Issue 03 January 2011 News 60341 HAPPY NEW YEAR! The DMF team wishes all its partners and friends a very fruitful 2011. We look forward to our continued collaboration. Debt Management Practitioners' Program ­ Practitioners for FY2011 After inviting all DMF-eligible countries in September 2010, the DMF team received nominations and applications from 30 countries. Many of the applicants had very strong and competitive backgrounds. Based on the criteria presented in the second issue of the DMF newsletter, four officials were selected to participate in the Debt Management Practitioners' Program (DMPP) for FY2011. We are pleased to announce them today: » Ms. Naly Sun, Chief of Debt Management Division at the Ministry of Economy and Finance, Cambodia » Mr. Jeremiah Jargbo, Assistant Director for Debt Management at the Ministry of Finance, Liberia » Mr. Stanislas Nkhata, Deputy Director for Debt and Aid Management at the Ministry of Finance, Malawi » Mr. Leonardo Somarriba Tablada, Economic and Financial Advisor at the Ministry of Finance and Public Credit, Nicaragua We would like to thank all applicants to the DMPP for their interest in the program and DMF's Technical Advisory Group (TAG) members for their advice in the selection of the practitioners. Debt Management Performance Assessment - Frequently Asked Questions The Debt Management Performance Assessment (DeMPA) has received growing demand from countries across different regions. As of January 2011, the exercise has been carried out in 55 countries. Several questions are frequently asked on the methodology, process and rationale of the DeMPA Tool. This feature picks a few of these issues, while a broader selection has been answered and is available at: http://go.worldbank.org/MXFF14FRY0. The DeMPA Tool is a public good, designed to help countries assess central government debt management performance. The DeMPA accomplishes this through a comprehensive evaluation of the strengths and weakness of current debt management practices, identifying areas where institutional, legislative and capacity deficits contribute to less-than fully effective management of government debt. What is the rationale for the DeMPA Tool? The rationale for the DeMPA Tool grew out of the fact that over the past decade, many low-income countries (LICs) have benefited from debt relief, including debt rescheduling from bilateral creditors and relief under the Heavily Indebted Poor Country (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI). While debt relief has placed many beneficiaries in a position to reduce debt-related vulnerabilities and maintain sustainable debt levels in the future, risks remain that inappropriate debt management decisions could endanger these recent gains. The DeMPA Tool is designed to help countries improve central government debt management capacity. Can countries undertake a self-assessment using the DeMPA methodology? If so, would it be necessary for the World Bank to review such an assessment? The DeMPA is an internationally recognized public good. The DeMPA Tool, in addition to the accompanying Guide, is publicly available, and countries are welcome to use the information contained therein as they deem fit. However, a self assessment would not confer many of the advantages of an independent external evaluation, and would not be officially endorsed by the World Bank. Is the DeMPA a catalyst for reform? As the overall objective of the DeMPA is to identify areas where institutional and capacity deficits contribute to less-than fully effective debt management, the results naturally lead to the identification of possible reforms. The DeMPA also facilitates the monitoring of progress in implementing reforms if the country schedules follow-up assessments. The DeMPA results, if disclosed by the authorities, can provide donors and other development partners with a comprehensive and objective method for identifying priority areas for assistance and allow for the development of coordinated and targeted technical assistance and training programs. Have other providers of debt management technical assistance contributed to the development of the DeMPA program? The World Bank was the lead agency in the process of developing the DeMPA Tool, while benefiting from extensive consultations and comments from technical assistance providers, including the IMF (Monetary and Capital Markets Department, Fiscal Affairs Department, and the Statistics Department), Debt Relief International (DRI), the United Nations Conference on Trade and Development (UNCTAD) Debt Management - DMFAS Programme, the Commonwealth Secretariat's Debt Management Section (ComSec), and the Overseas Technical Assistance Division of the U.S. Treasury Department. Additional input was also obtained during several specifically focused events, including the 1st Annual OECD Forum on African Public Debt Management in Amsterdam (December 2006); the 5th Inter-Regional Debt Managers Seminar in London (September 2007); UNCTAD's 6th Debt Management Conference in Geneva (November 2007); and, during