Welcome to the PDM Practice web site

Welcome to the Public Debt Management Practice (PDM Practice) web site – the site for debt management professionals!

Although the importance of debt management has been recognized for centuries – the first “independent” debt management office was created in Sweden in 1789 and the creation of the Bank of England (which also has its origins in the management of debt) was setup even earlier in 1694 – it is surprising that PDM is still not recognized as a discipline and a profession in its own right. As of now, there is no professional body of public debt managers (as we have for say accountants) and one cannot study for an accredited degree in public debt management.

Perhaps the reason lies in the multi-disciplinary nature of public debt management, which encompasses elements from economics, finance, law, IT etc. However, it is a situation that we think needs to change. It is often mentioned that public debt is one of the biggest financial portfolio of a country. Public debt managers will be aware of the complexity of this portfolio in terms of the different types of debt instruments that it is comprised of, its currency composition, interest rate structure etc. and the associated risks that this entails. The socio-economic consequences of poor debt management hardly need to be reiterated.

In addition to our core objective of developing governments’ capacity for managing public debt by offering high quality and affordable consultancy services as well as training, PDM Practice would like to contribute towards the recognition of debt management as a discipline and a profession. A tall order you might think but one which we think is not impossible to achieve if debt managers themselves start realizing the importance of their work and other organisations involved in public debt management the idea.

PDM Practice’s own contribution will take three forms:

First, we will advocate for better recognition of debt management professionals. We chose to call ourselves “a Practice” for the word means “actively pursue or be engaged in a particular profession or occupation”. But more importantly though, we intend to start a discussion on the issue in various forums of interest to public debt managers.

Secondly, we have for some time been looking for a partner academic institution to offer an Executive Master in Public Debt Management. This project is on-going and we have met and discussed with a number of universities as to what form and shape such a course could take. You can find out more on the project’s dedicated web site at: http://josemaurel.wix.com/empdm.

Thirdly, in time, we will be offering a set of resources through this web site which we hope, will be useful to debt managers. More on this later.

We hope you will enjoy this new web site on public debt management. Please email us your views and suggestions.

World Bank’s e-Institute to offer on-line DeMPA course

The World Bank’s e-Institute is to offer the Debt Management Performance Assessment (DeMPA) course online. The course will run from 20 October to 7 November 2014.  This e-learning course is to assist participants address debt management capacity challenges by equipping them with knowledge on comprehensive debt management functions through the application of the DeMPA tool.

The DeMPA tool provides a set of indicators for comprehensively assessing debt management performance in developing countries. The debt management performance indicators (DPIs) span core areas of public debt management, covering:

  • Governance and strategy development
  • Coordination with macroeconomic policies
  • Borrowing and related financing activities
  • Cash flow forecasting and cash balance management
  • Operational risk management
  • Debt records and reporting

Based on the Public Expenditure and Financial Accountability (PEFA) methodology for public financial management and sound practices in government debt management, the indicators represent an internationally recognized and comprehensive methodology for assessing debt management performance in relation to country peers and monitoring progress over time. The indicators are useful to guide the design of reform programs, monitor debt management performance over time, and enhance donor harmonization.

According to the e-Institute web site, the objectives of the course is for the participants to:

  • Understand the scope, coverage and rationale behind the 15 DeMPA DPIs;
  • Be familiar with the DeMPA scoring methodology; Understand inter-linkages between the indicators;
  • Discuss and deliberate on methodology for assessment of DPIs;
  • Be able to use the DeMPA methodology to evaluate and track progress on debt management performance using evidence-based data in their countries.

The course is targeted to debt managers and Central Bank officials dealing with debt management in client countries, technical assistance providers in client countries, as well as World Bank country economists.

The e-Institute was launched as a virtual learning classroom to provide convenient, easy, and reliable access to cutting edge knowledge and communities of practice. More than forty-five e-Learning courses address complex real-world problems in priority areas such as governance, health, cities, climate change, and public private partnerships. Learners also have access to free monthly podcasts and webinars, video success stories, multimedia toolkits, and other resources.

The deadline to register for the October course is 6 October 2014.  However a second course is planned for March 2015. To register please visit the course home page.

 

The year in 2014 – a debt manager’s perspective

2014 was a challenging year for public debt managers as they continued to operate in the aftermath of the 2007-2009 financial crisis from which many countries are still trying to fully recover. Sluggish growth in developed countries continued to have repercussions on low and middle income countries while falling commodity prices, geopolitical unrest and the Ebola epidemic compounded the problems of certain regions. According to the IMF’s World Economic Outlook (October 2014), the global economy grew only by 3.3% in 2014 and the outlook for 2015 is only marginally better – 3.8%. The net effect is likely to be a deterioration in the fiscal balance of many countries which, in turn, is bound to lead to rising debt levels globally.

