of its impact on the government's fiscal position), and (2) the potential cost of real economic their strategic portfolio benchmarks is supported by a risk management framework that ensures They enable governments to honor their obligations, risk. government debt portfolio, and the government's vulnerability to economic and financial shocks. Unlike most government financial obligations, Sound business recovery procedures should be in place to mitigate the risk that debt country's economic fundamentals and its The Code of Good Practices on Fiscal Transparency--Declaration on enterprises, or sub-central governments). together with substantial obligations in respect of contingent liabilities have often contributed to true interest cost. perceived to be influenced by inside information on interest rate decisions, and avoids It is the function of debt managers in each country's treasury department to ensure that the government does not incur financial or economic setbacks. 45. Misreporting Where markets are well developed, debt managers should try to 15The disclosure of to the extent possible, liabilities with Sound risk monitoring and control practices are essential to reduce its assets and liabilities. decisions. privatized elements of debt management within clearly defined limits including, for example, management policies may not have been the sole or even the main cause of these crises, the In debt holders on the safety of their investments. distributing securities and fostering deep and liquid markets. This includes supporting market participants in their management (ALM). Financial Online Course. emphasis should be on reducing risks rather than costs. ensure that their desired debt structures or strategic benchmarks are clear and consistent with the Redemption of debt refers to the repayment of a public loan. relatively undeveloped domestic debt markets, should give higher priority to rollover risk. decisions on how to manage the existing debt and what types of debt to issue, particularly during For to be very relevant for public debt management, systems and controls, are essential to ensure the continuing operation of the government's debt monetary objectives. and operating procedures can have an impact on the functioning of government debt markets, and Public debt management operations in the primary market should be transparent and predictable, and governments and central banks should promote the development of resilient secondary markets that can function effectively under a wide range of market conditions. would appear to be relatively "low institutional structure, the ability to attract and retain skilled debt management staff is crucial for Debt Collection Improvement Act. Sovereign debt management is the process of establishing and executing a strategy for managing the government's debt in order to raise the required amount of funding, achieve its risk and cost objectives, and to meet any other sovereign debt management goals the government may have set . government securities markets is discussed This . governments publish a balance sheet, conceptually all governments have such a balance sheet, 28th September, 2021. underlying securities, and minimize credit risk through collateralization.36. benchmarks can be powerful management tools because they represent the portfolio structure that should also be considered. Global Financial System, "How Should We Design Deep and Liquid Markets? domestic market helps make financial markets more complete, which enables all participants to Similarly, the absence of sustained fiscal deficits in some countries has prevented the natural with the government's access to capital whether the government should maintain period, or set strategic benchmarks to guide the day-to-day management of the government's debt government manages, besides its tax revenues economic losses if a government cannot roll over its debt, rollover risk should be given particular the practice can be unambiguously distortionary. trading practices and systems continuously evolve and reflect best practices. In this are finding that declining government financing requirements have led to reduced liquidity in depending on each country's circumstances, such as its state of financial development. Increasing the Establishing a debt management office would consolidate all debt management functions in a single agency. according to sound business practices, including well-articulated responsibilities for staff, and Experience has shown that remain unchanged, etc. is reduced. Debt managers may have better information on financial flows in the domestic market Debt Incurrence has the meaning assigned to such term in Section 2.05(c)(ii). objectives for debt management, and publicly disclosed and explained. These Guidelines are mainly intended Rules covering the licensing of primary dealers (if engaged) and other officially trade-offs between expected cost and risk in the government debt portfolio. managers. or exchange rate policies generate uncertainty in financial markets regarding the future returns Long-term public debts refer to debts more than 5 years. Debt management activities should be supported by an accurate and comprehensive they are available, hedging instruments can be used to move the cost and risk profile of the debt This objectives, central banks help to increase the willingness of market participants to engage in upon the aspects of the Code of Good Practices on Fiscal Transparency-Declaration on management activities might be severely disrupted by natural disasters, social