IMF-WB Workshop on Medium Term Debt
Management Strategy (MTDS)
Assessment of a range of alternative
strategies
Joint Vienna Institute, Vienna, Austria
February 23 – 27, 2015
IMF-WB Workshop on Medium Term Debt
Management Strategy (MTDS)
Illustrative Strategies
IMF-WB Workshop on Medium Term Debt
Management Strategy (MTDS)
Evaluating Strategies:
cost and risk trade-off
• Step1: Simulate range of candidate viable and realistic
strategies under specific baseline
• Step 2: Have already defined the set of alternative strategies
and alternative scenarios – the stress tests
• Step 3: Consider outcome under alternative conditions /
stress test
• Step 4: Compare the outcome under baseline and stress test
for each strategy
• Step 5: Rank performance and determine the preferred
strategy
IMF-WB Workshop on Medium Term Debt
Management Strategy (MTDS)
Assessing performance
• Need to be critical in the assessment
– Consider ex ante the possible ranking / effects of stress
scenarios…
– Which strategy is likely to be least costly?
– What risk exposures are likely to increase with each strategy?
– Why do expectations differ from outcomes?
• Need to determine in advance indicators and
cost/risk levels
IMF-WB Workshop on Medium Term Debt
Management Strategy (MTDS)
Recall Cost and Risk Indicators
• Cost?
– Interest
– Interest / Revenues or Interest / GDP
– Interest + Adjusted Principal
– Debt / GDP
Which measures are relevant for the specific economy?
• Risk?
What is the reasonable level of risk?
IMF-WB Workshop on Medium Term Debt
Management Strategy (MTDS)
Measurement of risk
Cost
Risk Scenario 1
Risk1,X
Baseline Scenario
Cost1,X
Costbaseline
Time
Time
IMF-WB Workshop on Medium Term Debt
Management Strategy (MTDS)
Borrowing Strategies
S1
S2
S3
S4
% of Total
% of Total
% of Total
% of Total
External
Types of Debt
Domestic
All IDA
External
100
Multilateral
Concessional
100
External
All T-bills
External
Domestic
All Eurobonds
External
Domestic
All Domestic Bonds
100
Eurobonds
100
Domestic
100
Domestic < 1yr
100
Domestic > =10yr
Domestic
100
100
7
IMF-WB Workshop on Medium Term Debt
Management Strategy (MTDS)
Outcomes: Changes in debt outstanding
S1: All IDA
S3: All Eurobonds
S2: All T-bills
S4: All 10Yr -20Yr T-Bond
IMF-WB Workshop on Medium Term Debt
Management Strategy (MTDS)
Outcomes: Redemption profiles
S1: All IDA
S2: All T-bills
S3: All Eurobonds
S4: All 10Yr -20Yr T-Bonds
IMF-WB Workshop on Medium Term Debt
Management Strategy (MTDS)
Outcomes: Debt/GDP
S1: All IDA
S3: All Eurobonds
S2: All T-bills
S4: All 10Yr -20 Yr T-Bonds
IMF-WB Workshop on Medium Term Debt
Management Strategy (MTDS)
Outcomes: Interest/GDP
S1: All IDA
S3: All Eurobonds
S2: All T-bills
S4: All 10Yr -20 Yr T-Bonds
IMF-WB Workshop on Medium Term Debt
Management Strategy (MTDS)
Outcomes: PV Debt/GDP
S1: All IDA
S3: All Eurobonds
S2: All T-bills
S4: All 10Yr -20 Yr T-Bonds
IMF-WB Workshop on Medium Term Debt
Management Strategy (MTDS)
Outcomes: PV Debt / GDP
S1: All IDA
S3: All Eurobond
S2: All T-bills
S4: All 10Yr T-Bond
IMF-WB Workshop on Medium Term Debt
Management Strategy (MTDS)
Evolution of outcomes through time
S1: All IDA
S2: All T-bills
S3: All Eurobonds
S4: All 10Yr -20Yr T-Bonds
IMF-WB Workshop on Medium Term Debt
Management Strategy (MTDS)
Other cost risk indicators
Can we think of other relevant indicators?
IMF-WB Workshop on Medium Term Debt
Management Strategy (MTDS)
Resolving a conflict between indicators?
• Consider wider set of indicators?
• Consider more closely how well the strategies
meet other objectives
• Consider how they perform relative to
identified priorities for mitigate macro
vulnerabilities
• At the end of the day … need to use judgment
IMF-WB Workshop on Medium Term Debt
Management Strategy (MTDS)
Implied Issuance Patterns
Total Gross Financing in USD
2011
2012
2013
2014
2015
S1 All IDA
16,241
8,036
8,407
5,228
4,359
S2 All T-bills
16,241
24,177
32,604
38,434
43,650
S3 Eurobonds
16,241
9,076
10,089
7,685
7,445
S4 Domestic
bonds
(>=10yr)
16,241
9,770
11,069
8,941
8,886
Is this viable?
How realistic are the strategies being analyzed?
What do these decisions imply for the rest of the economy?
Is this compatible with the monetary policy stance?
IMF-WB Workshop on Medium Term Debt
Management Strategy (MTDS)
Drawing conclusions
• Quantitative tools help inform decision-making by allowing
producing a ranking of candidate strategies on a consistent
basis
• However:
– The quality of outputs is only as good as the quality of the
inputs
– Decisions need to be made in line with the pre-set
objectives and take constrains into account
IMF-WB Workshop on Medium Term Debt
Management Strategy (MTDS)
Questions?