a meeting of the Inter-Agency Task Force on Finance Statistics (March 2007), among others. Regional technical assistance organizations namely: the Center for Latin American Monetary Studies (CEMLA), the Macroeconomic & Financial Management Institute of Eastern and Southern Africa (MEFMI), Pole-Dette (Regional Debt Management Training Center of Central and Western Africa), and the West African Institute for Financial and Economic Management (WAIFEM) also provided comments and suggestions. Perspectives from the West African Institute for Financial and Economic Management For this edition of the DMF Newsletter, we have asked Mr. Baba Musa, Director of the Debt Management Department, at the West African Institute for Financial and Economic Management (WAIFEM) to give his views on the DMF framework and activities. WAIFEM was established in 1996 by the Central Banks of Gambia, Ghana, Liberia, Nigeria and Sierra Leone, the member countries, and has been an implementing partner of the DMF since July 2009. The institute provides technical assistance and policy advice on debt management related issues in the Western African region. Capacity building in the area of debt management has been a clear priority for WAIFEM since its inception. WAIFEM conducts technical assistance activities in the region through national and regional training workshops on basic debt management, domestic debt management, debt recording, debt sustainability analysis, legal aspects of debt management, and through institutional management missions. In executing those activities, the institute has partnered with other regional and international debt management institutions. 1. Have you seen key benefits of DMF activities in your region? If so, could you please give us some examples? Anglophone West African Countries and WAIFEM have benefited from DMF activities. To date, DMF completed four DeMPA missions, two Reform Plan missions and two training events in the region. The achievements recorded following the application of DMF could be highlighted as follows: » Countries have achieved greater transparency in debt management practice. Reflecting the impact of DeMPA missions, countries have adopted the practice of producing regular reports such as annual reporting to parliaments, publication of debt management issues through statistical bulletin, websites, and debt strategy reports. » WAIFEM and the constituent member countries have adopted the methodology of the World Bank's approach to capacity building. However, countries assume ownership of the process particularly the process of peer reviewing of all mission reports and reform plans by a third party debt expert and the opportunity given to all the countries to review and comment on the reports by themselves. » DMF activities have also improved coordination of debt management activities within the countries themselves. » Strengthening middle office functions and institutionalizing disaster recovery plans have been beneficial. Many countries have realized the need to start the process of capacity building for debt strategy formulation. » Enhanced synergy among capacity building service providers (World Bank, IMF, UNCTAD, ComSec and WAIFEM) across regions and beyond, now coordinate their technical assistance to countries to avoid duplication and waste of resources. 2. What would be your suggestions/recommendations regarding DMF in general? With the completion of DeMPA, countries are eagerly looking forward to donor funding of implementation of their reform plans. Most of the reforms require minimum of three years of implementation. At the moment, the momentum of reforms is high, and the need for mobilization of funds and technical support critical. Also, many country officials have received training in Medium-Term Debt Management Strategy (MTDS). However, the capacity for a country to conduct MTDS on its own or with minimal external assistance is still a big challenge. Therefore, there is a need for continued training in that area and/or a need to simplify MTDS template/manual of operation, as it is often seen as complicated. Finally, there is a need for the World Bank to develop a subnational DeMPA Tool and Guide, as well as the need to develop subnational debt strategy. Keeping in view the importance of disclosure and transparency, Mr. Musa adds that countries should publish their DeMPA reports. Kenya was the first low-income country to receive a joint Bank-Fund MTDS mission after the end of the MTDS pilot phase. The baseline mission took place in spring 2009 and a follow-up mission visited Nairobi in May, 2010. The missions took place in partnership with the Commonwealth Secretariat (Comsec) and Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI). Outcome Kenya is the first DMF-eligible country in sub-Saharan Africa to publish a debt management strategy document based on a quantitative analysis of cost and risk of alternative strategies. The first strategy document covered the period FY2009/10-FY2011/12, and was published with the budget in June, 2009. Subsequently, the