2014 saw several developments in public debt management as the discipline continues to evolve. The IMF/WB issuance of a revised version of the Guidelines for Public Debt Management in April encapsulates the changes that have taken place over the last decade. The celebration of the twenty years of the Macro Economic and Financial Management Institute (MEFMI), reminded me of the work a core group of international and regional organisations have been doing over this period to develop capacity in PDM. One interesting development highlighted on pdmpractice.org is the launch of e-learning courses in debt sustainability analysis and DeMPA by the IMF and World Bank which we believe is the way forward for the delivery of short specialist courses in PDM.

Countries have also pursued their efforts to strengthen debt management at the national level. Some countries have continued to rationalize institutional arrangements through the setting up debt management entities – including India which has commissioned a new task force to look into the matter. Major preoccupations of debt managers during 2014 included the identification and quantification and reporting of contingent liabilities – including those arising from Public Private Partnerships (PPPs) and cash management within the implementation of public financial management (PFM) reforms.

If Greece was arguably the most talked about country in public debt management circles in 2013, Argentina definitely won this infamous position for 2014. The interpretation of “Pari Passu” – until recently a standard and “boiler plate” clause in commercial loan contracts – by a New York Federal judge took many a financial lawyer by surprise and seemed to pause a potential threat to the future of sovereign restructuring. The Argentinian situation is still unfolding but it has already affected the drafting of Pari Passu clauses for subsequent new bond issuance in quite a few countries. This event has, in our view, reiterated the importance for countries to have strong international as well as local legal teams working in tandem when issuing debt. In spite of the use of Collective Action Clauses (CACs), this episode also points to the absence of an international mechanism to deal with the restructuring of bonds.

Another issue which caught the headlines in 2014, and which is not unrelated to the paragraph above, is that of new bond issues by so-called “frontier economies”. While the need for funding (especially for infrastructure) is justified, some commentators have sounded alarm bells about the risks that such issues could pause.  The need for sound debt sustainability analysis – especially taking into account possible shocks – therefore remains mandatory. Meanwhile many developing countries have also tried to diversify their sources of borrowing through either the development of domestic debt markets or by targeting niche investors through instruments such as diaspora bonds. Developed and emerging countries have also followed suit, as evidenced by the UK DMO’s and Hong Kong’s first Sukuk bond issues.

As 2014 draws to a close, we extend our Greetings of the Season to all debt managers and hope that 2015 will be a successful and rewarding year.

IMF to run Debt Sustainability Analysis (DSA) course on EDX.org

The IMF is to run a five-week course on Debt Sustainability Analysis (DSA) on the immensely popular edX learning platform from 22 October 2014. Although debt management courses have been offered online for some time now, these have been mainly from specialist providers such as UNITAR. The DSA course can therefore be considered a first and a very positive development in debt management training.

Founded by the Massachusetts Institute of Technology and Harvard University in May 2012, edX is what is referred to as a Massive Open Online Course (MOOC) provider and online learning platform. It hosts online university-level courses in a wide range of disciplines to a worldwide audience at no charge. Unlike other MOOC platforms, edX is non-profit and runs on an open-source software. According to Wikipedia, there are currently 56 schools, non-profits, corporations and international organizations that offer or plan to offer courses on the edX website. As of 22 July 2014, edX had more than 2.5 million users taking over 240 courses online – from biology to economics, finance, math, medicine, humanities, law, literature music, statistics and more.

According to the course organisers, the five-week online course aims to provide a comprehensive overview of the debt sustainability analysis (DSA) and medium-term debt management strategy (MTDS) framework adopted by the IMF and the World Bank. Specifically, the course will: (i) introduce the main principles of debt sustainability; (ii) cover recently updated DSA frameworks-both for advanced and emerging markets and for low-income countries-with an emphasis on country data; (iii) present the MTDS framework; and (iv) illustrate debt sustainability analysis under uncertainty.

Earlier this year, The IMF also offered its popular Financial Programming and Policies course on the same platform.

To register, visit the DSA course homepage.

 

IMF/WB issue revised Guidelines for PDM

The IMF and World Bank have issued a revised version of the document “Guidelines for Public Debt Management” (GPDM).  The GPDM was originally issued in March 2001 and an amended version published in December 2003, together with a set of “Accompanying Documents and Selected Case Studies”. This new revision therefore occurs after a decade.

