Debt Management Programme

Transcription

1 C O M M O N W E A L T H S E C R E T A R I A T Debt Management Programme Responding to the Global Economic Crisis Welcome to the second edition of the annual review of the Commonwealth Secretariat s Debt Management Programme. This edition provides a snapshot of our response in providing support and assistance to member countries during July 2010 to June 2011 a year marked by the sovereign debt crisis. This review also reports on major outcomes in countries flowing from our assistance, based on key performance indicators. ANNUAL REVIEW, What started as a Greek crisis, the sovereign debt crisis deepened this year and spread to Ireland and Portugal while threatening to spill over to core Eurozone countries like Spain. Fiscal sustainability remain as the core problem in many advanced economies. However, the inter-linkages of balance sheets of the various sectors, particularly the banking sector and also its cross-border dimension of government bond holdings have added to the complexity in shaping a quick resolution to the on-going sovereign debt crisis. In the developing world, where much of our work on debt management is involved for the Commonwealth member countries, most economies managed to avoid a direct hit from the debt crisis. However, much of the hard earned fiscal space has been vastly eroded in recent years. The recent build up of debt in many countries would warrant a tightening of the fiscal belt, greater priority for adopting strategic debt management policies and strengthening institutional structures and capacity in debt management. With persisting global economic uncertainty, debt management would require enhanced policy coordination. Within the Commonwealth, nine member countries witnessed an increase in their debt levels in excess of 10 per cent of their GDP. At the same time, more than ten member small state economies, mostly from the Caribbean region are beset with a debt burden of more than 70 per cent of their GDP. Faced with growing challenges on sovereign debt management, the demand for assistance from member countries, particularly on policy advisory support, continued to be buoyant. Against this challenging global economic landscape, 20 member countries benefited from our assistance during this year provided through 31 in-country missions. This assistance ranged from policy advisory support; training on debt management policies and analysis; support on debt statistics and data compilation through CS-DRMS; and country consultations for assistance. As a new initiative, an E-learning programme was successfully launched where 60 debt managers were trained on the management of external debt. At the same time, through a survey exercise comprehensive feedback on required technical assistance was received from 25 member countries which will inform future course and design of assistance. Arindam Roy (Head, Debt Management Section) Our key objective is to promote prudent debt management practices in member countries. We do so by providing advisory support in developing sound debt management policies, s t r a t e g i e s a n d operations in line with best practice, backed by its state-of-the-art debt software. Inside: CONSULTATIONS AND OUTREACH 2 Our re-oriented strategy on delivery of assistance with increased emphasis on results based approach and coordination and collaboration with other providers of technical assistance is working well and has already started yielding tangible results. Some key results achieved during this year include: the formulation of a public debt act and reorganisation of debt office in Jamaica; adoption of debt management strategy in Ghana, Jamaica and Kenya; publication of a debt bulletin in Sierra Leone; establishment of an integrated public debt database in Sri Lanka and Kenya; and establishment of computerised sub-national debt database in three states in India the first of its kind in developing countries. Moving ahead, we hope to witness more visible improvements on debt management in our member countries in the near future which will be duly supported by our expanded and redesigned strategy on delivery of assistance. Thank you POLICY ADVISORY SUPPORT SNAPSHOT OF DEBT MANAGEMENT PROGRAMME ( ) BUILDING CAPACITY IN DEBT MANAGEMENT ESTABLISHING GOOD QUALITY DATABASE DISSEMINATION OF BEST PRACTICES Looking ahead to the future The Secretariat will be rolling a new, cutting edge software Public Debt Analytical Tool as a decision support system for sovereign debt management to formulate and implement debt management policies within a strategic and risk-based framework. The development of the PDAT tool is at an advanced stage and well on course to be released during the middle of 2012 for the benefit of our client countries. The provision of PDAT will fill a long standing gap on the availability of a ready made software to assist countries implement debt management strategies through an integrated framework. The Debt Management Section (DMS) is an arm of the Special Advisory Services Division

2 Consultations and Outreach Stepping up Assistance through Enhanced Consultations Responding to requests for assistance, comprehensive plan to strengthen debt management was formulated for six countries during this year (Malawi, Mauritius, Nigeria, Sri Lanka, South Africa and Trinidad and Tobago) and on subnational debt management in India. For this purpose, extensive consultation with country stakeholders was undertaken. This is in tune with our strategy of striking closer ties with member countries to better understand their needs. The design of such demand driven assistance takes into account possible supply of assistance from other international organisations. Through this approach, assistance to a member country is now sequenced to advance the strengthening of its capacity for establishing an integrated and good quality debt database in CS-DRMS; effective use of the system for supporting debt operations; dissemination on debt portfolio and associated support on developing debt bulletin; and enhancing debt analysis capabilities through training. Such assistance is supplemented through policy advisory support to reform the debt management policies and institutional arrangements within a strategic framework. As part of enhanced consultations, the Commonwealth Secretariat User Group Meeting (UGM) took place in London in March 2011 to assess and discuss the future Instruments of Assistance scope and direction of its assistance to member countries on debt management. The UGM discussed emerging requirements on public debt management by member countries. The meeting was attended by more than 50 debt managers from across 36 member countries of the Commonwealth. During the UGM, the debt managers urged the advisory support to be broadened and deepened to better meet the needs of its client countries. While lauding the Secretariat on finding continued ways to build capacity in member countries, the delegates encouraged the Secretariat to continue developing regional capacity and expertise and maintain partnerships with regional and international organisations. To have a better perspective on the medium-term demand for assistance from member countries, a survey exercise was undertaken this year with comprehensive response received from 25 member countries. The survey response will serve as a crucial input for shaping the future delivery of our assistance. Page 2

