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DEBT MANAGEMENT: SOME ISSUES CHANGES OVER THE DECADE B. Baball Debt Management-DMFAS Programme UNCTAD PRESENTED AT U

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DEBT MANAGEMENT: SOME ISSUES CHANGES OVER THE DECADE B. Baball Debt Management-DMFAS Programme UNCTAD PRESENTED AT U

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    1. UNCTAD United Nations Conference on Trade and Development DEBT MANAGEMENT: SOME ISSUES & CHANGES OVER THE DECADE B. Baball Debt Management-DMFAS Programme UNCTAD PRESENTED AT UNESCAP’S REGIONAL WORKSHOP ON CAPACITY BUILDING FOR EXTERNAL DEBT MANAGEMENT IN THE ERA OF RAPID GLOBALIZATION BANGKOK, 6-7 JULY 2004

    3. Debt management was viewed as relatively insignificant … Macroeconomic framework Institutional structure Human resources Other resources International organizations Other

    4. Debt was at periphery of macroeconomic policy Not significantly considered in terms of policy decisions Countries borrowed, based on budget and BOP needs Not on implications of borrowing on sustainability, indicators, vulnerability

    5. Debt strategy was not yet in the vocabulary of many countries. Policy decisions on debt were mainly REACTIVE – reacting to problems or crises.

    6. Debt management was insignificant in terms of institutional structure The functions were generally relegated to a unit, within a section, within a department. Several units were common. Decentralized environment… not a problem But with no coordination Debt management characterized by ineffective information flows, communication, policy decisions

    7. In many countries, staff allocated with no recognition of the need for specialized skills Motivation   Frequent movements… Inadequate

    8. Data was far from perfect Concentration on public and publicly guaranteed external debt Not on… Private non-guaranteed Domestic debt Onlending

    9.  International institutions, advice to countries on restructuring of debt… Yet, continued lending to these countries. Multilateral debt could not be rescheduled.

    10.   Support mainly in terms of computerised debt management systems

    11. In this context..  Many countries went from one debt crisis to another, from one restructuring programme to another until… commercial debt was either restructured down or forgiven Same for bilateral debt from flow rescheduling to increasingly concessional restructuring, Increasing from 1/3 write-offs of stock in 1988 to a possible 90% forgiveness in 1999 (Cologne Terms) Now Evian approach: flexible based on debt sustainability analysis.

    12. In this context..      The South-East Asian financial crisis, when it hit, was as unanticipated in terms of its impact, as it was in terms of the contagion effects and solutions.

    13. DEBT MANAGEMENT WAS A NEGLECTED DISCIPLINE…     

    14. This, in spite of external debt, not to mention, total public debt being the largest, or one of the largest, financial portfolios in many countries   Debt accounting for the largest component of budget expenditures Replacing important public investments   And absorbing the largest share of exports       

    15. This neglect was reflected in literature and guidelines Few: World Bank: Debt Management: An Introduction (1994) UNCTAD: Effective Debt Management (1989) External Debt: Definition and Coverage (1984, 1988) Debt Indicators, World Bank - indicative NO GUIDELINES

    16. TODAY… HAS ANYTHING CHANGED?

    17. MONTERREY CONSENSUS (Mexico, March 2002) ‘National comprehensive strategies to monitor and manage external liabilities, embedded in domestic preconditions for debt sustainability…are key elements for reducing national vulnerabilities….Technical assistance for external debt management and debt tracking can play an important role and should be strengthened’. International Conference on Financing for Development. First quadripartite exchange of views between government, civil society, the business community, and institutional stakeholders on global economic issues.

    18. The UNITED NATIONS GENERAL ASSEMBLY (December 2003) reinforced its existing resolution on debt (A/C.2/58/L.18) and also now invites UNCTAD, IMF and the World Bank, in cooperation with the regional banks, regional commissions and multilateral institutions, to study the possibility of creating a consultative group on external debt management aiming at developing best practices and strengthening the institutional capacity of developing countries in debt management….

    19. UNCTAD X Plan of Action (Bangkok, 2000): ‘There should be analytical work on management of public, external and domestic debt in developing countries in support on the work carried out by the DMFAS Programme and in cooperation with other international organizations’. UNCTAD, through the DMFAS Programme, should strengthen the ‘…link to work of the World Bank notably, through the World Bank’s Debt Sustainability Module(DSM+)’ Reinforced in UNCTAD XI, June 2004, Brazil

    20. HAS ANYTHING CHANGED? SOME … DEBT MANAGEMENT IS PROBABLY THE MOST DYNAMIC AREA OF MACROECONOMICS AND PUBLIC ADMINISTRATION GREATER RECOGNITION OF IMPORTANCE OF DEBT MANAGEMENT INCREASINGLY PROACTIVE DEBT MANAGEMENT RATHER THAN REACTIVE DEBT MANAGEMENT

    21. DEBT MANAGEMENT HAS EVOLVED, IN TERMS OF… Debt statistics Debt Recording Software Debt Guidelines Debt strategy formulation Debt sustainability analysis software Functions Legal & Institutional arrangements International coordination & support Other

    22. PREVIOUSLY… EXTERNAL DEBT: DEFINITION AND COVERAGE (1984,1988) IMF, WORLD BANK, BIS, OECD) TODAY: EXTERNAL DEBT: GUIDE FOR COMPILERS AND USERS (2003) (IMF, WORLD BANK, BIS, COMSEC, EUROSTAT, OECD, PARIS CLUB, UNCTAD)

    23. COMPREHENSIVE GUIDE FOR COMPILATION & USERS CONSISTENCY WITH OTHER STATISTICAL SERIES: BOP, GOV’T FINANCE, SNA BASIC CLASSIFICATIONS: DEBTOR, INSTRUMENT, MATURITY NEW CLASSIFICATIONS: RESIDUAL MATURITY ISSUES:DEBTOR (GOVERNMENT, CENTRAL BANK OTHER PUBLIC. PRIVATE), CREDITOR. DOMESTIC DEBT.