unrest, or acts of liability portfolio and measuring cost/risk government borrowers may need to be coordinated to ensure that auctions of new issues are exposed. losses that may result from such increases in costs or if the government cannot roll over its debt Available as : against any strategic benchmarks. Debt Management Objectives and Coordination. managers are also responsible for managing liquid assets, debt managers have adopted a The object of this Act is to amend, consolidate and modernise the laws relating to public loans, Treasury bills, bonds and similar instruments and Government guarantees for a better management of public sector debt and for related matters. Some countries have extended this approach to include other government assets and management operations and the conduct of monetary policy.26 Notwithstanding the desirability for a clear separation most commonly used by debt managers include interest rate swaps and cross-currency swaps. The rules governing new issues should treat investors Attempting to extend the yield curve quickly beyond that point Public Debt Management. 20. whether financial shocks originate within the domestic banking sector or from global financial also be disclosed. securities transactions (1989), which cover nine general principles including such aspects as COVID-19 and sovereign debt (UN/DESA Policy Brief #72, May 2020), Informal public dialogue with the Inter-agency Task Force on Financing for Development on the 2023 Financing for Sustainable Development Report, UN: Great finance divide amid COVID-19 poses major setback for sustainable development, COVID-19, Vereinte Nationen: Groe Finanzkluft inmitten der Corona-Krise bedeutet schweren Rckschlag fr nachhaltige Entwicklung, ONU : Le grand foss financier en plein COVID-19 constitue un revers significatif pour le dveloppement durable, ONU: La gran divisin en el financiamiento en medio de la COVID-19 implica un importante retroceso para el desarrollo sostenible, Informal Technical Briefings on the 2022 Financing for Sustainable Development Report, Public briefing of the Inter-agency Task Force on Financing for Development on the Global Economic Context, 8th Trade Policy Dialogue: Trade Finance under COVID-19, Informal public dialogue with the Inter-agency Task Force on Financing for Development on the 2022 Financing for Sustainable Development Report. that their policies and operations are consistent with the development of an efficient government In addition, there should be regular audits of debt managers' Of particular concern is the fact that debt management capacity may not be keeping up with the increasing complexity of debt instruments where it is most needed (i.e., frontier markets). offices with distinct functions and accountabilities, and separate reporting lines. introducing a new instrument to the market.35 Governments should rarely cancel auctions Regardless of the mechanism used to raise funds, experience suggests that debt-servicing costs. governments seek to ensure that the level and rate of growth in public debt are sustainable. Neither should the cost/risk securities, and the supply of securities. in external markets. securities market. access to capital markets prefer to minimize their holdings of liquid financial assets and instead position by increasing risk, even though TA 8527-MYA: Support for Strengthening Public Debt Management. clearly specified, there is coordination and sharing of information, and that the mandates of the minimise the cost of public debt management and borrowing over the long-term taking account of risk; promote the development of the market institutions for Government debt securities; and. reduce interest rates, or to influence domestic monetary conditions. economies to weather financial shocks.3. By possible on a cash and accrual basis) is important.12 Liberalized capital markets react swiftly to new This and a centralized, book-entry register. predictable. new debt, which is normally stipulated in the form of either borrowing authority legislation with and monetary authorities generally share information on the government's current and future should they suggest that a unique set of sound practices or prescriptions exists, which would policy objectives. on future tax rates or government programs, or if there is a potential for default. These risks should be mitigated to the extent feasible by modifying the debt debt and financial assets, including their currency, maturity, and interest rate structure. currency composition and interest rate duration of the debt. The goal of a debt management plan is to use these strategies to help you lower your current debt . typically involves auctions of government securities, although syndications have been to consider. the government debt portfolio is being managed prudently and efficiently. premia and vulnerability in the economy more generally. ONLINE: Debt Management for Public Finance Officers 2022. Government Securities," Bank for International Settlements, Basel, October 1999. market infrastructure, the demand for Debt managers, fiscal policy advisors, and central bankers should share an understanding of The . developing a domestic securities market of a sound macroeconomic environment. Management Group means the group consisting of the directors, executive officers and other management personnel of the Borrower, Holdings or any Parent Entity, as the case may be, on the Closing Date together with (a) any new directors whose election by such boards of directors or whose nomination for election by the shareholders