3 Consultations and Outreach Eurozone Debt Crisis Dominates Secretariat s Conference on Debt Management The Commonwealth Secretariat held its second Stakeholders Conference on Debt Management at its London Headquarters during 31 March 1 April The theme of this year s Conference was Building Resilience in Debt Management - Preserving Debt Sustainability and Financial Stability. During his inaugural address, Commonwealth Secretary-General Kamalesh Sharma said: Debt takes funds away from where they are most needed health, education, the environment the real priorities. We have already loosened the chains of debt: now, we need to keep using the same combination of brain and brawn in our global efforts to shake them off, once and for all. Sir Dwight Vennor, Governor, ECCB and Coskun Cangoz, Director General, Turkish Treasury at the High Level Panel Discussion The conference was convened at a time when the global economic crisis which unfolded in 2009, was deepening with the evolving Eurozone debt crisis. The main objective of the conference was to deliberate on the lessons emanating from the Eurozone debt crisis as well as to discuss the challenges that debt managers from developing countries face in such global economic environment. Over 100 delegates from 41 countries participated at the event. Participants included a diverse profile with finance ministers; central bank governors; financial secretaries; senior officials; debt managers; representatives from international organisations; leading academics and financial market analysts attending the Conference. The conference benefited from Ministerial addresses which provided country perspectives on wide ranging issues related to public debt management. Hon ble Ken Kandoo, Minister of Finance, Malawi spoke on challenges for Malawi in financing growth while ensuring debt sustainability. Hon ble Audley Shaw, Minister of Finance and Public Services, Jamaica gleaned from Jamaica s most recent debt restructuring experience while speaking on the subject of dealing with debt problems by a market access country. An emerging market perspective was provided by Hon ble Nhlanhla Musa Nene, Deputy Minister of Finance, Republic of South Commonwealth-Secretary General with Ministers of Finance from Jamaica and Malawi and Deputy Minister of Finance, South Africa. Africa. Hon ble Nene s address focussed on the priorities for public debt management for developing countries in the twenty first century. Other highlights were key note speeches by internationally acclaimed experts on issues related to the current debt crisis. Eminent economists like Willem Buiter, Chief Economist in Citibank spoke on the effectiveness of fiscal rules for debt sustainability while Professor Charles Goodhart, Chair of the Financial Markets Group, London Schools of Economics focused on the way forward for managing financial stability and financial risks. Delivering a special address, Dr. Y V Reddy, former Governor, Reserve Bank of India provided his outlook on how the emerging market economies and the international financial architecture should address challenges on public debt management. A high level panel discussion comprising central bank governors, Finance Secretaries and senior officials from a number of emerging market and developing countries provided a practical perspective of the various issues germane to the central theme of the conference. Representatives from various international organisations like the BIS, IMF, OECD and World Bank also shared their perspective on the implications of the global economic crisis for debt management in developing countries. During , nine Commonwealth countries witnessed an increase in their debt levels by more than one-tenth of their GDP. Page 3

4 Policy Advisory Support D E B T M A N A G E M E N T S E C T I O N Building Stronger Policy Foundations on Debt Management Effective and sound debt management enables governments to take advantage of sovereign borrowings for financing their growing developmental needs on a sustainable manner and create positive externalities through the development of domestic capital markets. More importantly, sovereign debt being the largest financial portfolio in any country, prudent debt management policies also ensure a country limit the impact of various financial risks associated with their debt portfolio. Sound debt management is therefore regarded as one of the key cornerstones of economic policy which safeguards a country from macroeconomic and financial instability. Our work on policy advisory support was initiated one year ago as a response to the global economic crisis for supporting our member countries. The debt management program provides policy advice to prepare member countries adopt prudent and more pro-active debt management. In so doing, we endeavour to provide advisory support on a number of areas to strengthen policies, functions and institutions related to sovereign debt management. Policy advice is provided on legal framework, institutional arrangements, setting up of debt offices, formulation of medium-term debt management strategies within a risk management framework, implementation of debt management strategies and access to capital markets, including development of domestic debt market. The end objective is that countries adopt sound debt management policies and effectively manage their debt liabilities through strengthened institutions and framework to ensure long-term debt sustainability. With growing priority accorded by member states to strengthen debt management functions and adopt sound debt management policies, there has been significant demand for assistance in recent years in this area from our member countries. Since the initiation of policy advisory work in mid-2009, 11 member countries from the Commonwealth benefited from such assistance which include Botswana, Dominica, The Gambia, Ghana, Jamaica, Kenya, Maldives, Mauritius, Namibia, Samoa and Tanzania. The provision of demand-led advisory support has been evenly keeled on both upstream areas through effective coordination with other developmental partners like IMF and World Bank to strike better synergies, as well as in downstream activities to hand hold countries during the actual implementation of reforms. Much of the recommendations made by in-house specialists and leading international experts, after extensive consultation with country authorities reflect sound international practices as well as the optimum feasible solution in a country specific setting. Kenya to Strengthen its Middle Office Functions in Debt Management Since 2004, the Ministry of Finance in Kenya has been implementing reforms to strengthen its debt management capability. Kenya already has set up an agreed institutional framework with assistance from the World Bank whereby debt management responsibilities are shared between the Ministry of Finance and the Central Bank of Kenya. The middle office functions are now expected to reside within the Ministry of Finance for driving the policy support work related to public debt management. To strengthen its middle office related functions on debt and risk analysis and policy support, the Ministry of Finance in Kenya requested assistance from the Commonwealth Secretariat for defining the day to day roles and operations of the middle office. Following a mission to Nairobi in November 2010 by a team from the Secretariat, a detailed report was submitted to the Government with a clear and welldefined list of comprehensive tasks for middle office covering public debt management, on-lending operations and issuance of guarantees. The recommendations were made after undertaking a gap analysis between the current activities being carried out by the Debt Ministry of Finance Officials from Kenya Management Department and a conventional debt management office, particularly focussing on middle office functions and its interfaces with the front and back offices and other units/agencies. With the roles, responsibilities and functions of the middle office clearly defined and set out, it is expected that this central unit will strengthen its analytical foundations and play an active role on shaping core policies for prudent management of public debt, contingent liabilities like issuance of guarantees and on-lending operations of the government. Page 4

