Medium-term debt management strategies: recent capacity building efforts

Government debt portfolios are becoming more complex (for example, due to the issuance of Eurobonds or local currency bonds, or the potential realization of contingent liabilities), which requires that the MTDS framework be adapted considering additional risk factors and a wider range of strategies. In parallel, modes of delivery have evolved, with increasing use of on-line learning, and more interactive, country-specific presentation of tools and techniques. In many countries, effective capacity building in MTDS analysis was complemented by efforts to strengthen institutions; debt recording; and government cash management. Country ownership, often reflected in commitments under Fund- or Bank-supported programs, has proven critical to the sustained enhancement of debt management capacity. 

The value and effectiveness of these capacity building efforts are documented in the note using qualitative and quantitative metrics. Both the responses from national authorities to a questionnaire, and the evolution of various quantitative indicators suggest that effects were positive and generally sustained. Many recipient countries are now more able to integrate debt management into overall economic policy formulation and adapt their debt management strategies to changing countries circumstances. For some, debt risk indicators have improved even while debt levels have increased.

Looking forward, the note suggests that the MTDS framework and modes of delivery should continue to be updated and refined, while maintaining core functions. Some countries will need more sophisticated techniques both to analyze risk-return trade-offs and to implement their chosen strategy. Others are still building a solid foundation in debt management. In addition to hands-on trainings, more use of on-line learning may contribute to an effective and efficient approach. Explicit early commitment to a sustained reform program to strengthen debt management may be helpful both in promoting stabilization and in underpinning the authorities’ ownership of those reforms.