sent to Accountant- General s, Central Bank and PIA Term sheet Loan agreement Updated debt recording system Settlement instructions/ payment advice Term sheet Loan agreement Settlement instructions/ payment advice Settlement instructions/ payment advice Settlement instructions/ PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 62 OF 98

63 Accountant- General Central Bank Accountant-General and/or Central Bank for processing. Receive Payment Advice from DMO and authorise. Check Payment Advice against Budget approvals and internal controls. Prepare Payment Authority for the Central Bank. Input payment details to the government financial reporting system (IFMIS). Debit designated government bank account and make payment to the nominated bank account as set out in the Payment Authority. payment advice Approved settlement instructions/ payment advice Settlement instructions/ payment advice Updated government financial reporting system Payment Authority Payment Authority Payment settled ACTIVITY 6.2 REORGANISATION SECURITIES General Description The DMO may carry out operations involving buyback of domestic securities but may include buyback of external securities and/or exchange of existing securities for other securities (domestic and external). The major objective of these operations is liability and cash management, with the purpose of reducing the outstanding debt burden, by lengthening maturities or changing the maturity structure, adjusting the public debt profile, encouraging specific operations such as the development of benchmark bonds, or managing the aggregate cash position held across government bank accounts. Business Process/Workflow PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 63 OF 98

64 Buyback of Government Securities Environment/Context: The DMO will use buyback or exchange to manage the aggregate cash position held across government bank accounts or to consolidate debt issues in selected maturities. The DMO will use tenders as the primary method for debt buyback, which may include a pre-released buyback calendar for domestic debt. The process to be followed by all market participants will be documented in the Operating Procedures published by the DMO and/or the agent (i.e., Central Bank). The DMO will use primary dealers and/or market makers to undertake the buybacks. After the DMO has completed the transaction to buyback existing debt, the back office will be responsible for ensuring that the settlement amount is paid into the nominated settlement account. The back office will also be responsible for ensuring that the debt recording system captures these transactions and the Accountant-General is notified of the payment. Settlement will be through the government accounts at the Central Bank. Treasury or Cash Management Committee Front Head of Front Meet weekly or monthly to review and update the aggregate cash position held across government bank accounts and cashflow forecasts for the next week/month/ quarter. Prepare and send report on government s cash position and cashflow forecasts for the next week/month/quarter to DMO. Obtain government s cash position and cashflow forecasts from Treasury or Cash Management Committee. Monitor market conditions (interest rates, swap rates, spreads, other issuers in the market), maintain an investor relations program to test demand with investors, and consult with primary dealers and market makers. Prepare Treasury bill or bond buyback announcement. Review and sign-off Treasury bill or bond buyback announcement. Cash position in government bank accounts Cashflow forecasts Cashflow report for DMO Government cash position and cashflow forecasts Market consultation: - primary dealers and/or market makers - investors Draft Treasury bill or bond tender/buyback announcement Draft Treasury bill or bond buyback announcement PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 64 OF 98

65 Head of DMO Front Front Head of Front Head of DMO Auction Committee Approve Treasury bill or bond buyback announcement. Publish Treasury bill or bond buyback announcement and post to DMO and/or Central Bank website. Receive bids for Treasury bills or bonds from buyback through electronic bidding system or manually (via Central Bank as agent if applicable). Collate bids for Treasury bill or bond buyback and prepare allocation report. Review and sign-off Treasury bill or bond buyback allocation report. Authorise Treasury bill or bond buyback allocation report for submission to the Auction Committee. Approve Treasury bill or bond buyback allocation report. Signed-off Treasury bill or bond buyback announcement Signed-off Treasury bill or bond buyback announcement Approved Treasury bill or bond buyback announcement Approved Treasury bill or bond buyback announcement Published Treasury bill or bond buyback announcement Bids from tender Auction bidding system Draft auction allocation report Draft auction allocation report Signed-off draft auction allocation report Signed-off draft auction allocation report Authorised auction allocation report Authorised auction allocation report PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 65 OF 98

66 Front Head of Front Front Supervisor/ Head of Back Head of DMO Publish Treasury bill or bond buyback results and post to DMO and/or Central Bank website. Prepare term sheet. Approve term sheet. Send term sheet to back office for input to debt recording system and processing. Obtain term sheet from front office. Input debt buyback into debt recording system. Prepare settlement instructions/ payment advice. Check debt buyback data entered into debt recording system. Check settlement instructions/ payment advice. Approve settlement instructions/ payment advice and send to Accountant-General and/or Central Bank for processing. Approved auction allocation report Approved auction allocation report Published auction results Auction term sheet Auction term sheet Approved auction term sheet Approved auction term sheet Auction result and term sheet sent to back office Term sheet Updated debt recording system Settlement instructions/ payment advice Term sheet Settlement instructions/ payment authority Settlement instructions/ payment advice Settlement instructions/ payment advice Approved settlement instructions/payment PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 66 OF 98