5 Policy Advisory Support Enabling Institutional Reforms in Botswana and Mauritius Faced with sub-optimal institutional structures and arrangements related to public debt management, many countries are currently undertaking reforms to strengthen the institutional framework for debt management. With the global economic crisis significantly impacting the public finances in Botswana and Mauritius, growing emphasis is being accorded to public debt management as part of adopting sound macroeconomic policies. In contrast to its earlier record of low levels of government borrowings, Botswana is now faced with the prospect of significantly growing borrowing requirement in the medium term thereby necessitating a sound institutional framework to manage the rising debt liabilities of the government. Mauritius, on the other hand witnessed its public sector debt levels exceed the permissible limits of 60 per cent of GDP in This necessitated amendment in Public Debt Management Act as many of the original provisions lost relevance in the new context. Faced with challenges of fiscal consolidation and putting in place a debt management strategy that would guide it towards achieving its fiscal objectives and reduce its exposure to further economic shocks, the Government of Mauritius considered it appropriate and timely to review the institutional arrangements on public sector debt management, especially after it transferred much of its debt management responsibilities in 2008 to its central bank. Both Botswana and Mauritius have recognised the need for better informed borrowing decisions and clearer responsibilities and lines of accountability leading to institutional rearrangements. Following requests for assistance from the governments of Botswana and Mauritius, two separate missions from the Secretariat held consultation with a number of stakeholders related to public debt management. The DMS team and Government of Botswana Officials Following this, the Secretariat submitted to the two countries its recommendations through diagnostic reports for institutional reforms. The recommendations contain a clear road map and follow up assistance to implement the recommended reforms. Both countries have accepted the recommendations and initiated measures to reform their institutional framework. The objectives of such reforms are to modernise public debt management operations by strengthening interface/coordination between debt management and other macroeconomic policies including fiscal and monetary policy; develop a strong legal framework for public debt management; establish sound governance arrangements; put in place a streamlined institutional structure seeking to consolidate debt management activities with clear roles and responsibilities; and finally to have the modern functional capabilities and structures required for public debt management. So far, Botswana, Jamaica, Maldives and Mauritius have benefited from such advisory support to strengthen their wide ranging institutional arrangements. Geographical Distribution of Assistance on Debt Management Training Debt Data Quality Consultation for Assistance Policy Advisory Assistance CS-DRMS Interface with FMIS Debt Management Bulletin Page 5

6 Policy Advisory Support D E B T M A N A G E M E N T S E C T I O N Restructuring the Debt Management Unit in Jamaica Building on a recent assistance provided by the Secretariat through its policy advisory support recommending institutional reforms on public debt management, the Ministry of Finance and Public Services in Jamaica agreed to carry through the recommendations by focusing on the internal organisational structure of the Debt Management Unit (DMU). Following a mission undertaken by the Secretariat in December 2010, an advisory report for reorganising the DMU was submitted to the Government. The report provided detailed terms of reference for the new DMU and its proposed organogram; a comprehensive plan to help establish the front, middle and back offices, with assigned responsibilities and functions for each office; a delivery plan for each office taking into account the Ministry s timeline to establish the new DMU. For this purpose, high level objectives and minimum requirements for each post within the DMU were specified. The advisory report also sets out training programmes required to strengthen the new DMU. (Hon ble Audley Shaw, Minister of Finance and Public Services, Jamaica; Kamalesh Sharma, Commonwealth-Secretary General; and Arindam Roy, Head of Debt Management Section, Commonwealth Secretariat) The newly recommended set up of the debt office will enable Jamaica to undertake many of its debt management operations in a strategic manner in accordance with best practices adopted by leading debt offices globally. During the last two years, as part of the Secretariat s comprehensive package of assistance aimed at strengthening debt management functions within a strategic framework, Jamaica has been implementing a series of reforms on a number of areas related to debt management (see Box Below). Supporting Comprehensive Debt Management Reforms in Jamaica With deteriorating global economic environment, Jamaica faced a debt crisis in 2009 burdened with public debt exceeding one and a half times its national income. Against this backdrop, Jamaica has benefited comprehensively from the Secretariat s policy advisory support in a number of areas to reform and strengthen its debt management framework. At one level, the Secretariat assisted Jamaica to formulate a unified legal framework on public debt management conforming to best practices and Jamaica s legal structure thereby replacing more than 30 separate pieces of earlier legislations related to public debt. Based on this legal framework, Jamaica has now drafted a Public Debt Management Bill for enactment in its Parliament. Following three advisory missions by the Secretariat on institutional arrangements related to debt management, Jamaica is now implementing a reorganisation of their debt office along modern lines into functional front, middle and back office units complemented with new staffing structures. The institutional reorganisation also seeks to strengthen the institutional arrangements and governance framework for public debt management based on international sound practices. Finally, the Secretariat in partnership with the IMF and World Bank assisted Jamaica to develop a medium-term debt management strategy (MTDS) within a risk management framework. The debt management strategy has now been formally adopted by the authorities and will guide future borrowing decisions of the government to minimise their long-term debt service cost. Earlier in 2010, Jamaica successfully completed a voluntary debt exchange programme as part of a comprehensive debt restructuring programme. With such wide ranging reforms, Jamaica is now suitably poised to undertake debt management operations within a strategic framework based on prudent considerations to ensure future long-term debt sustainability. All these reforms on public debt management also ensured that Jamaica received timely financial aid and loan packages from a number of bilateral and multilateral donors to tide over the liquidity crisis from maturing debt service obligations. Page 6