According to the Preface of the 2014 edition:

The main revisions reflect (i) greater clarity on the roles and accountabilities of debt managers and their responsibility for providing pertinent information to fiscal authorities on the amount of debt that can realistically be absorbed by the market; (ii) enhanced communication with investors,  which was considered essential especially during periods of crisis, with pertinent information on debt composition and related risk indicators being periodically provided to minimize uncertainty; (iii) the use of collective action clauses (CACs) in bond contracts for the efficient resolution of sovereign debt restructurings; (iv) a more detailed consideration of risk mitigation strategies, particularly liquidity and refinancing risk, and of contingency plans, including the building of cash buffers; (v) greater emphasis on the use of stress testing, the importance of managing counterparty risk when derivatives are used, and the need to better manage and monitor the risks arising from contingent liabilities; and (vi) the need to enhance the liquidity of the domestic bond market, while impediments that inhibit the development of domestic government bond markets, such as limited diversification of the investor base, should be promptly identified and addressed, as well as the need to consider flexibility in issuance programs, especially in times of crisis.

The new version of the Guidelines can be downloaded from the IMF web site here or from our Resources Page > Library

The Gambia: Finance Ministry forms debt management advisory committee

The Ministry of Finance and Economic Affairs in The Gambia recently launched a Debt Management Advisory Committee (DMAC) tasked with regulating the government’s financing and payment needs at the lowest cost.

The committee’s functions include advising the Finance Ministry on an annual borrowing plan. It is also billed to monitor the implementation of the debt strategy and annual borrowing, while discussing progress on the development of the domestic debt market, risk arising from contingent liabilities and guarantees, as well as any new instruments of debt.

Abdoulie Jallow, permanent secretary at the Ministry of Finance, while launching the committee, acknowledged that the government recognises the challenges posed by the global financial environment and its related risks to the performance of the Gambian economy.

The country’s recent domestic debt challenges, he said, are characterised by high interest cost and high rollover risks, whilst external debt has lower cost and risk largely due to its concessionality.

“Allow me to appraise you on the mandate of the debt management directorate. Amongst others, the directorate is responsible for advice and analysis on matters relating to debt management policy, the status of the debt portfolio, recording and reporting of debt data, debt service forecast and payment, development of MTDS and annual borrowing plan,” Mr Jallow stated.

Given the nature of its operations, Mr Jallow added, it will continue to work closely with the ministry’s Treasury directorate, Central Bank of The Gambia, the Gambia Revenue Authority and other related institutions in order to improve the overall management.

Mr Jallow pointed out that significant progress has been made in the area of debt management, among which included the regular publication of the debt bulletin, the development of debt sustainability analysis and medium-term debt strategy and the integration of the domestic debt and external data into a single database.

Mod Ceesay, another permanent secretary at Finance Ministry hailed the launching, announcing that the advisory committee comprises individuals who are worthy and capable of rendering such a huge responsibility. “The Ministry, therefore, is counting on your expertise to deliver on this task,” he added.

In order to have greater economic management, growth and stability, he opined, the committee needed coordinate first the fiscal and monetary policy, while reminding them of their responsibility to provide independent advisory guidance to the management on policy, strategy and policy matters.

“It’s a performance benchmark required under the debt management performance assessment tool of the World Bank, where countries are assessed and ranked on how best practice and policy instruments are put in place to ensure that debts are effectively managed,” he further pointed out.

Ebrima Darboe, director of Loans and Debt Management, indicated that the goal of setting up such a committee is to give management technical advice that will help steer the economy on a continuous basis in a stable manner, and therein derive stability in debt profile.

“As you may all know; we contract loans and debt from international, and domestic sources. These loans and debt are indispensible instruments for economic growth, and development in our country.”

“Therefore, the creation of Debt Management Advisory Committee is an exceptional creativity in addressing public sector financial management issues,” he stated.

Mr Darboe hinted on issues the committee will be deliberating on such as debt capacity, and also spoke of standard measurements for debt ratios that are used in comparing debt ratios to debt sustainability thresholds, and statement of economic conditions.

He said: “Accordingly, the aim of managing collective public sector indebtness will enable us to structure a more ambitious and dynamic investment program such as the Programme for Accelerated Growth and Employment (PAGE), and its successor programmes.”

Lamin Camara, deputy permanent secretary for International Cooperation at the Ministry of Finance, said the public debt objectives of The Gambia are to ensure that government’s financing needs and its obligations are met at the lowest possible cost over the medium to long terms, with a prudent degree of risk, while promoting the development of the domestic debt market.

Public debt management, he stated, seeks to ensure that the public sector can service its debt, while minimising cost in the long run. He maintained that this, on the other hand, minimises the cost to the economy of crises resulting from imprudent debt management.

Source and Copyright: Gambian Affairs  http://gambiaaffairs.com/