67 Accountant- General Central Bank Receive Payment Advice from DMO and authorise. Check Payment Advice against Budget approvals and internal controls. Prepare Payment Authority for the Central Bank. Input payment details to the government financial reporting system (IFMIS). Debit designated government bank account and make payment to the nominated bank account as set out in the Payment Authority. advice Settlement instructions/ payment advice Updated government financial reporting system Payment Authority Payment Authority Payment settled ACTIVITY 6.3 SWAPS The DMO may enter into currency and/or interest rate swaps, normally at the time of issuance of securities to obtain lower cost of funds in the preferred currency. For example, it may be more cost effective to issue JPY debt swapped to USD than issuing USD debt directly. Approval to enter into the swap will be obtained as part of the approval provided for the issuance of the securities. In these cases, the DMO will need to negotiate the swap deal, ensure that the swap documentation is completed and ensure that settlement instructions are issued to all the relevant parties in order that all payments are processed on the transaction settlement date. General Description Following the issuance of securities in the international market, the DMO obtains bids from a selection of counterparties for the nominated currency and/or interest rate swap. The DMO will select the most cost effective swap and negotiate the final terms and conditions, ensure that the swap documentation is completed, and ensure that settlement instructions are issued to all the relevant parties in order that all initial payments and receipts are processed on the settlement date for bot the securities that have been issued and the swap. Business Process/Workflow PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 67 OF 98

68 Swaps Environment/Context: The DMO obtains bids from a selection of counterparties for the nominated currency and/or interest rate swap and selects the most cost effective swap. The front office will negotiate the final terms and condition. The middle office will ensure that the swap documentation is completed. The back office will ensure that settlement instructions are issued to all the relevant parties in order that all initial payments are processed on the settlement date of the securities that have been issued. The back office will also be responsible for ensuring that the debt recording system captures these swaps and the Accountant-General is notified of all payments and receipts. Settlement will be through the government accounts at the Central Bank. Head of Front & Front Desk r Middle Legal r or Representative Front Head of Front Prepare and send requests for proposal to swap counterparties. Review responses from swap counterparties and select most cost effective swap. Negotiate terms and conditions of the swap. Negotiate and finalise legal documentation throughout the negotiation process. Obtain legal opinion on the swap from legal counsel to ensure that covenants and other conditions are met. Prepare loan agent s warrant/power of attorney (if Minister of Finance cannot sign) Finalise swap terms and conditions and conclude the swap agreement. Sign-off swap agreement. Approved security mandate report (including swap) Negotiated swap terms and conditions Negotiated swap terms and conditions Legal documentation Legal opinion Legal documentation Legal opinion Draft swap agreement Draft swap agreement PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 68 OF 98

69 Head of DMO Minister of Finance or Loan Agent Front Head of Front Front Authorise swap agreement. Submit to Minister of Finance for signing. Sign swap agreement or sign loan agent s warrant/ with the authority to sign on behalf of the Minister of Finance. Loan Agent to sign on behalf of the Minister of Finance Prepare draft term sheet and press statement. Approve term sheet and press statement. Send copy of press statement to Minister of Finance s office for release. Send term sheet and copy of the swap agreement to back office for input to debt recording system and processing. Send copy of the swap agreement to the Accountant-General s, Signed-off swap agreement Signed-off swap agreement Authorised swap agreement Loan agreement Signed swap agreement Signed swap agreement Draft term sheet Draft press statement Draft term sheet Draft press statement Term sheet Press statement released Term sheet Signed loan agreement Signed swap agreement and term PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 69 OF 98

70 Supervisor/ Head of Back Head of DMO Accountant- General Central Bank. Obtain term sheet and swap agreement from front office. Input swap details into debt recording system following data entry procedure manual. Prepare settlement instructions/ payment and receipt advice. Check swap data entered into debt recording system. Check settlement instructions/ payment and receipt advice. Approve settlement instructions/ payment and receipt advice and send to Accountant-General and/or Central Bank for processing. Receive Payment and Receipt Advice from DMO and authorise. Check Payment Advice against Budget approvals and internal controls. Prepare Payment Authority and Receipt Notification for the Central Bank. sheet sent to back office Signed swap agreement sent to Accountant-General s, Central Bank and PIA Term sheet Swap agreement Updated debt recording system Settlement instructions/ payment and receipt advice Term sheet Swap agreement Settlement instructions/ payment and receipt advice Settlement instructions/ payment and receipt advice Settlement instructions/ payment and receipt advice Approved settlement instructions/ payment and receipt advice Settlement instructions/ payment and receipt advice Updated government financial reporting system Payment authority PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 70 OF 98

71 Central Bank Input payment and receipt details to the government financial reporting system (IFMIS). Debit designated government bank account and make payment to the nominated bank account as set out in the Payment Authority. Credit receipt from counterparty to designated government bank account. Receipt notification Payment authority Receipt notification Payment and receipt settled ACTIVITY 7: ANALYSIS The MTDS sets the government s debt management objective and policy guidelines for debt management. The DMO will be responsible for the preparation of debt service forecasts for input to the annual Budget and appropriation by Parliament/National Assembly and for updates of debt service forecasts and comparisons of actual versus forecast. Debt sustainability analyses are undertaken to assist in maintaining the current sustainable debt portfolio consistent with economic growth and development and in line with the development agenda of the present government administration. The DMO undertakes a cost-risk assessment as part of the MTDS. Where the DMO is responsible for government cash management, it collates government cash flows and prepares forecasts of the aggregate cash balances across government bank accounts. ACTIVITY 7.1 DEBT SUSTAINABILITY ANALYSIS General Description Debt Sustainability Analysis (DSA) is conducted annually to analyse the debt portfolio by multiple indicators and ratios and to construct different scenarios to project the government s future debt ratios. The stakeholder institutions that take part in the DSA are DMO, Central Bank, Ministry of Finance, Ministry of National Planning and other relevant government entities. The DSA feeds in to the MTDS. The responsibility for the DSA rests with the middle office. Business Process/Workflow Debt Sustainability Analysis Environment/Context: The DMO will facilitate a debt sustainability analysis (DSA) each year bringing together all stakeholders across government DMO, Ministry of Finance, Treasury, Ministry of Planning, and Central Bank. The middle office will be responsible for coordinating and facilitating the DSA. The DMO will use one of the tools available, such as the DSF toolkit, DSM+, or Horizon, to undertake the DSA using an interface between the debt recording system, if possible. PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 71 OF 98