7 Policy Advisory Support Commonwealth Secretariat partners with IMF and World Bank to assist Ghana update its Medium-term Debt Management Strategy In view of the significantly changed macroeconomic and financial market scenario in Ghana mainly due to the on-going global economic crisis, it was imperative to review the earlier MTDS formulated by Ghana. Another factor that prompted the review was the recent graduation of Ghana as a middle income country with implications for its access to concessional external finance. The need for an updated MTDS was also in line with the structural benchmarks under the IMF Extended Credit Facility for Ghana. In 2008, with assistance from the IMF, World Bank and the Secretariat, as a pilot country, Ghana formulated and adopted its maiden medium-term debt management strategy (MTDS). The MTDS provides a framework for formulating and implementing a debt management strategy for the medium term. It primarily focuses on determining the appropriate composition of the debt portfolio, and hence of future borrowings by taking into account future macroeconomic and market environment. A MTDS exercise illustrates the government s cost and risk trade-offs associated with alternative debt management strategies and for managing the risk exposure embedded in a debt portfolio, in particular the potential variation in debt servicing costs and its consequent budgetary impact. For this purpose, the IMF-World Bank has jointly developed a MTDS framework supported by a MTDS toolkit which was used for formulating MTDS in Ghana. At the request of the Minister for Finance of Ghana, the Commonwealth Secretariat accompanied a joint IMF-World Bank team along with West African Institute for Financial and Economic Management (WAIFEM) to provide technical assistance for a review of its MTDS. The team worked with the authorities to analyse the cost and risk implications of a range of debt strategies under a set of agreed assumptions on the macroeconomic environment and a set of market risk scenarios and sensitivity analysis of the preferred strategy. The mix of borrowing was also reviewed to assess the feasibility of implementation and the potential consequences for the development of the domestic debt market. Following a revision of the baseline macroeconomic assumptions by the authorities, an updated MTDS will be formally adopted by Ghana and published. The assistance also ensured that Ghana will be able to undertake this crucial activity on a self-sufficient manner with significant strengthening of its middle office related analytical capabilities. Growing Number of Member Countries Adopt Formal Medium-term Debt Management Strategies Following assistance from the Secretariat in collaboration with the IMF and World Bank, four member countries (Ghana, Kenya, The Gambia and Jamaica) adopted a formal Medium-term Debt Management Strategy in recent times. Page 7

8 A Snapshot of Debt Management Programme in Focusing on Outcomes Moving to a Results Based Approach: In tune with the Secretariat s move to a strategic plan hinged on a Results Based Management policy, the debt management programme (DMP) of the Secretariat has been geared to achieve tangible outcomes at the country level. The strategy for providing assistance to member countries now has discreet inter-linkages drawn up between the DMP s three main instruments of work on, (i) policy advisory support, (ii) capacity building, and (iii) support on debt data and statistics through the use of the Commonwealth Secretariat Debt Recording and Management System (CS-DRMS). Through this new approach, assistance to a member country is appropriately calibrated and sequenced with clear roadmap targets to better assess the performance and progress of a country. This is done in close collaboration with the member country to ensure ownership of the intervention. Sequencing Assistance with Country Progress: The DMP is designed to ensure that countries demonstrate achievements of their end results arising out of any particular intervention, before qualifying for assistance on other aspects of debt management. In specific cases, if required, follow up assistance is provided to a country to realise the end objective in a specific intervention. Assistance to a member country is now sequenced to advance the strengthening of debt management capacity. It starts from establishing an integrated and good quality debt database in CS-DRMS; and gradually moves up to dissemination of public debt statistics through bulletins; analytical evaluation of the debt portfolio; and enhancing debt management operations through effective use of CS- DRMS. At the same time, targeted assistance on policy advisory support continues to support the reforms in public debt management. Understanding the Needs on Assistance: Following requests for debt management assistance, a comprehensive plan of assistance was formulated during this year for six countries on sovereign debt management (Malawi, Mauritius, Nigeria, Sri Lanka, South Africa and Trinidad and Tobago) and on sub-national debt management in India. The design of such demand-led assistance takes into account possible assistance from other international organisations. At the same time, to have a better perspective on the medium-term demand for assistance from member countries, a detailed survey exercise was undertaken this year with response received from 25 member countries. The survey response will serve as a crucial input for shaping the future delivery of assistance under the Secretariat s DMP. Strengthening Policies as a Response to the Global Economic Crisis: The global economic crisis has posed diverse challenges on sovereign debt management for developing countries. Faced with the need to accord greater priority to strengthen the debt management framework, the DMP faced strong demand for assistance on policy advisory support from member countries on institutional arrangements, legal f r a m e w o r k, f o r m u l a t i o n a n d implementation of debt strategy and development of debt market. Against trying times, the DMP provided salient, sound and strategic advice to five member countries (Botswana, Ghana, Jamaica, Kenya and Mauritius) to ensure that debt is managed prudently and proactively, within a sound, robust and strategic framework. The provision of demand-led advisory support has been evenly keeled on both upstream areas through effective coordination with other developmental partners like IMF and World Bank to achieve better synergies, and also in downstream activities to hand hold countries during the actual implementation of reforms. Commonwealth Secretariat s Debt Management Programme For over a quarter of a century, the Secretariat s debt management programme (DMP) funded from the Commonwealth Fund for Technical Cooperation (CFTC) has focussed on the needs of its member countries. Assistance to member countries is provided free of charge. At the heart of the programme is assistance through its globally renowned software Commonwealth Secretariat - Debt Recording and Management System, (CS-DRMS), developed and maintained in-house at the Secretariat. The CS-DRMS is used in 60 countries globally. Another debt system, Commonwealth Secretariat Securities Auctioning System (CS-SAS) supports the auctioning of Government securities. Closely on the heels of the outbreak of the global economic crisis, responding to member country needs, the programme has expanded now to include advisory support to strengthen institutional arrangements, legal framework, and strategies for strengthening debt management functions and policies. At the same time, the third instrument of assistance relating to capacity building on debt management was broadened and deepened to ensure local capacity on sound debt management practices develops at a fast pace in the member countries. Recent Evaluations Validate the Effectiveness of Debt Management Programme As part of an independent evaluation of its work within the Secretariat, the UK based Oxford Policy Management (OPM) recently completed a strategic evaluation of the Secretariat s Debt Management Programme. The results of the evaluation indicate that the debt management programme is highly regarded by its client countries and scores highly for relevance, effectiveness, efficiency and sustainability. On a related note, as part of a wider review of international organisations providing multilateral aid, the UK Government s Department for Institutional Development (DFID) recently completed its evaluation of the development programme of the Commonwealth Secretariat. In its evaluation, DFID noted the recent evaluation of debt management programme has shown effective delivery for contributing to results. Page 8