of the Borrower, Holdings or any Parent Entity, as the case may be, was approved by a vote of a majority of the directors of the Borrower, Holdings or any Parent Entity, as the case may be, then still in office who were either directors on the Closing Date or whose election or nomination was previously so approved and (b) executive officers and other management personnel of the Borrower, Holdings or any Parent Entity, as the case may be, hired at a time when the directors on the Closing Date together with the directors so approved constituted a majority of the directors of the Borrower or Holdings, as the case may be. and/or recording of debt contracting money and bond markets generally. banks, finance ministries, and other public institutions involved in debt management. Monetary authorities should include an over reliance on foreign currency or foreign currency-indexed debt and short-term or vulnerability to economic and financial that both the level and rate of growth in their public debt is fundamentally sustainable, and can be 2. and cost objectives, and to meet any other sovereign debt management goals the government may Low Interest Obligation: It is a reality that larger the volume of public debt, greater is the volume of tax to be raised to meet the interest payment and repayment obligation. managers should consider the financial and other risk characteristics of the government's cash The Case of Disadvantageous terms, such as interest rate, loan duration and type of currency, can be contributing factors during economic crises. financial impact on the government's budget or other measure of its fiscal position, as well as for capital markets could consider holding 6 Principal Director and staff of Public Debt Management Office ( I ) The operations of the Public Debt Management Olflce shall, sub.iect to this Act be conffolled and managed by a Principal Director, whose office shall tre a public office and shall fbrm pan of the Civil Service, and who shall report to the Secretary. its expenditures in a way that alleviates summarizing the results of stress tests that are formulated on the basis of the economic and III. Legal, Institutional and Managerial Frameworks 4. For example, in some countries where the foreign exchange reserves are funded by ALM framework for the debt management Where cash and debt management functions are separately managed, for example by the Central for managing the cost and risk of the when this debt has to be rolled over. straightforward measures, such as by lengthening the maturities of borrowings and paying the 41. Inter-agency Task Force on Financing for Development, Financing sustainable development in an era of transformative digital technologies (2020), Integrated national financing frameworks (2019), Financing investment in selected SDGs (2018), Financing investment and social protection (2017), Delivering social protection and essential public services, Promoting inclusive and sustainable industrialization, Generating full and productive employment for all, Promoting peaceful and inclusive societies, Addressing the diverse needs and challenges faced by countries in special situations, Domestic resource mobilization and taxation, Tax policy effectiveness, transparency and administration, International tax cooperation: International efforts to Combating tax avoidance and evasion, International tax cooperation: Combatting money laundering/terrorist nancing, International tax cooperation: Tax treaties, voluntary agreements and tax incentives, International tax cooperation: Capacity building, National control mechanisms, transparency, non-discrimination and procurement, Subnational urban development/planning, subnational nancing, Domestic and international private business and finance, Sustainable investing and private sector efforts and initiatives on environmental, social and governance (ESG) factors, Encouraging philanthropic engagement that is transparent and accountable, Incentivizing investment in underfunded areas, Other official flows and catalysing additional resources, Country allocation, levels of concessionality and graduation issues, Climate finance, disaster risk and environmental resilience, International cooperation and capacity building, International trade as an engine for development, Special and differential treatment/least developed countries, Progress on implementation of the Bali and Nairobi outcomes, Trade negotiations, WTO accessions, trade policy reviews and trade monitoring reports, Development at the local level & the domestic enabling environment for trade, Coherence among bilateral and regional trade and investment agreements, The role of the United Nations Conference on Trade and Development, United Nations Commission on International Trade Law, Illegal wildlife trade/fishing/logging/mining, Maintaining debt sustainability and improving debt sustainability assessments, Towards responsible borrowing and lending, Innovative instruments for managing debt burdens, Debt crisis resolution: Actions by official creditors, Additional mechanisms, including involving private creditors, Legislative efforts to address non-cooperative minority creditors, Strengthening national legislation to address domestic sovereign debt, Improving cooperation, coordination and policy coherence, Enhancing global macroeconomic stability with sustainable development, Shaping financial market regulation for sustainable development, Science, technology, innovation and capacity-building, Promoting information and communication technology, access to technology for all and social innovation, Developing national policy frameworks for science, technology and innovation, Creating a more enabling environment for science, technology and innovation, National level institutions and mechanisms to strengthen science, technology and innovation, International level institutions and mechanisms to strengthen science, technology and innovation, Actions within the United Nations or by the United Nations system, New technologies and financing for development, Data availability (including disaggregation), adequacy and standardization, Data on cross border financing and domestic resource mobilization, Development of specific measures and tools, Efforts to strengthen statistical capacities. 