72 Middle Front All Stakeholders Head of Middle Organise workshop for all stakeholders across government to undertake DSA exercise. Collate information from all stakeholders required for DSA exercise: Existing debt Projections: - primary balance - monthly cashflows - interest rates - exchange rates - inflation - GDP Scenarios: - baseline - optimistic - pessimistic/stress Provide details of proposed new financing plan for the medium term (i.e., next 3 fiscal years): External financing: - multilateral - bilateral - commercial - market Domestic financing: - Treasury bills - Treasury bonds - retail instruments - commercial banks and Central Bank Undertake DSA using DSF toolkit, DSM+, or Horizon and produce DSA analysis. Prepare draft DSA report. Check and sign-off draft DSA report. Information from stakeholders Existing debt Projections Scenarios Govt financing requirement Forecast disbursements Draft borrowing plan with list of planned new borrowing Existing debt Projections Scenarios Draft DSA report Draft DSA report Draft DSA report sign-off PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 72 OF 98

73 Head of DMO Authorise DSA Report. Draft DSA report Public Debt Committee Cabinet/ Council of Ministers Middle Review draft DSA Report and recommend acceptance. Submit recommended DSA Report to Cabinet/Council of Ministers for approval. Review recommended DSA Report and approve. Arrange for DSA Report to be translated (if necessary). Publish DSA Report and post to DMO website (in pdf format). DSA report authorised Authorised draft DSA Report Recommended DSA Report Recommended DSA Report Approved DSA Report Approved DSA Report Translated DSA Report Published DSA Report ACTIVITY 7.2 COST-RISK ANALYSIS General Description The DMO undertakes a cost-risk assessment as part of the MTDS refer to Activity 1.1. The cost-risk assessment will apply standard techniques such as value-at-risk (VaR), cost-at-risk (CaR), debt service-at-risk (DSaR), cash flow-at-risk (CFaR) or budget-atrisk (BaR). The responsibility for the cost-risk analysis rests with the middle office. Evaluate the cost-risk trade-offs: The MTDS allows informed decisions to be made, ensuring the costs and risks associated with alternative strategies are clearly recognized and identified. Setting clear medium-term strategic goals will help DMs avoid poor decisions made solely on the basis of cost, or for the sake of short-term expediency. Identify and manage risk: Even where financing choices are limited, the MTDS helps identify and monitor key financial risks, and establish strategies that ensure countries are well placed to take advantage of new borrowing opportunities, in a considered and risk conscious way. The MTDS also facilitates risk management by enabling the consideration of options for risk mitigation. This could include supporting the development of the domestic debt market, maintaining cash or reserves buffers, or establishing committed lines of credit. The various costs and risks are the result of testing various strategy combinations. In other words, financing gap can be filled by various combinations of debt in terms of PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 73 OF 98

74 structure (external, domestic) maturity (short term, medium term), currency combinations (US dollar, Euro, Local currency) and interest rate structure (variable rate, fixed rate). It is worth pointing out that in general, there is no strategy that would generate a scenario, which will have a unique solution of minimum cost and minimum risk. Therefore what will result from various strategy combinations is a tradeoff between cost and risk. DSA looks at debt burden (stock levels) and liquidity (flows) indicators. CaR, on the other hand, is confined to flow measures in terms of interest and exchange rate costs. It is an appropriate framework for estimating the various combinations of costs and risks from which a preferred strategy can be selected. The first, many are familiar with measuring cost `when the transaction of payments takes place. However in defining real cost, the accrual accounting concept should be used. In other words, for example, a 3-year zero coupon bond may not have any cash payments during the three years but when measured on accrual basis a representative cost has to be shown for every year. Second, costs have to be measured in terms of market values (or fair values) rather than historical values. Third, both unrealised gains and losses due to exchange rate movements must be included in the cost. This means that losses and gains on capital amounts (on unrealised basis) had to be taken in to consideration every year. CaR to confine their forecasts based on market risk (interest rate and exchange rate risks) and refinancing risks. CaR is a measurement of interest costs (including external interest converted to local currency payments), the burden of this in the budget should be represented as a ratio of budget revenue or GDP. Ideally both ratios should be presented for expected costs and for the 95 percent level cost, the latter is the CaR. In addition one can also report on the relative CaR i.e., the difference between absolute CaR and expected cost. Business Process/Workflow Refer to Activity 1.1. ACTIVITY 7.3 CASH FLOW PLANNING General Description Where the DMO is responsible for government cash management, it prepares forecasts and monitors the aggregate level of overnight cash balances or float to determine borrowing and debt-related activities and ensure that the float is in accordance with the level or range set by government policy. This requires accurate and timely forecasts of government cash flows and end-of-day bank account balances. Where there is an excess pool of liquidity in government accounts, this is available for investment or buyback of domestic debt through transactions such as entering into reverse repurchase agreements or buyback of Treasury bills. The responsibility for cash flow planning will be with the cash managers located either in the front of back office. Business Process/Workflow PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 74 OF 98