9 A Snapshot of Debt Management Programme in Focusing on Outcomes Creating a Niche on Debt Bulletins: As part of our new initiative to improve transparency on public debt management, three member countries (Dominica, Lesotho and Seychelles) were assisted during this year to develop debt bulletins. One of the major gaps observed in developing countries is the lack of availability of comprehensive analytical information on their public debt portfolio and also on their debt operations. This niche initiative aims to blend building analytical and reporting capabilities in debt offices and also to leverage the use of debt database in CS- DRMS. Consolidating the Base: A good quality and complete debt database serves as the core foundation to facilitate efficient and effective debt management operations. Four countries (Barbados, Cameroon, Guyana, and Tanzania) received assistance for enhancing the quality of external debt data through debt data validation and an in-depth review of the use of CS-DRMS for better supporting debt management operations. To achieve an integrated public debt database in the same system, four countries (Botswana, Maldives, Nigeria and Sri Lanka ) were assisted for building domestic debt database in CS-DRMS by interfacing the CS-DRMS with their central bank s depository system. For supporting the auctioning process of government securities in their primary markets, the Commonwealth Secretariat - Securities Auctioning System (CS-SAS) was installed in the central banks of 3 member countries (Guyana, Samoa and Solomon Islands). Bringing efficiency in Public Financial Management: To make public financial management accounting and reporting more efficient, two countries (Barbados and Botswana) were assisted to interface the debt database in CS- DRMS with their government Integrated Financial Management Information System (IFMIS). Leveraging Capacity Building through Partnerships: On the capacity building front, the Secretariat provided hands-on training to diverse profiles of debt officials in various areas of debt management. Overall, four regional workshops were organised during this reporting period, all in collaboration with our strategic partners from r e g i o n a l a n d i n t e r n a t i o n a l organisations. At the same time, 7 countries (Barbados, Cameroon, The Gambia, India, Kenya, Maldives and Mauritius) benefited from in-country trainings on debt management. Overall, more than 250 debt managers were trained in diverse areas of debt management. Adopting Innovative Approaches in Capacity Building: To make the capacity building element of the DMP more sustainable, accessible, broadbased and cost effective, during the year, a new innovative E-learning programme was successfully launched. Over 60 debt managers were trained on the use of CS-DRMS for managing external debt. Following this, 20 star performers were provided face-to-face training on advanced aspects of CS- DRMS. The program has been devised in collaboration with the Vancouver based Commonwealth of Learning and will be widened to other aspects of debt management. Key Achievements in Jamaica is reforming its debt management structure to support sound debt management practices through the adoption of a new Public Debt Act and by setting up a debt unit under modern lines. The Gambia, Ghana, Jamaica and Kenya adopt a medium-term debt management strategy to guide its future borrowings in a prudent manner. Sierra Leone publishes an annual debt bulletin providing comprehensive information on the debt portfolio and debt operations. Kenya, Mauritius and Sri Lanka develop comprehensive public debt database in CS-DRMS to better support their debt management operations. Three Indian states build a comprehensive database on their debt liabilities in CS-DRMS as part of strengthening sub-national debt management. The Secretariat publishes a Guidance Note on Legal Framework for Government Debt Management. The Secretariat in collaboration with USAID publishes a primer document on Developing Government Bond Markets. Page 9

10 Building Capacity in Debt Management Improving Audit of Public Debt Operations in Countries The International Organisation of Supreme Audit Institutions (INTOSAI) operates as an umbrella organisation for the external government audit community providing guidance on an institutionalised framework for supreme audit institutions to promote development and transfer of knowledge, improve government auditing worldwide and enhance professional capacities, standing and influence of member SAIs in their respective countries. Audit of public debt operations is considered to be an integral part of governance process reflecting sound debt management practice. Typically, the supreme audit agencies within any country are responsible for undertaking audit of public debt operations. INTOSAI Development Initiative (IDI) embarked on a public debt management audit (PDMA) programme for to build capacity and train public sector auditors to effectively conduct an audit of public debt data and procedures in their respective countries. In 2010, IDI sought the participation of Commonwealth Secretariat in the PDMA programme in recognition to the work that the Secretariat undertakes on debt management. The first involvement of the Secretariat in the PDMA programme was through a meeting in Kenya organized by IDI to draft matrixes, objectives and reporting templates for public debt audit. In March 2011, IDI in collaboration with the Commonwealth Secretariat and UNCTAD organised a regional meeting in Zambia as a follow up of their previous Participants in the Joint INTOSAI, COMSEC and UNCTAD Training Workshop for Auditors held in Lusaka, Zambia work. The main objective of the meeting was to review the draft audit reports and train participants on how they can use CS-DRMS to facilitate and meet the requirements of public audits. Officials from supreme audit institutions in Kenya, Malawi and Liberia were specifically trained on the use of CS-DRMS for supporting auditing functions related to public debt management. The Gambia Acquires Technical Capacity to Conduct Debt Sustainability Assessment The on-going global economic crisis and economic uncertainty has underscored the need for developing countries to navigate t h e i r e c o n o m y particularly with a view to safeguard debt sustainability. The Gambia, with a public sector debt at 54 per cent of GDP and external debt at 34 per cent of GDP is considered to be at high risk of debt distress based on a debt sustainability analysis jointly conducted by the IMF and World Bank. Toward this objective, through an in-country workshop in Banjul, the Secretariat provided hands-on training to 19 officials drawn from the Ministry of Finance, Central Bank of Gambia, Ministry of Economic Policy, Office of the President and The Gambia Bureau of Statistics on the Debt Sustainability Assessment (DSA) Framework and on the application of the DSA template for the Low Income Countries developed by the IMF and World Bank. At the end of the workshop, the participants were able to run a home grown DSA based on their macroeconomic analysis. The various central agencies in The Gambia have now developed the technical expertise required to conduct DSA analysis on a regular and sustainable basis without reliance on external assistance. While the Gambian authorities have initiated policy measures aimed at fiscal consolidation and external debt sustainability, there is also a need to keep a continued vigil on the sustainability position by the authorities. Page 10