authorities produced a second strategy document covering FY2010/11-2012/13, which was published with the budget in June, 2010. As a result of the 2010 analysis, the new strategy shifts towards greater external financing relative to the 2009 strategy and further extends the maturity profile of the domestic debt. Both documents can be found on the Kenyan Ministry of Finance's website (www.treasury.go.ke/). Motivation Prior to 2009, debt management was guided by an informal strategy that sought to maximize concessional borrowing on the external side, while gradually extending the maturity profile of domestic debt. Mindful of the interest costs, the government had carefully paced the accumulation of domestic debt. While reliance on official sources had served Kenya well in the past, the government sought alternative sources of financing to accommodate higher infrastructure expenditure and to increase its independence from donor financing, which had proven to be volatile in the past. However, the scope to substitute domestic sources of financing in the place of external financing was limited, particularly given the risk of crowding out private sector investment. The government also contemplated issuing a sovereign international bond, which was put on hold as market conditions deteriorated significantly in the context of the global financial crisis. As the government reviewed different borrowing options, it became imperative to comprehensively assess the cost and risk consequences of alternative debt management strategies and to make informed decisions. Feedback from the Authorities CONTACT US On the web: www.worldbank.org/debt Debt Management Facility (DMF) Newsletter Email: Issue 3, January 2011. Doerte Doemeland: ddoemeland@worldbank.org Pascaline Maseko: pmaseko@worldbank.org The DMF Newsletter is published quarterly and is provided economicpolicyanddebt@worldbank.org to debt management practitioners from developing countries, donors, DMF implementing partners, civil society organizations, and private sector firms. The newsletter Telephone: aims to share DMF work plans, lessons learned, debt (202) 458-7266 management-related news and developments. Fax: (202) 522-3740 Regional Training, the MEFMI Example A training event on the DeMPA Tool was conducted in Windhoek, Namibia, (November 15-19, 2010). The training was co-organized with MEFMI and was opened by Ms. E.B. Shafudah, Permanent Secretary at the Ministry of Finance, Namibia. Welcome remarks were delivered by Dr. E. Ngalande, Executive Director at MEFMI. A total of 24 officials from the debt management offices and central banks of the MEFMI member countries attended the training. As part of the training, representatives from Tanzania, Mozambique, Malawi and Kenya presented specifics of debt management from their countries, while Mr. Raphael Otieno, Director, brought out debt management perspective in the MEFMI region. Participants from Swaziland and Kenya presented their experiences in capacity-building and debt management reforms, and Zimbabwe presented their arrears clearance strategy, as part of the reform plan module. DMF Activities: October to December 2010 Since its inception, the DMF has financed a total of 23 Debt Management Performance Assessment (DeMPA) missions, 12 Medium Term Debt Management Strategy (MTDS) missions, and 8 Reform Plan missions. The facility has also financed 9 training sessions. Details of activities for the period under review are as follows: DeMPA The DMF completed four DeMPA missions. The DeMPA missions took place in Yemen, Albania, Mongolia and Bhutan. The mission in Mongolia was a Second DeMPA. This brings the total of Second DeMPAs to five. MTDS There were no MTDS missions. Reform Plan The DMF completed two Reform Plan missions. The Reform Plan missions took place in Moldova and The Gambia. Training A DeMPA Workshop (November 14-19, 2010) was conducted in Namibia in collaboration with MEFMI (see above). Upcoming DMF Activities After having had three offerings of the Subnational Fiscal and Debt Management course in 2010, a pilot mission to the state of Lagos, Nigeria is scheduled from January 31 to February 9, 2011. This is the first subnational DeMPA pilot within the framework of the World Bank's work program in strengthening debt management at the subnational government level. Training Three regional training events are scheduled for the period DMF Missions: January to March 2011 January to March 2011: » Second DeMPA mission to Zambia, January 19-28, 2011 » DeMPA mission to Comoros, January 26 - February 8, 2011 » MTDS training in Dakar with Pole-Dette (Francophone » Reform Plan mission to Malawi, January 17-28, 2011 Africa), January 29 - February 4, 2011 » MTDS Follow-up mission to Tanzania, January 18-28, 2011 » DeMPA training event in Mexico with CEMLA, February » MTDS Baseline mission to Senegal, February 7-18, 2011 28 - March 4, 2011 » Reform Plan mission to Maldives, February 2011 » MTDS training in Jakarta with DMFAS, March 2011 » Second DeMPA mission to Burkina Faso, March 2011