Developing Government Bond Markets in Sub-Saharan Africa
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Developing Government Bond Markets in Sub-Saharan Africa. month 2003. Guidelines for Public Debt Management : Background and Purpose Pierre Yourougou Banking and Debt Management Group Treasury, The World Bank Johannesburg, South Africa June 17 -19, 2003. June 2003.

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Developing Government Bond Markets in Sub-Saharan Africa

month 2003

Guidelines for Public Debt Management : Background and Purpose

Pierre Yourougou

Banking and Debt Management Group

Treasury, The World Bank

Johannesburg, South Africa

June 17 -19, 2003


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June 2003

Outline of the Presentation

  • Background and Purpose of the Guidelines

    • What is Public Debt Management and why it is Important ?

    • Background of the Guidelines

    • Purpose of the Guidelines

  • The Guidelines

  • Examples of Sound Practice for LICs and HIPCs


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June 2003

What is Public Debt Management ?

The process of establishing and executing a strategy for managing the government’s debt to:

  • raise the required amount of funding

  • achieve its cost and risk objectives

  • meet any other objectives, such as developing the domestic debt markets


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June 2003

What is Public Debt Management ? (2)

Debt management goals differ from those for fiscal and monetary policy, although there exists significant interdependence among them:

  • Fiscal policy determines the amount of debt while debt management involves its composition

  • Debt issuance for monetary purposes vs. issuance to create and maintain a deep and liquid market


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June 2003

Why is Public Debt Management Important?

  • Public debt portfolio can be large and may pose substantial risk to the government’s balance sheet and the country’s financial stability

    • Portfolio often the largest in the country and the most complex

    • If not managed prudently, poses risk to the budget and can lead to risk of default and large economic losses

    • Poor debt management practices

      • can undermine investor sentiment and spark financial instability

      • Can increase a country’s susceptibility to crisis, particularly for countries that are vulnerable because of high debt levels or are susceptible to external shocks


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June 2003

Why is Public Debt Management Important? (2)

  • Sound debt management can lower long-term borrowing costs for government and other domestic borrowers by

    • Establishing liquid benchmark issues and reducing the liquidity premium

    • Promoting depth and liquidity in the domestic bond markets

    • Establishing pricing benchmarks to enable other market participants to form contracts and price risks


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June 2003

Why is Public Debt Management Important? (3)

  • Good debt management makes countries less susceptible to contagion and financial crises

  • There are limits to what sound debt management can achieve

    • Debt management is not a substitute for sound fiscal, monetary, and exchange rate policies


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June 2003

Background of Guidelines

  • Requested by the Financial Stability Forum, then by the IMFC to help countries reduce their vulnerability to economic and financial shocks

  • Prepared by staff of the World Bank and IMF with input from debt management experts in over 30 countries and benefited from comments through 5 regional outreach conferences

  • Final guidelines endorsed by World Bank and IMF Boards then by IMFC at Spring 2001 meeting

  • Accompanying document prepared to illustrate how countries conduct debt management in accordance with the Guidelines


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June 2003

Purpose of Guidelines

Designed to help policymakers build their capacity to strengthen the quality of their debt management and reduce country vulnerability

  • Encompass both domestic and external debt, and contingent liabilities

  • Focus on areas of agreement for sound practice

  • Intended to assist in capacity building, not to serve as minimum standard

  • Necessarily general: need to be applied with flexibility, depending on each country’s circumstance


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