Despite the obstacles posed by Hurricane Sandy, public debt managers from around the world gathered at the World Bank’s Sovereign Debt Management Forum on October 31, 2012 to share their experiences. The 2012 Forum brought together over 120 debt managers and representatives from international financial institutions to review lessons learned from adapting and implementing public debt management strategies in the challenging economic environment over the past year.
WEDNESDAY, OCTOBER 31
8:00 a.m. FORUM REGISTRATION AND BREAKFAST Venue: Main Complex (MC) - Front Lobby
8:50 a.m. OPENING REMARKS Venue: Preston Auditorium Speaker: Axel R. Peuker, Director, Financial Advisory and Banking, The World Bank
9:00 a.m. PLENARY 1 10 Years after the Guidelines: what impact did the Guidelines have, and is there a need to revise them? Venue: Preston Auditorium
In 2001, The World Bank and the International Monetary Fund jointly published the Guidelines for Public Debt Management. At the time, the aim was to develop a set of guidelines on public debt management that would assist policy makers in strengthening the quality of their public debt management and reducing vulnerability to financial shocks. This session will review how the Guidelines have performed since publication, focusing on the usefulness of the Guidelines for countries in both calm and volatile periods, and whether the Guidelines are still valid in expressing sound practice. Moderator: Phillip Anderson, Senior Manager, Financial Advisory and Banking, The World Bank Speakers: Lars Hörngren, Chief Economist, Swedish National Debt Office, Otavio Medeiros, Head of Public Debt Strategic Planning Department, Brazilian National Treasury, Sergey Storchak, Deputy Finance Minister, Russian Federation, Mike Williams, Consultant
10:30 a.m. PARALLEL BREAKOUT SESSIONS 1 AND 2
BREAKOUT SESSION 1 - Is the crisis a call for closer coordination among monetary policy, fiscal policy and debt management? Venue: Preston Auditorium
The current financial crisis has presented central banks with the challenge of finding a transmission mechanism for expansionary monetary policies that can stimulate the pace of economic activity. With short-term interest rates already close to zero and a financial system unwilling or unable to lend to companies and households, some central banks have intervened in the markets, buying long-term government securities to drive down long-term interest rates. Recent discussions about the prospect of high public debt/GDP ratios in many advanced economies as well as the persistence of large fiscal deficits have raised concerns among both monetary authorities and public debt managers about the possibility of “fiscal dominance". This session will explore the relationship among debt management, monetary policy and fiscal policy in a crisis environment. The discussion will address how countries have approached the reformulation of these relationships and the concerns that may arise about the future when central banks move to a more restrictive monetary policy stance at a time when public debt levels are high. Moderator: Sudarshan Gooptu, Sector Manager, Economic Policy and Debt Department, The World Bank Speakers: Phillip Turner, Deputy Head, Monetary & Economic Department, Bank for International Settlements, Lars Hörngren, Chief Economist, Swedish National Debt Office
BREAKOUT SESSION 2 - Overcoming obstacles to building public debt management capacity Venue: MC2-800
This session will focus on how to develop debt management capacity, in light of common constraints countries face, such as low technical capacity, high turnover, and limited access to analytical tools. Some countries have been able to surmount these obstacles, and learning from successful examples of institution building across a diverse range of countries is critical to avoiding mistakes going forward. The workshop will include a discussion of the Debt Management Performance Assessment (DeMPA), Medium Term Debt Management Strategy (MTDS) and will review how reform plan tools can be applied in improving debt management. Moderator: Lars Jessen, Lead Financial Officer, Financial Advisory and Banking, The World Bank Speakers: Elena Matveeva, Director of Public Debt Department, Ministry of Finance, Moldova, Widjanarko, Director of Evaluation Accounting and Settlement, Directorate General for Public Debt Management, Indonesia, Michele Robinson, Debt Management Consultant
11:30 a.m. COFFEE BREAK Venue: Outside MC2-800 & Front Lobby
11:45 a.m. PARALLEL BREAKOUT SESSIONS 3 AND 4