75 Cash Flow Planning Environment/Context: The DMO has responsibility for government cash management, involving the forecasting of aggregate level of overnight cash balances and the integration of debt and cash management to maintain a float as set by government policy. The cash managers responsible for forecasting and monitoring overnight cash balances will be located either in the back office or front office. The front office will undertake the issuance/buyback of Treasury bills to maintain the target float. Cash Manager Head of Front or Head of DMO Cash Manager Monitor cash balances and obtain forecasts of debt service obligations and government revenues & expenditures for all government entities either directly from line ministries and government entities or from the Treasury/Ministry of Finance. Monthly for the next 12 months Weekly for the next 3 months Daily for the next 4 weeks Aggregate cash flow forecasts and prepare cash projections for each currency and/or bank account. Produce forecast of cash flows and government cash balances. Check and sign-off forecast of cash flows and government cash balances. Authorise forecast of cash flows and government cash balances. Submit forecast of cash flows and government cash balances to front office and key government Cash flow forecast from line ministries and government entities Forecast of cash flows and government cash balances Forecast of cash flows and government cash balances Forecast of cash flows and government cash balances checked Forecast of cash flows and government cash balances Forecast of cash flows and government cash balances authorised Forecast of cash flows and government cash PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 75 OF 98

76 stakeholders (front office will undertake issuance/buyback of Treasury bills to manage the float) balances Forecast of cash flows and government cash balances submitted to key government stakeholders and front office ACTIVITY 7.4 DEBT SERVICE MONITORING General Description The DMO prepares a schedule of debt service payments at the commencement of each financial year and updates periodically as required (semi-annually, quarterly or monthly). Forecasting of debt service payments on existing debt is normally undertaken by the back office, with economic and financial parameters provided by the Treasury or Ministry of Finance and a new borrowing program provided by the front office. The forecasts will be validated by the middle office that will also monitor debt service actual versus forecast throughout the fiscal year. Business Process/Workflow Debt Service Monitoring Environment/Context: As part of the government s budget monitoring, the DMO is required to monitor and report debt service out-turns compared to forecasts throughout the fiscal year. The back office will be responsible for preparing debt service out-turns. The middle office will be responsible for monitoring and reporting. Middle Head of Middle Prepare debt service out-turn at the end of each month. Monitor debt service out-turn against forecast at the end of each month. Prepare out-turn v forecast debt service report. Check and sign-off debt service report and send to Head of DMO and other senior managers. Updated debt recording system Debt service out-turn Debt service out-turn Debt service report Debt service report Debt service report signoff PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 76 OF 98

77 ACTIVITY 8: REPORTING The DMO produces and publishes a number of debt reports including the MTDS, an Annual Review that provides a review of debt management operations, a debt statistical bulletin (published quarterly or semi-annually), and periodic (monthly and/or quarterly) domestic market reports. In addition, the DMO is required to report on the external debt portfolio to the World Bank. If the government accesses international markets to issue securities, the DMO will be required to file Form 18-K with the US Securities and Exchange Commission (SEC). ACTIVITY 8.1 GOVERNMENT REPORTING General Description The DMO prepares and publishes a MTDS annually this is documented under Activity 1.2. The DMO also prepares and publishes an Annual Report that provides a review of debt management activities for the previous fiscal year with an evaluation of outcomes against stated objectives and compliance with the MTDS. The Annual Report will include information on the costs and risks of the debt portfolio, performance (such as compliance with the MTDS), and performance relative to benchmarks or limits (or both) that may have been set in the MTDS. The responsibility for the MTDS and Annual Report rests with the middle office. These are submitted to the Minister of Finance and/or Public Debt Committee/Council and tabled in Parliament/National Assembly. Business Process/Workflow Annual Report Environment/Context: The DMO produces and annual report that provides a review of debt management activities for the previous fiscal year with an evaluation of outcomes against stated objectives and compliance with the MTDS. The middle office is responsible for producing and publishing the annual report. Middle Consult with front and back office together with key stakeholders across government including the Central Bank to obtain input to the annual report. Draft Annual Report: Economic environment Total public debt External debt management Domestic debt management Sub-national debt Contribution from DMO and key stakeholders Draft Annual Report PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 77 OF 98

78 Head of Middle Risk management Borrowing plan Institutional issues Financial statement and accounts Check and sign-off draft Annual Report. Draft Annual Report Signed-off draft Annual Report Head of DMO Authorise draft Annual Report. Draft Annual Report Public Debt Committee Minister of Finance Middle Review draft Annual Report and recommend acceptance. Submit recommended Annual Report to Minister of Finance for approval Review recommended Annual Report and approve. Arrange for Annual Report to be translated (if necessary). Submit Annual Report to Parliament/National Assembly. Publish Annual Report and post to DMO website. Authorised draft Annual Report Draft Annual Report Recommended Annual Report Recommended Annual Report Approved Annual Report Approved Annual Report Translated Annual Report Published Annual Report ACTIVITY 8.2 WORLD BANK DEBTOR REPORTING SYSTEM General Description The DMO is required to complete reports for the World Bank Debtor Reporting System. The World Bank requires Reports 1, 1A and 2 on a quarterly basis and Report 4 on an annual basis by 31 March each year. PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 78 OF 98

