A P A Program m atic Approach ti A h to Debt Managem ent g - - PowerPoint PPT Presentation

A P ti A h A Program m atic Approach to Debt Managem ent g Capacity Building in LI Cs

Sudarshan Gooptu Sudarshan Gooptu

Sector Manager, Economic Policy and Debt Department (PRMED) The World Bank October 26, 2010.

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Outline Outline

I . Unique debt m anagem ent ( DM) challenges faced by low -incom e countries ( LI Cs) I I . W orld Bank efforts to strengthen DM capacity

• P

ti h t DM it b ildi

• Program m atic approach to DM capacity building
• DM analytical tools and country im plem entation
• Building capacity through I m plem enting Partners ( I Ps) and

regional trainings regional trainings

• Outreach and know ledge activities

I I I . Takeaw ays for LI Cs from DeMPA and MTDS analyses I V. Next Steps

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I . LI Cs face unique DM challenges

External Public & Publicly Guaranteed Debt Com position

(by Instrument – end 2009)

Low Income Middle Income

• Structure of LIC

debt differs markedly from MIC

Bonds and Notes 2.31% Other Liabilities 6.21%

Publicly- Guaranteed Private Sector External Debt 0.12%

Bonds and Notes Trade Credits 0.34% Other Liabilities 1.58%

Publicly- Guaranteed Private Sector External Debt 2.16%

MICs

• In general, LIC

debt is highly i l

Loans 89.90% 39.25% Loans 56.56%

Source: World Bank Quarterly External Debt Statistics

Low Income Middle Income

External Debt Com position by Creditor – end 2 0 0 9

concessional and dependent

• n multilateral

and official

Multilateral

Private* 10%

Multilateral 11%

Bilateral 14%

bilateral flows

Multilateral 31%

Bilateral 59% 14% Private* 75%

Source: Development Data Group, * includes publicly non-guaranteed debt from private creditors

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Private capital flow s Private capital flow s

$ billi t

Net Private Capital Flow s to Developing Countries

8 9 10 1000 1200 1400

• f which LIC countries

Private capital flows share of GDP (right axis) $ billions percent 4 5 6 7 600 800 1000 share of GDP (right axis) 1 2 3 4 200 400 1995 1997 1999 2001 2003 2005 2007 2009p

Source: World Bank Global Economic Prospects (2010)

• LI Cs’ already sm all share projected to decrease further

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Official flow s Official flow s

Net Disbursed Aid from Crisis and Non-Crisis Affected Donor Countries ( 1 9 7 7 -2 0 0 7 , crisis= 0 ) Affected Donor Countries ( 1 9 7 7 2 0 0 7 , crisis 0 )

170 190 210 = 1 0 0 ) crisis countries non-crisis countries 110 130 150 index ( crisis 50 70 90

• 10
• 8
• 6
• 4
• 2

2 4 6 8 10

• Disb. aid

Source: Dang, Knack and Rogers (2010)

10 8 6 4 2 2 4 6 8 10 Years from crisis ( crisis = 0 )

• ODA flow s from crisis affected donor countries likely

ODA flow s from crisis affected donor countries likely to stagnate for prolonged period

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I I . W orld Bank efforts to strengthen DM: The Debt Managem ent Soup DM: The Debt Managem ent Soup

Debt sustainability Debt management Long term debt Debt management debt sustainability DeMPA (process) MTDS (debt composition) DSA/ DSF (debt level) (process) ( )

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Available analytical tools to help LI Cs build capacity and reduce vulnerability capacity and reduce vulnerability

• Suite of products give prospective country clients a clear view of their optimal “path”

For IDA-only countries For non-IDA-only countries LIC MIC

Gov’t/ IMF/ WB jointly do

DSA

Risk of Debt Distress Rating

DSA

Subnational jointly do annual DSAs Fiscal Reform Fiscal Sustainability Subnational debt & fiscal management Non-concessional borrowing policies

• f IMF/ WB

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Sequencing tailored to country-specific needs country specific needs

DeMPA

Cape Verde Malawi Moldova Bangladesh Congo, Rep. Ghana Sierra Leone Cameroon Bangladesh Ghana Mozambique Nicaragua Nigeria Zambia

MTDS Reform Pl

Sierra Leone Solomon Islands Ghana Tanzania

MTDS Plan

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Activity Sum m ary Activity Sum m ary