BREAKOUT SESSION 3 - Analytical tools supporting debt management strategy development: In-house or off-the-shelf tools? Venue: MC2-800 This session will explore how some countries developed their own analytical models to support the development of their medium term debt management strategies, including discussion of the main challenges they faced in developing risk models. Questions that will be addressed include: how complex/simple should these models be? How can analytical tools support the choice of medium term strategy and the development of annual funding plans? How useful or necessary are analytical models and what are their constraints? The session will also include an example of an application of the Medium Term Debt Management Strategy Toolkit developed jointly by The World Bank and the International Monetary Fund. Moderator: Myrvin Anthony, Senior Economist, International Monetary Fund Speakers: Emre Balibek, Deputy Director General, Turkish Treasury, James Olekah, Head of Policy Strategy and Risk Management, Debt Management Office, Nigeria, Jacob Ejsing, Assistant Head of Government Debt Management, Danmarks Nationalbank, Denmark
BREAKOUT SESSION 4 - Improving governance in public debt management Venue: Preston Auditorium
This session will review best practices related to public debt management governance arrangements and will discuss how different models might be applied in low income vs. middle and high Income countries. Other questions to be discussed include: How to structure the reporting link between the Head of the DMO and the Minister of Finance? What are some of the lessons of dealing with auditors and legislative bodies? Moderator: Tomas Magnusson, Consultant, The World Bank Speakers: Phaedon Kalozois, Director of Finance, Public Debt Management Office, Cyprus, Branko Drcelic, Head of Public Debt Administration, Ministry of Finance and Economy, Serbia, Jose Oyola, Intosai Adviser, INTOSAI
1:00 p.m. LUNCHEON Venue: Preston Lounge
2:15 p.m. PARALLEL BREAKOUT SESSIONS 5 AND 6
BREAKOUT SESSION 5 - Selecting among different financing proposals for public sector investments: a practical approach Venue: MC2-800
This session will discuss the criteria used by countries to choose among different proposals from bilateral and multilateral sources as well as private sector in order to finance public sector investments. Topics will include; i) the development of a framework to assess external and domestic financing sources; ii) how to compare the costs and risks arising from financing proposals; iii) how to take into account other considerations such as political relations, the expertise of the lenders in the sector or the additional services provided; iv) aligning project financing decisions with the debt management strategy; and v) what kind of procedures should be developed for documenting the financial decisions. The session will provide examples of choices countries have made and the lender perspective. Moderator: Lee Meddin, Deputy Treasurer, International Finance Corporation Speakers: Olga Mereuta, Head of External Financing and Debt Division, Ministry of Finance, Moldova, Nguyen Thi Thu Hien, Deputy Director, Planning and Risk Management Division, Ministry of Finance, Vietnam
BREAKOUT SESSION 6 - The second step in debt management IT systems: from debt registering to supporting the design and monitoring of a debt management strategy Venue: Preston Auditorium
A reliable debt recording system ranks first in the set of IT concerns sovereign issuers have. This session will explore how to develop an IT system that supports the design of a debt management strategy, as well as risk management and the monitoring of the strategy. Are there off-the-shelf solutions in the market? What are the main challenges in developing an IT system in-house? Moderator: Jacob Ejsing, Assistant Head of Government Debt Management, Danmarks Nationalbank, Denmark Speakers: Patricia Joachin, Deputy Director of Planning of Public Strategy, Ministry of Public Finance, Guatemala, Elizabeth Toledo, Directorate of Risk Management, Ministry of Finance, Peru, Ibrahim M. Natagwandu, Assistant Director, Debt Management Office, Nigeria
3:30 p.m. PLENARY 2 Should debt managers care about risk exposures that are not directly debt-related? Venue: Preston Auditorium
This session will examine how countries have established institutional, analytical and transactional frameworks to deal with numerous risks to the budget in addition to those inherent in the management of the public debt portfolio. The former include explicit contingent liabilities, such as guarantees for subnational debt, guarantees for PPPs and litigation against the State, as well as implicit contingent liabilities, such as natural disasters and bailouts of sub-national governments. Some countries manage the risks arising from commodity price volatility if this has an important impact on their budget, while still others address weather risks. The session will also explore how the management of these non-debt risks relates to current public debt management arrangements and to debt management strategy design, and asks if they can be usefully analyzed within a sovereign asset and liability management framework. Moderator: Elizabeth Currie, Lead Financial Officer, Financial Advisory and Banking, The World Bank Speakers: Juan Quintero, Deputy Director, Head of Internal Debt Office, Ministry of Finance and Public Credit Colombia, Jozef Draaisma, Senior Country Economist for Mexico, The World Bank, Anthony Linehan, Deputy Director, Funding and Debt Management, National Treasury Management Agency, Ireland