    24. EVOLVED IN TERMS OF TECHNOLOGY AND FUNCTIONALITIES TECHNOLOGY: EVOLVED FROM SINGLE USER, COBOL, DOS BASED FUNCTIONALITIES DOMESTIC DEBT REPORTS SECURITY OTHER INSTRUMENTS STILL EVOLVING – classifications, private sector external debt

    25. LOCAL GOVERNMENT PRIVATE SECTOR EXTERNAL DEBT DEBT STRATEGY SOFTWARE LINKS INTEGRATED FINANCIAL MANAGEMENT SYSTEMS

    26.

    27. NOW COUNTRIES INCREASINGLY CONSIDERING REGULAR (MINIMUM ANNUAL) DEBT STRATEGY EXERCISE AS PART OF MACROECONOMIC FRAMEWORK PROACTIVE, TO ALERT COUNTRIES TO POTENTIAL DEBT DIFFICULTIES, RATHER THAN REACTING TO DEBT CRISES WHEN THEY OCCUR THEORY, CONCEPTS AND INDICATORS EVOLVING SOFTWARE DEVELOPED BUT CONTINUES TO EVOLVE LONG WAY TO GO… ….IMF PRESENTATION LATER…                                                                                           

    29. NEW APPROACH TO ORGANIZATION OF DEBT MANAGEMENT CENTRALIZING OF DEBT MANAGEMENT IN A DEBT OFFICE - INDEPENDENT/QUASI-INDEPENDENT - MAINLY IN DEVELOPED COUNTRIES - DEBT: SECURITIES ISSUANCE QUESTION: CAN THIS MODEL BE APPLIED TO DEVELOPING COUNTRIES WITH SIGNIFICANT OFFICIAL DEBT? BEST PRACTICE?? STAFFING??                                                                                                 

    30. GIVING GREATER IMPORTANCE TO DEBT MANAGEMENT IMF, WORLD BANK UNCTAD:REFLECTED IN NAME CHANGE FROM DMFAS PROGRAMME TO DEBT MANAGEMENT-DMFAS PROGRAMME CAPACITY BUILDING APPROACH UN AGENCIES (UNESCAP, UNDP, OTHER)   OTHER                                                                                               

    31. INTERNATIONAL COORDINATION. E.g. DEBT GUIDE INTERNATIONAL TASK FORCE ON DEBT STATISTICS GUIDELINES FOR PUBLIC DEBT MANAGEMENT JOINT BIS-IMF-OECD-WORLD BANK Statistics on External Debt World Bank-IMF: quarterly external debt statistics database (SDDS-subscribing countries) World Bank-UNCTAD: DSM+                                                                                                  

    32. INTERNATIONAL SUPPORT DEBT MANAGEMENT IMPORTANT COMPONENT OF PACKAGE TO SUPPORT BY SOME DONORS & INTERNATIONAL ORGANIZATIONS LONG-TERM COMMITMENT Eg. :UNCTAD HELP DESK FOR DEBT RECORDING                                                                                                   

    33. MOST IMPORTANT… COUNTRIES GIVING MORE ATTENTION TO DEBT MANAGEMENT Eg. REVIEWING STRUCTURES IMPROVED RECORDING DEBT STRATEGY DOMESTIC DEBT RISK MANAGEMENT CAPACITY BUILDING PROGRAMMES

    34. AT NATIONAL LEVEL LEGAL & INSTITUTIONAL ARRANGEMENTS DEBT STRATEGY RISK MANAGEMENT APPROACH MACRO-LINKAGES: RESERVES MANAGEMENT,MONETARY POLICY, BUDGET, OTHER RECORDING: DOMESTIC DEBT, CONTINGENT LIABILITIES, PRIVATE SECTOR EXTERNAL DEBT, ONLENDING, GRANTS: GOV’T & NGOs

    35. AT NATIONAL LEVEL TRAINING AND RETAINING STAFF OTHER NOT A SHORT-TERM PROCESS

    36. AT INTERNATIONAL LEVEL DEBT STRATEGY THEORY, CONCEPTS, INDICATORS DEBT STRATEGY SOFTWARE RISK MANAGEMENT APPROACH RISK MANAGEMENT SOFTWARE IS THERE A BEST PRACTICE FOR ORGANIZATION OF A DEBT OFFICE ? STATISTICS & RECORDING DEBT GUIDE: TOTAL PUBLIC SECTOR DEBT: DOMESTIC DEBT INTEGRATED FINANCIAL MANAGEMENT SYSTEMS…

    37. DEBT MANAGEMENT CONTINUES TO EVOLVE… COUNTRIES WILL HAVE TO RESPOND TO NEW DEVELOPMENTS….

    38. In conclusion … DEBT MANAGEMENT IS NOW GIVEN MORE RECOGNITION AND THEREFORE MORE CONCERTED EFFORTS TO IMPROVE BUT… STILL A LONG WAY TO GO IN TERMS OF THEORY AND APPLICATION HAVING IMPROVED SYSTEMS IN COUNTRIES TO REAP THE BENEFITS OF BORROWING FOR GROWTH AND DEVELOPMENT, WITHOUT THE DANGERS OF SLIPPING INTO A DEBT TRAP

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