1. Introduction and Overview
UNCTAD, World Bank and IMF Workshop
Geneva, February

2. MTDS Overview

3. 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

4. Debt Management matters for development
Accessing finance
Ensures resources available for public investment needs
Managing cost
Influences availability of resources for other priorities
Debt Management
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

5. 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)

6. Debt Management is Distinct From Fiscal Policy
Debt Sustainability Analysis
Required primary balance for sustainability
Medium-Term Debt Strategy
Cost and risk of different financing options – with a given primary balance
Fiscal Policy
Debt Management
Aggregate government spending and taxation
Microeconomic impacts of tax and spending policies
Structure of debt
Cost and risks of debt portfolio

7. Debt Management is Distinct From Fiscal Policy
Cost and risk of debt portfolio
Fiscal Policy
Debt Management
Aggregate government spending and taxation
Microeconomic impacts of tax and spending policies
Structure of debt
Cost and risks of debt portfolio
Fiscal Risks
Primary balance and financing need

8. 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

9. IMF/World Bank Guidance Note
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 excel-based model
Outputs
Cost and risk of existing strategy
Cost and risk estimates of potential alternative debt strategies

10. Output Analysis 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

11. 8 Steps of MTDS

12. The 8 Steps One Two Three Four Objectives and scope of the strategy
Cost and risk of existing debt
Three
Potential sources of finance
Four
Medium-term macro-policy and market environment
Five
Broad structural factors and risks
Six
Analysis of alternative debt management strategies
Seven
Review with fiscal, monetary and market authorities
Eight
Propose and approve strategy
Broad structural factors and risks
Analysis of alternative debt management strategies
Review with fiscal, monetary and market authorities
Propose and approve strategy

13. Step 1: Objectives & Scope
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

14. 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

15. Step 3: Potential Instruments and Characteristics
Objective
Identify potential sources of finance, their financial characteristics including cost and risk parameters
Output
List existing and potential instruments, domestic and external. Describe financial characteristics
Evaluation of the potential of annual borrowing in each instrument
Discussion/ranking of the instruments based on cost/risk characteristics

16. 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

17. Step 5: Review Key Longer-Term Structural Factors
Objective
Review structural factors that will potentially influence the desired direction of the MTDS over the longer-term
Output
Identify long-run structural factors that the MTDS should take into account
Commodity price vulnerability
Macro vulnerabilities created by the debt composition
Change in access to concessional financing as income levels grow

18. Step 6: Analysis of Strategies
Objectives
Identify and analyze possible debt management strategies, assess performance, and chose preferred debt management strategies
Outputs
Comparison of feasible debt compositions, identifying preferences relative to objectives
Comparison of cost and cost-range implications of debt management strategies
Identify the preferred, and a few alternative strategies

19. 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

20. Step 8: Propose and Approve the Strategy
Objective
Present the preferred and alternative strategies to the highest responsible authority
Propose the preferred strategy for approval
Output
A document describing the preferred strategy, as well as a few alternatives (“MTDS report”)
A clear description of the key associated costs and risks, and relationship with the broad objectives

21. Dissemination and Implementation

22. Dissemination is vital
Commitment
Gain commitment of key stakeholders
Ensures consistency in ongoing DM decision making
Ensures market understanding of Government intent
Certainty and Confidence
Dissemination
Establishes benchmark against which to evaluate outcomes
Accountability
Improves the quality of the debate
Strengthens analysis and (consequently) improves outcomes
Analysis

23. MTDS implemented through borrowing plan
Specific instruments and timeframes
Market Development Strategy

24. 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