79 Business Process/Workflow World Bank Debtor Reporting System Environment/Context: The DMO back office will generate reports from the debt recording system each quarter and yearly to send to the World Bank in accordance with the Debtor Reporting System requirements. Head of Back Head of DMO Produce reports 1, 1A and 2 on a quarterly basis and Produce reports 1, 1A, 2 and 4 on an annual basis. Check reports to be submitted to World Bank. Approve reports to be submitted to World Bank. Send reports to World Bank. Existing public debt data DRS reports DRS reports DRS reports checked DRS reports DRS reports approved DRS reports DRS reports submitted to the World Bank ACTIVITY 8.3 ACCOUNTING GENERAL LEDGER General Description The DMO is required to either provide general ledger entries for all debt transactions for input to the government accounting system or check the general ledger entries against the debt records held by the DMO. Business Process/Workflow PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 79 OF 98

80 Accounting General Ledger Environment/Context: The DMO will be required to check the general ledger accounting entries prepared by the Accountant-General for inclusion in the government financial accounts (IFMIS) against the debt transaction data in the debt recording system. The will be the responsibility of the back office and undertaken at the end of each month. Accountant- General s Head of Back Head of DMO Produce general ledger accounting entries from IFMIS at the end of each month. Check general ledger accounting entries against the data from the debt recording system and report any variances. Check reconciliation report. Approve reconciliation report to be sent to the Accountant-General s. Send reconciliation report to the Accountant-General s. General ledger accounting entries General ledger accounting entries Existing debt data Reconciliation report Reconciliation report Reconciliation report checked Reconciliation report Reconciliation report approved Reconciliation report Reconciliation report submitted to the Accountant-General ACTIVITY 8.4 MONITORING AND COMPLIANCE General Description The middle office is required to monitor whether all government debt management operations are within the authorities and limits set by government policies and in compliance with the laws, regulations and statutory or contractual obligations. The middle office will report monthly to senior management. PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 80 OF 98

81 Business Process/Workflow Monitoring and Compliance Reports Environment/Context: The middle office will monitor all government debt management activities and prepare a monthly report for senior management on compliance with the laws, regulations and statutory or contractual obligations, noting non-compliance where necessary. The monitoring and reporting will also cover the limits established in the MTDS for all debt management activities (currency limits, interest rate limits, credit limits and other limits as well as performance measures based on the use of benchmark portfolios or sub-portfolios, and. The reports will also be submitted to the debt policy committee or advisory board. Middle Head of Middle Head of DMO Middle Monitor government debt management operations to ensure compliance with: Laws and regulations (domestic and international) Statutory obligations Contractual or legal obligations Limits (currency, interest rate, credit etc) MTDS Portfolio benchmarks Prepare compliance report noting failures to comply. Review and sign-off compliance report. Review and approve compliance report. Circulate compliance report to senior managers and place on agenda for next meeting of the debt policy committee or advisory board. Government debt management operations Compliance report Compliance report Compliance report signed-off Compliance report Compliance report approved Approved compliance report PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 81 OF 98

82 Compliance report circulated to senior management and sent to the debt policy committee or advisory board ACTIVITY 8.5 DEBT STATISTICAL BULLETIN General Description The DMO produces and publishes a Debt Statistical Bulletin that covers domestic and external public debt and loan guarantees. The bulletin is published at least annually (preferably semi-annually or quarterly) and provides information on public debt stocks (by creditor, residency classification, instrument, currency, interest-rate basis, and residual maturity), debt flows (principal and interest payments), debt ratios/indicators, and basic risk measures of the public debt portfolio such as: Basic risk measures would include the following: share of fixed-rate to floating-rate debt share of short-term to long-term debt average time to interest rate re-fixing share of foreign currency to domestic debt currency composition of foreign currency debt average maturity of the debt maturity profile of the debt The responsibility for the Debt Statistical Bulletin rests with the back office. The DMO also produces and publishes a Monthly and/or Quarterly Report on domestic debt market activities covering: debt stocks and changes over the reporting period debt issuance over the reporting period debt buyback over the reporting period yield curve and changes over the reporting period secondary market activity/turnover and spreads over the reporting period planned activities for the next reporting period relevant market and other DMO information The responsibility for the Monthly and/or Quarterly Report rests with the front office. Business Process/Workflow PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 82 OF 98

83 Debt Statistical Bulletin Environment/Context: The DMO produces and publishes a Debt Statistical Bulletin that covers domestic and external public debt and loan guarantees. The bulletin is published at least annually (preferably semi-annually or quarterly). The responsibility for the Debt Statistical Bulletin rests with the back office. Head of Back Head of DMO Collate debt data required for Debt Statistical Bulletin using debt recording system and data requests from the necessary public entities. Produce draft Debt Statistical Bulletin. Review and sign-off Debt Statistical Bulletin. Review and approve Debt Statistical Bulletin. Arrange for Debt Statistical Bulletin to be translated (if necessary). Publish Debt Statistical Bulletin and post to the DMO website. Current and historical public debt data Draft Debt Statistical Bulletin Draft Debt Statistical Bulletin Draft Debt Statistical Bulletin signed-off Draft Debt Statistical Bulletin Debt Statistical Bulletin approved Debt Statistical Bulletin Translated Debt Statistical Bulletin Published Debt Statistical Bulletin ACTIVITY 8.6 QUARTERLY/MONTHLY DEBT REPORTS General Description The DMO also produces and publishes a Monthly and/or Quarterly Report on public debt and domestic debt market activities covering: debt stocks and changes over the reporting period debt issuance over the reporting period debt buyback over the reporting period PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 83 OF 98

