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The Debt Management Facility for Low-Income Countries Doerte Doemeland Acting Program Manager DMF

The Debt Management Facility for Low-Income Countries Doerte Doemeland Acting Program Manager DMF Economic Policy and Debt Department The World Bank. Outline The Debt Management Facility for LICs Debt Management Performance Assessment ( DeMPA ) Medium-Term Debt Management Strategy (MTDS)

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The Debt Management Facility for Low-Income Countries Doerte Doemeland Acting Program Manager DMF

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  1. The Debt Management Facility for Low-Income Countries DoerteDoemeland Acting Program Manager DMF Economic Policy and Debt Department The World Bank

  2. Outline The Debt Management Facility for LICs Debt Management Performance Assessment (DeMPA) Medium-Term Debt Management Strategy (MTDS) Other DMF activities Conclusion

  3. I. The DMF for LICs

  4. What is the DMF? • The Debt Management Facility (DMF) for low-income countries is a multi-donor trust fund, that • provides grant-based technical assistance (over an initial four-year operational period), • with a view to strengthen debt management capacity and institutions, • via the supply of “global public goods” (knowledge tools) and the delivery of technical assistance, while facilitating knowledge sharing and enhancing coordination among different debt management providers.

  5. What is the DMF? • The DMF focuses on low-income and IDA-only countries. • Its work program is demand-driven. • Most activities financed under the DMF are implemented in collaboration with Implementing Partners, including CEMLA, Commonwealth Secretariat, DRI, DMFAS Programme of UNCTAD, MEFMI, Pôle Dette and WAIFEM.

  6. Activities financed under the DMF • Systematic application of the Debt Management Performance Assessment (DeMPA); • Country-led design of medium-term debt management strategies (MTDS) jointly with the IMF; • Design of reform programs; • Training events; • Research and development of knowledge products; • Peer learning initiatives, such as the Debt Management Practitioners’ Program and the Debt Managers’ Network.

  7. II. DeMPA

  8. Analytical tool with following attributes: What is DeMPA ?

  9. The Performance Indicators

  10. DPI - 11 Example of dimensions within PI

  11. Scoring method - (A to D) • i) Meet minimum requirement = Score C • Important for effective debt management • ii) Absence of minimum requirement = Score D • Signals an area of priority attention • iii) Sound practice = Score A (B intermediate for more granularity) • iv) Not rated – if process/system does not exist (e.g., derivatives) DeMPA’s scoring method

  12. DeMPA has been implemented in 32 countries so far FY09 (14) FY08 (13) FY10 Cote d’Ivoire Burkina Faso (RO) Antigua and Barbuda Pipeline CAR (RO) Grenada Ghana Congo, DRC Mali (RO) Burundi Mozambique Uganda Togo ST Kitts & Nevis Sao Tome Principe(RO Solomon Islands Tonga FY07 (5) Swaziland (RO) Cape Verde Samoa The Gambia (Pilot) Zambia Cameroon (RO) Yemen Malawi (Pilot) Bangladesh Congo, Brazza(RO) Sierra Leone Albania (Pilot) Honduras (RO) Guinea (RO) Liberia Guyana (Pilot) Moldova Nigeria (RO) Pakistan Nicaragua (Pilot) Mongolia Rwanda (RO) Ethiopia

  13. Technical Assistance Road Map Possible follow-ups Training/TA examples

  14. Preliminary Results

  15. III. MTDS

  16. What is the MTDS?

  17. Why an MTDS? C B “Go with the tides and wind” Contingency 1 D Initial Plan phase 1 Initial Plan phase 2 Contingency 1 A E Start Note: plans are made subject to constraints (navigation skills, weather conditions and forecast, ship size, etc.) Final destination

  18. Still, DeMPA results indicate that only 4 out of 27 assessed countries had a satisfactory medium-term strategy in place

  19. The MTDS has so far been implemented in 6 countries FY10 Pipeline FY08 (4) FY09 (2) Nigeria Bangladesh (P) Cape Verde Cameroon (P) Malawi Ghana (P) Kenya Tanzania Nicaragua (P) Moldova (P) Zambia

  20. The Eight Steps of an MTDS • Identify objectives for public debt management and scope of the strategy • Analyze the cost and risk of the existing debt • Identify and analyze potential funding sources • Identify baseline projections and risks in key policy areas • Review key longer-term structural factors • Assess and rank alternative strategies on the basis of the cost-risk trade-off • Review candidate strategies with fiscal and monetary policy authorities • Submit and secure agreement on the MTDS

  21. Step III. Identify and analyze potential funding sources Determine the range of strategies that might be feasible and desirable. • Concessional vs. commercial external borrowing • Access to international capital markets? At what cost? • Potential demand for government paper?

  22. Step IV. Identify baseline projections and risks in key policy areasStep V.Review longer-term structural factors • Objective is to identify : • baseline projections of key fiscal, monetary policy, external, and market variables; • the key risk to these projections; • a set of comprehensive risk scenarios; • any other factors that are relevant for an MTDS formulation. • Longer-term structural factors could include: • Commodity dependence and associated vulnerability to development in commodity prices; • Longer-term prospects of continued access to concessional finance.

  23. Step VI. Assess and rank alternative debt management strategies on the basis of the cost-risk trade off • Identify set of relevant strategies; • Assess, using the AT, the costs and risk of these alternative strategies. Cost (i/GDP) Risk (max Δ from baseline after shocks)

  24. IV. Other DMF Activities

  25. Training in FY10 DeMPA • One DeMPA training at the JVI • One regional DeMPA workshop for country authorities in Asia • One DeMPA Workshop at the World Bank MTDS • A training for trainers seminar for MTDS at the JVI • One regional MTDS workshops in Africa • One regional MTDS workshop in LAC

  26. Other Outreach Events • The Debt Management Practitioner’s Program which enables officials from debt management offices to join PRMED Bank Staff for 3-month assignments; • The Debt Managers’ Network, designed to provide a platform for peer learning on technical issues, especially for African debt managers; • The Annual Stakeholder’s Forum to bring together public and private sector stakeholders.

  27. V. Conclusion

  28. Conclusion • Results from DeMPA missions clearly highlight large gaps in PDM frameworks and capacity in developing countries. • Moreover, the current crisis underscores the urgency for improving PDM in many countries. • Thanks to the DMF, the scaling up of World Bank’s technical assistance for strengthening PDM has come at the right time. • Going forward, the World Bank will not only further leverage the dissemination of existing tools, but it will also continue to develop new tools and facilitate knowledge sharing with a view to foster coordination among debt management TA providers.

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