11 Building Capacity in Debt Management More than 250 Debt Managers Trained in Debt Management During this year, debt officials were trained on the use of CS- DRMS for debt data recording, compilation, and reporting through two regional and five in-country training workshops. The regional workshops were held in close partnership with the regional organisations. A regional workshop for debt management officials from the South and East African member countries on debt data compilation, reporting and analysis was held in Nairobi, Kenya in close partnership with the Macroeconomic and Financial Management Institute (MEFMI). Another regional workshop targeted at IT officials supporting the CS-DRMS was held in St. Kitts in partnership with the Eastern Caribbean Central Bank (ECCB). In addition, two regional workshops were organized in collaboration with IMF and WAIFEM on developing debt bulletins. Through four in-country trainings, debt officials from Barbados, Cameroon, Kenya and Mauritius were comprehensively trained on the compilation and reporting of central government debt statistics through the use of CS-DRMS. A sub-national debt workshop in India trained officials from four states on the compilation of debt data in CS-DRMS. To make the capacity building process on the use of CS-DRMS more broad-based, readily accessible and deep rooted, a new initiative of e-learning programme was launched (see article below). Overall, as part of our capacity building programme, more than 250 debt managers were trained on various aspects of debt management. Secretariat s New Initiative on E-learning Boosts Capacity Building While formally launching the programme, the Director of Special Advisory Services Division at the Secretariat, José Maurel, said: This is an important component of the debt management programme as our focus is always on the transfer of skills to debt officials in Commonwealth countries so they can effectively and sustainably manage their country s debt. The Commonwealth Secretariat by leveraging the power of technology has launched an e- learning programme to intensify its efforts to help officials manage sovereign debt. The formal launch of the e-learning programme on debt management took place at the end of the Secretariat s second biennial Stakeholders Conference on Debt Management at its headquarters in London on 1 April This maiden e-learning initiative allows debt officials to complete online courses on debt management and the use of the Commonwealth Secretariat Debt Recording and Management System, (CS-DRMS). This project was developed in close collaboration with the Commonwealth of Learning, (CoL) in Vancouver, Canada. The e-learning programme will gradually be widened to cover other aspects of debt management through courses in CS-DRMS and also analytical aspects of debt management. Since the inception of CS-DRMS over 25 years ago, the Secretariat has provided regular face -to-face training, workshops and seminars on debt management, but with the launch of the e- learning project it hopes to eventually have a full range of online tools and courses available to enhance the capacity in debt management. Under the elearning training initiative, 75 debt management professionals from 29 countries were trained through two separate cohorts with 88 per cent of learners successfully completing the course. Noting the high completion rate of the maiden programme, Angela Kwan, Learning Manager, Commonwealth of Learning, hailed the project as a success. Following the completion of the two cohort training programme through E-learning, the Secretariat brought together 24 star learners from 21 countries to attend the first face-2-face advanced CS-DRMS training for e-learners in London. The workshop covered advanced features of CS-DRMS and debt management concepts thereby contributing to rapid skill accumulation for participants on debt management through the application of CS-DRMS. Participants at the E-learning follow up training in London Page 11

12 Establishing Good Quality Debt Database Improving Debt Data Quality Through Data Audit and Validation Exercise Line Enanga official from Cameroon during the CS-DRMS data validation Training in Cameroon To ensure effective use of CS-DRMS for developing and maintaining a good quality debt database, CS- DRMS is supported in member countries by regular needs assessment missions, debt data validation, hotline support and remote assistance. This is equally complemented by capacity building instruments involving comprehensive and hands-on user training for debt data compilers as well as IT officials who administer the software nationally. Experiencing a slippage in external debt data quality, comprehensive debt data audit was undertaken during this year in Barbados, Cameroon and Guyana. The audit exercise identified the data problems and shortcomings associated with deteriorating debt data quality in the individual countries and recommended a comprehensive plan to correct them. At the same time, an indepth and hands-on training on the use of CS-DRMS and external debt data compilation was provided to debt officials from these countries to maintain good quality data on a sustainable basis. While the external debt data was validated through a separate assistance in Cameroon, debt data validation will be shortly undertaken in other countries. Establishing an Integrated Public Debt Database Reflecting shared responsibilities for debt management, debt database in most developing countries are split between the Ministry of Finance and central bank with the institutions owning external and domestic debt database respectively. Nonavailability of an integrated public debt database has therefore impeded the scope of a debt office to undertake comprehensive debt analysis based on the entire debt portfolio to aid policy formulation as well to report on them. The increasing reliance on domestic debt witnessed over the last decade across all member countries prompted increasing emphasis to support countries record domestic debt data in CS -DRMS. Many a times this has been achieved by interfacing the CS-DRMS with the auctioning or depository system used by the central bank for issuance of domestic debt securities. With external debt already residing in the CS-DRMS, development of domestic debt data will ensure availability of a comprehensive and integrated public debt database in the same system to support effective debt management operations. During this year, the Secretariat assisted Mauritius to successfully implement uploading of domestic debt data from their central bank system to CS-DRMS. At the same time, review missions were undertaken in Botswana, Maldives, Nigeria and Sri Lanka to move towards building an integrated public debt database. So far, through this assistance, Kenya, Mauritius and Sri Lanka have developed a comprehensive debt database in CS-DRMS. Commonwealth Secretariat Debt Management Systems as Tools of Excellence The Secretariat's Debt Recording and Management System (CS -DRMS) entered its 26th year in Its reputation continues to be enhanced by its innovative, flexible and sophisticated software development, and ability to respond to countries requirements, international best standards, evolving debt management practices, financial market innovations and technological advancements. The system has been installed in 60 countries including 45 Commonwealth members and three G-20 countries. The latest country to install the system was Liberia in 2010 (see page 16 for list of countries). Over the years, the use of CS-DRMS has broadened beyond central government debt management to sub-national debt management as well as private sector external debt management. The system is used to manage more than US$ 2.5 trillion US dollar of global public debt. A new version of the system was released in October The major enhancements include making available a rich suite of reports on on-lending operations, providing reporting bridges to facilitate application of the IMF-World Bank s Debt Sustainability Assessment (DSA) based on both Low Income Country and Market Access Country Templates; and providing in-built reports as part of reporting on private sector external debt related to the World Bank s Debtor Reporting System. Page 12

