INTRODUCTION AND OVERVIEW
UNCTAD, World Bank and IMF Workshop
Geneva, February 06-10 2017
MTDS OVERVIEW
WHAT IS DEBT MANAGEMENT?
“Public debt management is the process of establishing and
implementing a strategy for managing debt to achieve the
government’s financing, risk, cost objectives and other goals,
such as developing the domestic debt market”
-Guidelines for Public Debt Management: IMF/World Bank, 2001
Debt Management
DEBT MANAGEMENT MATTERS FOR DEVELOPMENT
Accessing finance
Ensures resources available for
public investment needs
Managing cost
Influences availability of resources
for other priorities
Managing risk
Influences the realism of
Government budgets and plans
Developing domestic debt
markets
Influences development of the
financial sector and broader costs
and access to finance
MTDS IS ONE PART OF A COMPLEX PICTURE
Debt management and debt
sustainability
Debt management
DeMPA
(process)
MTDS (debt
composition)
Long term debt
sustainability
DSF (debt
level)
DEBT MANAGEMENT IS DISTINCT FROM FISCAL POLICY
Debt Sustainability Analysis
Medium-Term Debt Strategy
Required primary balance for sustainability
Cost and risk of different financing options
– with a given primary balance
Fiscal Policy
• Aggregate government
spending and taxation
• Microeconomic impacts of
tax and spending policies
Debt Management
• Structure of debt
• Cost and risks of debt
portfolio
DEBT MANAGEMENT IS DISTINCT FROM FISCAL POLICY
Cost and risk of debt
portfolio
Fiscal Policy
• Aggregate government spending
and taxation
Debt Management
Fiscal Risks
• Microeconomic impacts of tax
and spending policies
Primary balance and
financing need
• Structure of debt
• Cost and risks of debt portfolio
A document outlining how the Government will achieve it’s financing goals
while achieving an appropriate balance between cost and risk, and
supporting secondary objectives such as development of the domestic debt
market.
- Analytically informed, typically including quantitative benchmarks or
targets
A document outlining how the Government will achieve it’s financing goals while achieving an
appropriate balance between cost and risk, and supporting secondary objectives such as
development of the domestic debt market.
- Analytically informed, typically including quantitative benchmarks or targets
IMF/World Bank Guidance Note
Inputs
• Macro
assumptions
• Shock scenarios
• Existing debt
portfolio
• Strategies for
new borrowing
The Analytical Tool
• Iterative
simulations
within an excelbased model
Outputs
• Cost and risk of
existing
strategy
• Cost and risk
estimates of
potential
alternative
debt strategies
Interest and
exchange rate
scenarios
Potential
financing
strategies
Financing
Need
Existing debt
Analysis
Output
Size and composition of debt
stocks and flows
Cost and risk indicators
Redemption profile
8 STEPS OF MTDS
management
strategies
market
authorities
Four
Review with
fiscal, monetary
Propose
and and
market
approve
authorities
strategy
Medium-term
macro-policy
and market
environment
Eight
Three
Analysis of
alternative debt
Analysis
of
Review with
management
alternative
fiscal,
debtstrategies monetary and
Potential
sources of
finance
Seven
Broad
structural
factors and
risks
Two
Broad structural
factors and risks
Cost and risk of
existing debt
Six
One
Objectives and
scope of the
strategy
Five
THE 8 STEPS
Propose and
approve
strategy
STEP 1: OBJECTIVES & SCOPE
Objective
Identify main objectives
for public debt
management and the
scope of the medium
term debt management
strategy
Outputs
Description of the overall
objectives for public debt
management
Definition of the types of
debt to be covered by
the strategy
STEP 2: COSTS AND RISKS OF EXISTING DEBT
Objectives
Outputs
Identify current debt
management strategy
Detailed information on
outstanding debt
Identify outstanding debt and
its composition
Debt servicing profile of
outstanding debt
Calculate basic cost and
market risk indicators
Description of main portfolio
risks
STEP 3: POTENTIAL INSTRUMENTS AND CHARACTERISTICS
Objective
Output
List existing and potential instruments,
domestic and external. Describe financial
characteristics
Identify potential sources of finance,
their financial characteristics including
cost and risk parameters
Evaluation of the potential of annual
borrowing in each instrument
Discussion/ranking of the instruments based
on cost/risk characteristics
STEP 4: MACRO AND MARKET ENVIRONMENT
Objectives
Identify baseline
projections for key fiscal
and monetary policy
variables, market rates,
mains, and the relevant
constraints and
implications for MTDS
formulation
Output
Baseline projections for
key fiscal, monetary
policy and market
variables
A clear and
comprehensive set of
country specific risk
scenarios to be tested
STEP 5: REVIEW KEY LONGER-TERM STRUCTURAL FACTORS
Objective
Output
Identify long-run structural factors that the
MTDS should take into account
Review structural factors that
will potentially influence the
desired direction of the MTDS
over the longer-term
Commodity price vulnerability
Macro vulnerabilities created by the
debt composition
Change in access to concessional
financing as income levels grow
STEP 6: ANALYSIS OF STRATEGIES
Objectives
Outputs
Comparison of feasible debt
compositions, identifying
preferences relative to objectives
Identify and analyze possible
debt management strategies,
assess performance, and chose
preferred debt management
strategies
Comparison of cost and costrange implications of debt
management strategies
Identify the preferred, and a few
alternative strategies
STEP 7: REVIEW WITH OTHER AGENCIES
Objectives
Ensure that relevant feedback
from the strategies identified
is provided by the fiscal and
monetary policy authorities
Review the potential debt
market implications of the
strategies
Output
A clear assessment that the
candidate strategies are
consistent with fiscal and
monetary policies,
maintaining debt
sustainability, and in line with
plans for market
development
STEP 8: PROPOSE AND APPROVE THE STRATEGY
Objective
Output
Present the preferred and
alternative strategies to the
highest responsible authority
A document describing the
preferred strategy, as well as a
few alternatives (“MTDS report”)
Propose the preferred strategy
for approval
A clear description of the key
associated costs and risks, and
relationship with the broad
objectives
DISSEMINATION AND IMPLEMENTATION
DISSEMINATION IS VITAL
Commitment
Certainty and
Confidence
• Gain commitment of key stakeholders
• Ensures consistency in ongoing DM decision
making
• Ensures market understanding of Government
intent
Dissemination
Accountability
Analysis
• Establishes benchmark against which to evaluate
outcomes
• Improves the quality of the debate
• Strengthens analysis and (consequently) improves
outcomes
MTDS IMPLEMENTED THROUGH BORROWING PLAN
MTDS
Borrowing Plan
• Specific instruments and
timeframes
Market
Development
Strategy
IMPLEMENTATION WILL HIGHLIGHT KEY BOTTLENECKS
Shallow domestic debt markets
Weaknesses in primary market
operations
Potential conflicts with monetary
policy framework
Limited availability of concessional
financing
Implementation