84 yield curve and changes over the reporting period secondary market activity/turnover and spreads over the reporting period planned activities for the next reporting period relevant market and other DMO information The responsibility for the Monthly and/or Quarterly Report rests with the front office. Business Process/Workflow Domestic Market Monthly/Quarterly Report Environment/Context: The DMO produces and publishes a Monthly and/or Quarterly Report on domestic debt market activities, using the debt recording system and market data sources (Reuters and Bloomberg). Information on secondary market activity is provided by the Central Bank. The responsibility for the Monthly and/or Quarterly Report rests with the front office. Front Head of Front Collate debt data required for Monthly/Quarterly Report using debt recording systems, Registry system, market data sources and data from the Central Bank. Analyse the debt/market data and generate tables and graphs required for the report (in MS Excel) Produce draft Monthly/Quarterly Report. Review and sign-off draft Monthly/Quarterly Report. Existing public debt data Reuters & Bloomberg Secondary market data from Central Bank Draft Monthly/Quarterly Report Draft Monthly/Quarterly Report Draft Monthly/Quarterly Report signed-off Head of DMO Approve Monthly/Quarterly Report. Monthly/Quarterly Report Front Arrange for Monthly/Quarterly Report to be translated (if necessary). Publish Monthly/Quarterly Report and post to the DMO website. Monthly/Quarterly Report approved Monthly/Quarterly Report PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 84 OF 98

85 Translated Monthly/ Quarterly Report Published Monthly/ Quarterly Report ACTIVITY 8.7 FORM 18-K General Description The DMO will be required to prepare and submit Form 18-K to the United States Securities and Exchange Commission (US SEC) annually if the government plans to issues securities in international markets with placement into the domestic US. The responsibility for Form 18-K rests with the middle office. Business Process/Workflow Form 18-K Environment/Context: The DMO middle office will collate economic, financial and debt data from across government agencies and prepare Form-18K. This will be reviewed by the financial institutions in the US (referred to as due diligence ) before the DMO submits Form 18-K to the US SEC. Middle Head of Middle Collate economic, financial and debt data required for Form 18-K using data requested from Ministry of Finance, Treasury, Ministry of Planning, Central Bank, public and private sector entities and the back office. Produce draft Form 18-K. Review and sign-off draft Form 18-K. Economic data Financial data Public debt data Draft Form 18-K Draft Form 18-K Draft Form 18-K signedoff Head of DMO Review and approve Form 18-K. Draft Form 18-K Middle Send Form 18-K to the US legal counsel and underwriters for review and due diligence. Form 18-K approved Form 18-K Form 18-K submitted to US legal counsel and PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 85 OF 98

86 Legal Counsel and US Underwriters Middle Review Form 18-K and conduct due diligence assessment. Authorise Form 18-K. Send Form 18-K to the US SEC and post to the DMO website. underwriters Form 18-K Form 18-K subject to due diligence review Form 18-K authorised Form 18-K Form 18-K submitted to US SEC and published ACTIVITY 9: GUARANTEES The DMO may be responsible or participate in a process for assessing and approving loan guarantees. This will include reviewing a request for provision of a loan guarantee submitted by the guaranteed agency, undertaking a risk assessment, calculating the guarantee fee to be applied, submitting a proposal to the Minister of Finance or government seeking approval of the guarantee, completing the guarantee agreement and having it signed by the Minister of Finance or an appointed loan agent under a warrant or, and recording the details of the loan guarantee in the debt recording system. ACTIVITY 9.1 CONTRACTING GUARANTEES General Description The DMO will assess and approve the loan guarantee and obtain the necessary approval and signing of the loan guarantee agreement. A guarantee fee will apply and the DMO will notify the Accountant-General and Central Bank of the fee due in order that the fee paid by the guaranteed agency is credited to the designated bank account. Business Process/Workflow Guarantees Environment/Context: The DMO front office will lead the process for assessing and approving the loan guarantee, including a risk assessment. The middle office will ensure that all legal requirements are met and the Minister of Finance signs the loan guarantee agreement. The back office will notify the Accountant-General and Central Bank of all loan guarantee fee payments. Guaranteed agency, Pre-consultations to undertake a project appraisal and prepare the Pre-consultation PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 86 OF 98