13 Establishing Good Quality Database Commonwealth Secretariat Debt Management Systems as Tools of Excellence As part of the Secretariat s debt management solutions, Commonwealth Secretariat Securities Auctioning System (CS- SAS) developed recently is a tool to support primary market issuance of Government securities through auctions. The CS- SAS has been installed this year in the central banks of Guyana, Samoa and Solomon Islands. In another new initiative, the Secretariat has embarked upon the development of a new tool the Public Debt Analytical Tool (PDAT) as a decision support system to formulate and implement debt strategy within a risk management framework. PDAT, a specialised tool to support middle and front office functions will assist debt managers to better inform on borrowing strategies, integrate cash and debt management, develop an annual borrowing plan including an issuance calendar, and also assess impact of liability management operations. During this year a prototype of PDAT was presented to several debt experts. Consultations were also held with the IMF and World Bank on the development of PDAT. The final development of PDAT will include the useful feedback obtained from various stakeholders and is expected to be released for the use of client countries during the middle of Three States in India Develop Sub-national Debt Database in CS-DRMS Sub-national debt management is considered to be an integral part of public financial management of a country. Large scale unsustainable debt of the sub-nationals can pose a threat to the centre s fiscal sustainability. This can also impair the financial stability of a country. With growing fiscal decentralisation, debt of the sub-national entities like states and local governments has increased significantly in the last decade. However, for many sub-nationals, the basic foundation of having in place a robust debt database in a computerised system is not in place which greatly impedes prudent management of such liabilities. In India, the total sub-national debt in 2011 constituted a quarter of its national GDP. To put the state finances on a sound footing, during the last decade the central government initiated a number of incentives-based reform measures for the states to undertake Medium-Term Fiscal Reforms Programme (MTFRP) for fiscal consolidation. In conjunction with the objective of attaining fiscal consolidation and debt sustainability, the states were also encouraged to better manage their debt liabilities by instituting appropriate foundations and structures for effective debt management. Towards this objective, the Secretariat has been assisting few states in India on a pilot basis in recent years to strengthen sub-national debt management by establishing a robust debt database in CS-DRMS. This work has been supported by the Ministry of Finance, Government of India. So far, 7 states (out of the 28 states & 7 Union territories) in India are using CS-DRMS for supporting their debt management. Following assistance during this year, three states in India; viz., Andhra Pradesh, Karnataka and Maharashtra have now established a comprehensive database in the CS -DRMS on their debt liabilities. Two more states, Assam and Uttarakhand are also at an advanced stage of completing their database. For few states, database on guarantees and lending operations have also been developed in CS-DRMS. To ensure that debt data quality is durable, effectively utilized and consistent across states, the Secretariat in partnership with the Government of Andhra Pradesh further provided advanced hands-on training on the use of CS-DRMS to 15 officials from the states of Andhra Pradesh, Karnataka and Maharashtra. With this achievement, these states will now be in a position to administer their debt operations more effectively, efficiently and swiftly. It will also be able to leverage the database to undertake wider analysis of the debt portfolio for future management. India will be the first emerging market country to establish a computerised subnational debt database in a comprehensive manner. Status of States in Building Debt Database in CS-DRMS Completed Andhra Pradesh, Karnataka, Maharashtra. In another related initiative, the Secretariat in partnership with the UK based Crown Agents is assisting the provincial governments in Nigeria to develop its sub-national debt database in CS-DRMS. Three states in Nigeria have adopted CS-DRMS. On-going Assam, Jharkhand, Madhya Pradesh, Uttarakhand. Page 13

14 Dissemination of Best Practices D E B T M A N A G E M E N T S E C T I O N New Initiative on Debt Bulletin Gains Momentum to Enhance Dissemination countries based on information available within CS-DRMS and other sources. Benefiting from recent assistance, Sierra Leone has now produced a public debt bulletin and made it available in public Participants at the Debt Bulletin Workshop in Singapore One of the major gaps observed in developing countries is the lack of availability of comprehensive information on their public debt portfolio and also on their debt operations. At the same time there is a growing need for debt managers to regularly review and analyse public debt portfolios. As part of our new initiative to improve transparency on public debt management and strengthen analytical functions, targeted assistance is being provided to countries through country missions which are advisory in nature and supported through hands-on training on key concepts and analytics for developing public debt bulletins. DMS Staff and Officials from Ministry of Finance, Seychelles domain. It is expected, through this initiative, a growing number of countries will shortly produce their public debt bulletin making them publicly available. Building on a template developed by the Secretariat for comprehensive reporting on public debt portfolio and debt management operations, the Secretariat is now actively promoting the development of public debt bulletin by countries. For this purpose, much of the required information in the template can be readily accessed through standard reports made available within CS-DRMS. The Secretariat s initiative on developing debt bulletin in countries also seeks to capitalise on its renewed focus in member countries to develop a comprehensive public debt database by building domestic and external debt within a single database in CS-DRMS. This work further complements the recent initiatives of the IMF-led Inter-Agency Task Force on Finance Statistics through the publication of a draft Public Sector Debt Statistics Guide for compilation and reporting of public sector debt statistics. It also supports the World Bank led initiative of developing a Public Sector Debt Database based on standard reporting templates for cross-country comparison. During this year, three member countries (Dominica, Lesotho and Seychelles) were assisted to develop debt bulletins. Following this assistance, draft bulletins were prepared for these As part of broader capacity building process, the Secretariat also organised two regional workshops in Sierra Leone for the West Africa region in partnership with the West Africa Institute for Financial and Economic Management (WAIFEM) and in Singapore for the Asian region in partnership with the IMF. Through these events, over 50 debt officials were trained on the preparation of debt bulletin. Page 14