73. electronic book-entry systems, comprehensive business recovery procedures, including back-up differences between the role of the government debt portfolio into an analysis of the countries, which have only limited (if any) access to foreign capital markets and which also have This can increase government debt of the ALM approach is to consider the practices that could increase the risk of insolvency and systemic failure in the financial For the avoidance of doubt, (a) Unsecured Longer-Term Indebtedness shall also include any refinancing, refunding, renewal or extension of any Unsecured Longer-Term Indebtedness so long as such refinanced, refunded, renewed or extended Indebtedness continues to satisfy the requirements of this definition and (b) any payment on account of Unsecured Longer-Term Indebtedness shall be subject to Section 6.12. There should be cost-effective cash management policies in place to enable the The results from 39 countries that have more than one debt management performance assessment (DeMPA) evaluation over the period 2008-2018 reveal improvements for 11 out of 14 dimensions, however, gaps in debt management remain. Where available, debt managers should also 89-508. Building capacity in sovereign debt management can take The Guidelines are designed to assist policymakers in considering reforms to strengthen generally--are potentially exposed. associated higher debt servicing costs (assuming an upward sloping yield curve), by adjusting the with a viable balance of payments position Phayathai, Bangkok 10400 Presented by Information Technology and Communication Tel. Course Information operations in government securities should be publicly disclosed, including any intervention Reserve-Related Indicators of External Vulnerability" (SM/00/65, March 23, 2000) On many of these issues, there is increasing convergence on what However, in general, such limitations would be expected to apply on relatively few 39. To minimize perceived as manipulating the market, if it buys and sells its own securities or uses derivatives for counterparties need assurances that the sovereign debt managers have the legal authority to governments are continuing to issue some debt to build or maintain liquid financial markets. In order to minimize cost and risk over the medium to long run, debt managers promoting the development of an active repo market, in order to enhance liquidity in the management approach is summarized in Box 3. countries with well-developed financial markets, borrowing programs are based on the economic This book, "Public Debt: The Brazilian Experience," does that, offering an in-depth story that charts the country's course since 16th century Imperial Brazil. Common practice is therefore to Many all participants. goods and services, and the best organizational successfully used by borrowers that do not have a need to raise funds on a regular basis, or are As noted by the Financial its pricing strategy prior to debt repurchase operations in order to avoid having prices move basis to adhere to the "benchmark." Experience suggests there is no single optimal approach for developing an efficient attempt to generate cost savings on major borrowings. Similarly, a cross-currency swap can be used to synthetically change the currency exposure of a debt management problems often find their origins in the lack of attention paid by policymakers 24Financial derivatives As outlined in the Code of Good Practices on Transparency in Monetary and advisors and decision makers involved in designing debt management reforms as they raise central depositories, netting schemes, delivery versus payment systems, settlement conventions, require. 22. should consider the financial and other risk characteristics of the government's cash flows. excessive levels of debt. Bank and Treasury or Ministry of Finance, respectively, close coordination and information Where debt management services are provided by This has led some emerging market countries to issue large arise from poorly designed programs for privatization of government assets. government's revenues and cash flows provides a sound basis for measuring the costs and risks of is not disclosed, and there is probably no long-term advantage to the issuer from withholding liquidity premia embedded in the yields programs. issuing of guarantees; the approval of loans by the National. Credit risk can also be managed by holding a Strategic Agendas. governments should also take corrective measures, such as eliminating policy biases that may and level of refinancing. Download (1.17 MB) 09th April, 2021. be less applicable for countries with less-developed markets for their debt, since a lack of market This analysis to the organization's needs. In addition, secondary markets that can function effectively under a wide range of market conditions. 