87 Ministry of Finance, Line Ministry, DMO Front Head of Front Head of DMO Minister of Finance Head of Front & Front Desk r Middle Legal r or Representative terms and conditions of the loan guarantee. Undertake risk assessment. Prepare draft loan guarantee mandate report with loan guarantee terms and conditions to send to Minister of Finance for approval. Sign-off draft loan guarantee mandate report. Authorise loan guarantee mandate report. Submit to Minister of Finance for approval. Approve loan guarantee mandate report. Complete negotiations with guaranteed agency along with Ministry of Finance and line ministry (where necessary). Negotiate terms and conditions of the guarantee agreement. Calculate guarantee fee. Negotiate and finalise legal requirements on loan guarantee agreement. Loan guarantee proposal Loan guarantee proposal Draft loan guarantee mandate report Draft loan guarantee mandate report Signed-off draft loan guarantee mandate report Signed-off draft loan guarantee mandate report Authorised loan guarantee mandate report Loan guarantee mandate report Approved loan guarantee mandate report Approved/signed loan guarantee agreement Negotiated loan guarantee agreement Negotiated loan guarantee agreement PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 87 OF 98

88 Front Head of Front Head of DMO Minister of Finance or Loan Agent Obtain legal opinion on the guarantee agreement from legal counsel to ensure that covenants and other conditions are met. Prepare loan agent s warrant/power of attorney (if Minister of Finance cannot sign) Finalise loan guarantee agreement terms and conditions and conclude the guarantee agreement. Sign-off loan guarantee agreement. Authorise loan guarantee agreement and send to Minister of Finance for signing. Sign loan guarantee agreement or sign loan agent s warrant/power of attorney with the authority to sign on behalf of the Minister of Finance. Loan Agent to sign on behalf of Legal requirements Legal opinion Negotiated loan guarantee agreement Legal opinion Draft loan guarantee agreement Draft loan guarantee agreement Signed-off loan guarantee agreement Signed-off loan guarantee agreement Authorised loan guarantee agreement Loan guarantee agreement PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 88 OF 98

89 Front Head of Front Front Supervisor Minister of Finance. Prepare draft term sheet. Approve term sheet. Send term sheet and loan guarantee agreement to back office for input to debt recording system and processing. Send copy of the loan guarantee agreement to the Accountant- General s and Central Bank. Obtain term sheet and loan guarantee agreement from front office. Input guarantee agreement details into debt recording system following data entry procedure manual. Check loan guarantee agreement data entered into debt recording system from term sheet and guarantee agreement. Signed loan guarantee agreement Signed loan guarantee agreement Draft term sheet Draft term sheet Term sheet Term sheet Signed loan guarantee agreement and term sheet sent to back office, Accountant- General s and Central Bank Term sheet Loan guarantee agreement Updated debt recording system Term sheet Loan guarantee agreement Updated debt recording system Check of updated debt recording system PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 89 OF 98

90 ACTIVITY 9.2 SERVICING GUARANTEES General Description The back office of the DMO will be responsible for issuing instructions to the guaranteed agency to make payment of the guarantee fee to the designated account according to the guarantee agreement. Business Process/Workflow Guarantee Fee Servicing Environment/Context: The DMO will be responsible for preparing the guarantee fee payment advice either manually or from the debt recording system. Payment advices will be prepared by the back office for submission to the guaranteed agency. Supervisor/ Head of Back Prepare Payment Advice in accordance with the guarantee agreement. This will set out the payment calculation, payment currency, amount, date and bank account. Check Payment Advice. Payment advice Payment advice Payment advice Head of DMO Approve Payment Advice. Payment advice Send Payment Advice to the guaranteed agency. Approved payment advice Approved payment advice Approved payment advice sent to the guaranteed agency PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 90 OF 98

91 Guarantee Fee Processing Environment/Context: The guaranteed agency is responsible for making payment in accordance with the guarantee fee payment advice sent by the DMO. The DMO will check that payment has been made accordingly and input the payment to the debt recording system. Supervisor/ Head of Back Check that the guarantee fee has been made by the guaranteed agency through access of the government bank accounts and/or advice from the Central Bank. Input the guarantee fee payment to guarantee fee recording system. Check payment in the guarantee fee recording system. Bank statement Advice from the guaranteed agency Updated debt recording system Updated debt recording system Updated debt recording system checked 3.10 ACTIVITY 10: ONLENDING ACTIVITY 10.1 ONLENDING CONTRACTING General Description Multilateral, bilateral and commercial loans such as bank loans, supplier s credits and officially supported export credits are contracted with the government, which will put in place an on-lending agreement if necessary to a government agency or SOE responsible for the project. A project implementing agency will be established to manage the project including administration of on-lending disbursements and loan repayments. Negotiations are led by the Ministry of Finance in collaboration with the DMO and other agencies if necessary (line ministries, Ministry of Justice or Attorney General, central bank, etc). The Ministry of Finance/DMO negotiate the terms and conditions of the onlending, a legal opinion on the onlending agreement is obtained from the government s legal team and from legal counsel and the onlending agreement is signed by the Minister of Finance. The front office of the DMO will prepare a term sheet with the onlending details and forward this together with the sign onlending agreement to the back office for recording and processing the onlending loan. PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 91 OF 98

92 Onlending Environment/Context: The terms and conditions of the onlending agreement will be negotiated with the government agency or SOE in consultation with the Ministry of Finance and relevant line ministry. The structure of the onlending may match the primary loan or have a completely different structure in terms of currency, maturity and interest rate. Head of Front & Front Desk r Middle Legal r or Representative Front Head of Front Lead negotiations with government agency or SOE along with Ministry of Finance and line ministry. Negotiate terms and conditions of the onlending agreement. Negotiate and finalise legal requirements on onlending agreement. Obtain legal opinion on the onlending agreement from legal counsel to ensure that covenants and other conditions are met. Prepare loan agent s warrant/power of attorney (if Minister of Finance cannot sign) Finalise onlending agreement terms and conditions and conclude the onlending agreement. Sign-off onlending agreement. Approved/signed underlying loan agreement Negotiated onlending agreement Negotiated onlending agreement Legal requirements Legal opinion Negotiated onlending agreement Legal opinion Draft onlending agreement Draft onlending agreement Signed-off onlending agreement PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 92 OF 98