15 Dissemination of Best Practices Promoting Best Standards on Compilation and Dissemination of Debt Statistics As a member of the Inter-Agency Task Force on Finance Statistics (TFFS) led by the IMF, the Secretariat supports various international initiatives on best standards of debt data compilation, reporting and dissemination. During this year, the Secretariat hosted the meeting of the TFFS at its headquarters in London. As part of charting out best international standards for debt statistics compilation, two important international initiatives were launched. The draft Public Sector Debt Statistics Guide prepared under the aegis of the TFFS is a guide that documents best international standards for the compilation and dissemination of the broader public sector debt statistics. The Secretariat along with other members contributed to the preparation of the Guide. Specifically, the Guide recommends the recognition of debt liability, coverage of debt instruments, accounting and valuation principles, classification of debt instruments and institutional sector and presentation of debt statistics through reporting templates. Commonwealth Deputy Secretary-General, Ransford Smith in his opening remarks urged the TFFS to take up the issue of private sector debt in its future work program. The recent debt crisis has emphasized the importance of debt statistics of public enterprises and private sector debt liabilities. The Guide on Public Sector Debt Statistics builds upon the External Debt Statistics Guide which was brought out by the TFFS in As part of building capacity on compilation and reporting of debt statistics based on the recommendations of the two debt statistics Guides, the Secretariat partnered with Macroeconomic and Financial Management Institute (MEFMI) and IMF to train debt compilers from the East and South Africa region. In another related initiative, The World Bank, as part of the Open Data Initiative has developed a Public Sector Debt Statistics (PSD) database in partnership with the IMF. The database brings together detailed quarterly public sector debt statistics of selected countries, initially mainly developing / emerging market economies. The PSD database is linked to the newly developed Public Sector Debt Statistics Guide. This new database promotes consistency and comparability across countries by standardizing the treatment of public sector debt. The main purpose of the PSD database is to facilitate timely dissemination in standard formats of public sector debt data. The Secretariat s Publications Disseminate Sound Practices in Debt Management Legal framework is one of the core components influencing prudent debt management. Good legislation promotes good governance, provides strategic direction to borrowing decisions and defines and clarifies roles and responsibilities. This guidance note on legal framework seeks to reform public debt management in countries. Local debt markets in many developing countries are shallow and subject to many market distortions raising the risk and cost of government borrowing. This primer developed in collaboration with USAID is designed to support countries in the development of a deep, liquid, and vibrant government securities market to ensure sustainable finance. Page 15

16 C O M M O N W E A L T H S E C R E T A R I A T Debt Management Section The Commonwealth is a voluntary association of 54 countries that support each other and work together towards shared goals in democracy and development. For details log into: OUR WORK ON DEBT MANAGEMENT Debt Management Section Special Advisory Services Division Commonwealth Secretariat Marlborough House Pall Mall London SW1Y 5HX : +44 (0) : +44 (0) : : [email protected] Our Partners - Crown Agents - The IMF - The World Bank - Eastern Caribbean Central Bank - WAIFEM - MEFMI - Organisation Internationale de la Francophonie (OIF) - USAID This year, we bid farewell to John-Paul Fanning, Brian Taylor, Andrew Hargreaves and Dipti Mathur. Sanjay Kumar joined the team in November The DMS team is: Arindam Roy (Head) Walton Gilpin (Adviser) Sanjay Kumar (Adviser) Carilus Odumbe (Adviser) Miriam Tamene (Economist) Policy Advisory Support to Implement Debt Management Reforms Support through our Debt Management Products CS-DRMS CS-SAS Capacity Building CS-RMS USER COUNTRIES The Commonwealth Secretariat Debt Recording and Management System (CS-DRMS), available in both English and French versions, is currently deployed in 60 countries within as well as outside the Commonwealth countries. The software is licensed free of charge to Commonwealth countries and as part of a collaboration agreement with l Organisation Internationale de la Francophonie (OIF), member countries of OIF also get the software free. Other countries purchase the software through Crown Agents, an official distributor of CS- DRMS outside the Commonwealth countries. South and East Africa (12) Botswana, Comoros (French), Kenya, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, United Republic of Tanzania South Pacific (8) Cook Islands, Fiji Islands, Nauru, Papua New Guinea, Samoa, Solomon Islands, Tonga, Vanuatu Asia (9) Afghanistan, Bhutan, China, India, Laos PDR, Maldives, Nepal, Sri Lanka, Thailand West and Central Africa (13) Republic of Benin (French), Cameroon (French), Cape Verde, Equatorial Guinea (French), The Gambia, Ghana, Guinea Conakry (French), Liberia, Mali (French), Niger (French), Nigeria, Sao Tome (French), Sierra Leone Caribbean (16) Anguilla, Antigua and Barbuda, The Bahamas, Barbados, Belize, British Virgin Islands, Cayman Islands, Dominica, Grenada, Guyana, Jamaica, Montserrat, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname Europe (2) Kosovo, Malta CS-DRMS User countries: Geographical Distribution Systems Development Sanjay Lollbeharree (Team Leader) Mac Banda (Business Analyst) Nick Cusk (Systems Development Officer) Alain Fofeh (Systems Development Officer) Vikas Pandey (Systems Development Officer) Kieran Smart (Programmer) Mohammed Zamir (Programmer) Damodar Thejaswee (Tester) In 2010, Liberia became the 60th country to use CS-DRMS.