• DeMPA:
• 5 il t

d 44 i i l t d t d t

• 5 pilots and 44 missions completed to date
• 18 of which DMF financed
• 26 completed with support of IPs
• 9 DeMPA missions in pipeline
• Reform Plan:
• Reform Plan:
• 3 pilots and 5 missions completed
• All missions were DMF financed
• 3 completed with support of IPs
• 7 Reform Plan missions in pipeline
• 7 Reform Plan missions in pipeline
• MTDS:
• 5 pilots and 10 missions completed to date
• 8 of which DMF financed

6 l t d ith t f IP

• 6 completed with support of IPs
• 10 MTDS missions in pipeline
• Trainings:
• DeMPA: 15 trainings delivered since November 2007 (8 DMF financed)
• MTDS: 8 trainings delivered since May 2009 (5 DMF financed)

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Building capacity w ithin regional I Ps has been a key priority

Trainings since January 2 0 1 0 ( 8 ) Pipeline ( 5 )

DeMPA MEFMI November 11-14 2010

I Ps has been a key priority

MTDS, JVI, August 2010 MTDS, AFR Pole Dette July 2010 DeMPA, MEFMI November 11 14, 2010 DeMPA, CEMLA February 28-March 4, 2011 DeMPA, PREM Week April 2010 DeMPA, JVI, April 2010 (LIC clients, including Reform Plan module) DeMPA, JVI April 4-8, 2011 DSA at Subnational Level Level November 1 5 2010 k l MTDS, LAC with CEMLA, April 2010 Subnational Fiscal and Debt Management, December 2010, Shanghai Level November 1-5, 2010 MTDS, PREM Week April 2010 DeMPA, EU, March 2010 MTDS, Bank-Fund Staff, February 2010

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Outreach and Know ledge Activities

• The Annual Stakeholder’s Forum in March 2010:

Activities

• Provided opportunity for discussion of policy-relevant research on the current risks associated

with sovereign debt in the wake of the financial crisis

• Over 120 participants attended, including policymakers, regional technical assistance providers,

civil society organizations and representatives from bilateral and multilateral donors civil society organizations, and representatives from bilateral and multilateral donors

• Conference papers were published as an edited volume—Sovereign Debt and the Financial Crisis—

in October 2010

• The establishment of the Debt Management Practitioners Program (DMPP):

g g

• Two debt managers from Bhutan and Uzbekistan were in residence with PRMED for 6 months from

January to July 2010

• The launch of the Debt Managers’ Network (DMN) has been scheduled for fall

2011 2011

• Research and development efforts are ongoing in the development of a

Subnational DeMPA tool

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I I I . Lessons from DeMPA and MTDS analyses: DeMPA MTDS analyses: DeMPA

DeMPA: Country Perform ance by I ndicator

24 26 28 30 32 34 36 38 40 42 44

Legal framework Managerial Structure Debt Management Strategy Debt Records Debt Reporting

2 4 6 8 10 12 14 16 18 20 22 24

Evaluation of Debt Management Operations Debt Administration and Segregation of Duties, Staff Capacity and BCP Audit Coordination with Fiscal Policy Cash Flow Forecasting and Cash Balance Management Debt Administration and Data Security Coordination with Monetary Policy Domestic Borrowing External Borrowing Loan Guarantees, On lending Derivatives C or Higher Score D

Source: Authors’ calculations using aggregate DeMPA data from 44 finalized DeMPA reports

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Joint I MF/ W B MTDS findings / g

Key Risk I ndicators of Existing Debt Portfolio – 6 Country Sam ple Key Risk I ndicators of Existing Debt Portfolio 6 Country Sam ple

Country A Country B Country C Country D Country E Country F Outstanding debt to GDP 48% 71% 23% 33% 43% 12% Exchange rate risk Share of external debt in total debt outstanding 54% 58% 64% 71% 49% 42% Share of external debt in total debt outstanding 54% 58% 64% 71% 49% 42% Share of domestic debt in total debt outstanding 46% 42% 36% 29% 51% 58% Refinancing risk ATM Domestic debt (Years) 1.6 3.9 1.04 5.3 4.3 2.7 ATM External debt (Years) 16.2 15.8 12.48 20.6 11.5 10.9 Share of domestic debt maturing in next 12 months in total domestic debt outstanding 38% 21% 54% 12% 39% 33% Interest rate risk Share of fixed rate debt in total debt outstanding 95% 99% 79% 100% 100% 98% ATR Total debt (Years) 8.6 10.9 8.35 14.7 7.7 5.9 Share of debt that will refix interest rate in next 12 months 39% 11% 56% 9% 25% 24%