93 Head of DMO Minister of Finance or Loan Agent Front Head of Front Front Authorise onlending agreement and send to Minister of Finance for signing. Sign onlending agreement or sign loan agent s warrant/power of attorney with the authority to sign on behalf of the Minister of Finance. Loan Agent to sign on behalf of Minister of Finance. Prepare draft term sheet. Approve term sheet. Send term sheet and onlending agreement to back office for input to debt recording system and processing. Send copy of the onlending agreement to the Accountant- General s, Central Bank and PIA. Signed-off onlending agreement Authorised onlending agreement Onlending agreement Signed onlending agreement Signed onlending agreement Draft term sheet Draft term sheet Term sheet Term sheet Signed onlending agreement and term sheet sent to back office, Accountant- General s and Central Bank PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 93 OF 98

94 ACTIVITY 10.2 ONLENDING MOBILISATION General Description The DMO needs to determine the date and amount of all disbursements from the lending agency to the onlending agency whether this is paid direct or through the government accounts at the Central Bank. The back office gathers this information through receipt of disbursement notices from the project implementing unit and/or the onlending agency, or by accessing creditor websites (World Bank, African Development Bank, Asian Development Bank etc), contacting creditors directly, and/or contacting line Ministries. The will gather the information on the actual transactions and enter the data into the debt recording system. Business Process/Workflow Onlending Entry Environment/Context: Following the signing of the onlending agreement, the DMO back office will be responsible for inputting the onlending details into the debt recording system. The onlending details will be set out in the onlending agreement and the term sheet prepared by the front office. The onlending will be entered by a desk officer and checked by a supervisor. Supervisor Obtain term sheet and onlending agreement from front office. Input onlending details into debt recording system following data entry procedure manual. Check onlending data entered into debt recording system from term sheet and onlending agreement. Term sheet Onlending agreement Updated debt recording system Term sheet Onlending agreement Updated debt recording system Check of updated debt recording system PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 94 OF 98

95 Onlending Disbursements Environment/Context: The DMO will record disbursements when the lender remits funds to the onlending agency. The back office gathers this information through receipt of disbursement notices from the project implementing agency and/or the onlending agency, or by accessing creditor websites (World Bank, African Development Bank, Asian Development Bank etc), contacting creditors directly, and/or contacting line Ministries. Supervisor Head of Back Accountant- General Receive onlending disbursement advice from project implementing agency and/or the onlending agency, or by accessing creditor websites. Check disbursement for compliance with the onlending agreement. Input details of the disbursement into debt recording system. Prepare disbursement notice either generated from the debt recording system or manually setting out the receipt currency, amount, date and bank account. Check disbursement data entered into debt recording system against the loan disbursement advice. Check disbursement notice. Approve disbursement notice and send to the Accountant-General. Ensure disbursements have been paid to the onlending agency. Input disbursement details to the government financial reporting system (IFMIS). Onlending disbursement advice Updated debt recording system Disbursement notice Onlending disbursement advice Disbursement notice Check of updated debt recording system Disbursement notice Disbursement notice Approved disbursement notice Disbursement notice Updated government financial reporting system PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 95 OF 98

96 ACTIVITY 10.3 ONLENDING SERVICING General Description The back office of the DMO will be responsible for issuing instructions to the onlending agency to make loan payments (principal, interest and expenses) to the designated bank account according to the onlending agreement. Business Process/Workflow Payment Advice Environment/Context: The DMO will be responsible for preparing the payment advice either manually or from the debt recording system. Payment advices will be prepared by the back office for submission to the project implementing unit or onlending agency. Supervisor/ Head of Back Prepare Payment Advice in accordance with the debt recording system records and onlending agreement. This will set out the payment calculation, payment currency, amount, date and bank account. Check Payment Advice. Payment advice Payment advice Payment advice Head of DMO Approve Payment Advice. Payment advice Send Payment Advice to the Project Implementing Agency and/or onlending agency. Approved payment advice Approved payment advice Approved payment advice sent to project implementing unit and/or onlending agency PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 96 OF 98

97 Payment Processing Environment/Context: The project implementing unit and/or onlending agency is responsible for making payment in accordance with the payment advice sent by the DMO. The DMO will check that payment has been made accordingly and input the payment to the debt recording system. Supervisor/ Head of Back Check that payment has been made by the project implementing agency and/or onlending agency through access of the government bank accounts and/or advice from the Central Bank. Input payment to debt recording system. Check payment in debt recording system. Bank statement Advice from project implementing unit and/or onlending agency Updated debt recording system Updated debt recording system Updated debt recording system checked PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 97 OF 98

98 4. ANNEX: BUSINESS PROCESS MAPS <Refer to Process Maps.pdf> PUBLIC DEBT MANAGEMENT BUSINESS PROCESSES/WORKFLOWS PAGE 98 OF 98