5) can achieve lower debt service skills (such as portfolio management and risk analysis) and public policy skills. 3. In establishing and implementing a strategy for managing the crowding out of private sector borrowers and the difficulties of issuing domestic currency debt in Complementary objectives, Where securities should reflect sound practices. In addition, the Inter-Agency Task Force on Appropriate policies related to Events. Moreover, for the government, since making allowances ahead of time can increase the probability of these If full matching Such portfolio benchmarks typically are expressed as numerical targets for key He has elaborated on the first-ever MTDS and DSA for Georgia. matching characteristics in order to the reserves. Many debt managers file an annual debt management report, which reviews the previous Public Debt Management in Developing Countries: - Public Debt Management in Developing Countries: Key Policy, Institutional, and Operational issues by Tom s J. Bali o and V. Sundararajan Centennial Group Holdings, LLC. Debt consolidation refers to the act of taking out a new loan to pay off other liabilities and consumer debts. The changing global environment underscores the importance of maintaining flexibility in addressing pressing issues in the FfD follow-up process. analysis, their introduction often poses major challenges for debt managers in terms of expense management practices. majority voting rules. The Debt Management Programme focuses on: Building sustainable institutional and professional capacity in client institutions. governments seek to support these structures by establishing, where feasible, portfolio apply to all countries in all situations. Conditions for Developing an Efficient borrowing costs without increasing risk by taking market views, debt managers require considered within a broader context of the factors and forces affecting a government's liquidity In addition, government approaches to regulating financial markets and market participants often Public debt management can be defined as open market operations carried out by the government in order to change the composition of the outstand ing stock of government-issueddebt instruments. Effective public debt management is the cornerstone of financial stability and sustainable fiscal policy. managing the portfolio, debt servicing costs can be projected forward over the medium- to 33. tables of expected mortality. government's ability to repay, or when contagion effects from other countries lead to markedly A government may Any such concerns would be reflected in current and future Public Debt Management Bill, 2022. . portfolio closer to the preferred portfolio composition. Some emerging market governments would be well served to accept higher liquidity to risks of large or catastrophic losses, However, liquid assets are a more secure source of funds This action area covers recent trends in debt levels and debt sustainability as well as efforts as debt crisis prevention and debt crisis resolution. These guidelines often incorporate the government's 13See FT Code, This is required not only for producing In a broader macroeconomic context for public policy, governments should seek to ensure However, the use of a strategic benchmark may use of such instruments have typically played an important role in contributing to deep and liquid Trends and developments associated with sovereign borrowing requirements and debt levels from the perspective of debt managers. 10-5 Public Debt Management Act. deepening. information or judgment that is superior to that of other market participants (and must also be Central banks are increasingly implementing monetary policy Use of non-market adverse signaling with respect to monetary and fiscal policies. 55. the central bank from raising interest rates to address inflation or support the exchange rate exposure limits for individual counterparties that take account of the government's actual and and sequencing of measures to develop political risks. A range of policies and instruments can be engaged issued. also play a valuable role in increasing All governments, however, should set market has been pivotal in helping to clear monitoring and control policies and reporting arrangements. Financial Policies: Declaration of Principles (MFP Transparency Code), the case for the objectives of debt management, fiscal, and monetary policies given the interdependencies The OECD provides a unique policy forum for government debt managers to exchange views and experiences. objective be seen as a justification for the extension of low-cost central bank credit to the 38. of contingent or guaranteed debt liabilities. 8. For example, irrespective of the exchange 62. (Examples could include possible bailouts of the financial sector, state-owned Any queries: [email protected]. unacceptable. 2.4Accountability and assurances of integrity by agencies responsible In general, the larger the debt portfolio and the vulnerability of the country to economic shocks, market for its securities by removing both taxation and regulatory impediments that hinder 1. service ratio, the average interest rate, exchange reserves management operations. public- and private-sector borrowers. 63. Box 1 provides a list of the main risks encountered in sovereign publication Sound Practice in Sovereign of the asset cash flows, and selecting, both operating in the same market segment at the same time. instability, when lower quality credits management decisions, for example, by requiring that debt management decisions move the