• Foreign exchange risk on external debt and refinancing

risk on dom estic debt dom inate

Share of debt that will refix interest rate in next 12 months 39% 11% 56% 9% 25% 24%

Source: Staff estimates from sample of 6 countries where the MTDS has been applied

risk on dom estic debt dom inate

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I V. Next Steps

• World Bank activities provide a structured logical framework for

countries to systematically address their institutional development

I V. Next Steps

countries to systematically address their institutional development and capacity building needs:

• Combination of demand driven model and regular DSAs allows countries

t th f i i DM li i d i tit ti to own the process of improving DM policies and institutions

• Countries “graduating” from WB products are in a stronger position to

identify and address their own DM needs

WB ti iti dd f d bt t l bilit

• WB activities address core areas of debt management vulnerability

identified in DSAs and other assessments, providing complementarities with other initiatives and priorities

• DMF improves regional knowledge sharing and capacity building through

regional training and Implementing Partner (IP) development

• Countries should aim to complete all modules to provide a solid

foundation for future reform and capacity building efforts

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Next Steps (contd.)

• In assessing the effectiveness of the World Bank’s DM capacity

b ildi i i i d l i

Next Steps (contd.)

building activities and contemplating next steps, one must consider the lessons learned in recent years

• Traditionally, the focus of DM activities has been on central government

g debt; however, the global financial crisis has brought to light other sources

• f vulnerability:
• Subnational governments
• Contingent liabilities (e.g., SOEs, private sector bailouts)

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Thank You

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DeMPA: m issions and pipeline

FY 2 0 1 0 ( 1 5 )

Moldova

FY0 7 ( 5 ) -Pilots

Alb i Malawi M li Kazakhstan

FY 1 1 ( 2 ) FY 1 1 ( 9 ) - Pipeline

Sierra Leone* Senegal* Nicaragua Guyana The Gambia Albania Mongolia Cote d’Ivoire* Antigua & Barbuda

FY0 9 ( 1 4 )

Kazakhstan Togo* (2nd DeMPA) Guinea Bissau* Yemen Gambia (2nd DEMPA) Malawi* (2nd DEMPA) Cambodia

FY0 8 ( 1 3 )

CAR* Ghana Burkina Faso* y Grenada Uganda* Burundi* Congo, DR* Liberia* Papua New Guinea

Burkina Faso (2nd DeMPA)

Nicaragua (2nd DeMPA)

Samoa* Gambia (2nd DEMPA) Ghana Mali* Togo Mozambique Solomon Islands* Cape Verde ST Kitts & Nevis Uganda* Nepal* Maldives* Bhutan* Bolivia Gabon Swaziland Sao Tome & Principe Zambia Guinea* Cameroon* g Congo, Republic of p

* Missions undertaken in collaboration with DMF

Haiti Pakistan* Maldives Djibouti Tanzania* Albania (2nd DeMPA) Honduras* Rwanda* Nigeria* Bangladesh

Implementing Partner(s).

Mauritania* Benin*

DMF Financed

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Reform Plan: m issions and pipeline

FY0 9 ( 3 )

Bangladesh

FY1 0 ( 5 ) FY1 1 ( 7 ) - Pipeline

Maldives DRC Ghana Albania

( )

Bangladesh Solomon Islands* Cameroon* Maldives Moldova The Gambia Andhra Pradesh Congo, Republic of Sierra Leone* Ghana Senegal Gabon Gabon

* Missions undertaken in collaboration with DMF Implementing Partner(s) DMF Financed

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MTDS: m issions and pipeline p p

FY1 0 ( 9 ) FY 1 1 ( 1 0 ) – ( pipeline) FY0 8 ( 4 ) - Pilots FY1 0 ( 9 )

Nicaragua* (follow-up)

Malawi Mozambique* Cape Verde* Zambia* Cameroon Ghana Bangladesh Kenya* Moldova (Pilot)

FY0 9 ( 2 )

Tanzania (follow-up) Ghana* (follow-up)

Nicaragua (follow up)

Moldova (follow-up)* Tanzania* Nigeria* Nicaragua y Nigeria (follow-up) Cameroon (follow-up) Jamaica (follow-up) Nigeria Kenya (follow-up) Jamaica

Bangladesh (follow-up) ( p)

Senegal Vietnam Botswana

* Missions undertaken in collaboration with DMF Implementing Partner(s) DMF Financed

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