4:30 p.m. COFFEE BREAK Venue: Front Lobby
PLENARY 3 Broadening the investor base: practical examples from country experiences Venue: Preston Auditorium This session will discuss new trends and approaches to broaden the investor base beyond the core traditional institutional investors (e.g. banks, pension funds, insurance companies, mutual funds). New types of investors that are increasing their relevance in debt managers’ policy agenda include foreign investors, retail investors, the Diaspora and Islamic investors. Issues addressed in the panel would include: what is the rationale for expanding beyond the traditional investor base? Is it only diversifying risk or are there also other policies involved such as financial inclusion objectives? Is this trend introducing new types of risks and costs that debt managers need to take into account? Are the new types of instruments and investors having an impact on segmenting markets and therefore on the development of stable and liquid domestic bond markets? Moderators: Catiana Garcia-Kilroy, Senior Securities Market Specialist, The World Bank Speakers: András Réz, Head of Department, Hungarian Government Debt Management Agency w Gerald Nyaoma, Director Financial Markets, Central Bank of Kenya, Ahmed Mobarak, Assistant Advisor to the Minister, Debt Management Unit, Egypt, Juan Quintero, Deputy Director, Head of Internal Debt Office, Ministry of Finance and Public Credit, Colombia
5:50 p.m. SURVEY PLENARY PRESENTATION Developing a medium term debt management strategy Venue: Preston Auditorium
Preliminary results of a recent survey of debt managers on sovereign debt management strategies will be used to generate discussion on the extent to which countries have formal debt management strategies in place, if and how they have established strategic targets or benchmarks, and how debt management strategies are incorporated into the government budget process. Speakers: Phillip Anderson, Senior Manager, Financial Advisory and Banking, The World Bank, Rodrigo Cabral, Senior Financial Officer, Financial Advisory and Banking, The World Bank
6:00 p.m. CLOSING REMARKS Speaker: Phillip Anderson, Senior Manager, Financial Advisory and Banking, The World Bank
6:15 p.m. COCKTAIL RECEPTION Venue: Front Lobby
Plenary 1: Ten years after the guidelines: what impact did the guidelines have, and is there a need to revise them?
In 2001, The World Bank and the International Monetary Fund jointly published the Guidelines for Public Debt Management. At the time, the aim was to develop a set of guidelines on public debt management that would assist policy makers in strengthening the quality of their public debt management and reducing vulnerability to financial shocks. This session reviewed how the Guidelines have performed since publication, focusing on the usefulness of the Guidelines for countries in both calm and volatile periods, and whether the Guidelines are still valid in expressing sound practice.
Presentations:
The guidelines for public debt management: a Swedish perspective
Brazilian public debt management guidelines: 10 years
The guidelines, 10 years on... their impact and effectiveness: a personal perspective
Plenary 2: Should debt managers care about risk exposures that are not directly debt-related?
This session examined how countries have established institutional, analytical and transactional frameworks to deal with numerous risks to the budget in addition to those inherent in the management of the public debt portfolio. The former include explicit contingent liabilities, such as guarantees for sub-national debt, guarantees for PPPs and litigation against the State, as well as implicit contingent liabilities, such as natural disasters and bailouts of sub-national governments. Some countries manage the risks arising from commodity price volatility if this has an important impact on their budget, while still others address weather risks. The session also explored how the management of these non-debt risks relates to current public debt management arrangements and to debt management strategy design, and asked if they can be usefully analyzed within a sovereign asset and liability management framework.
Presentations:
Risk management in Colombia: contingent liabilities
Fiscal Risk Management in Mexico
Plenary 3: Broadening the investor base: Practical examples from country experiences
This session discussed new trends and approaches to broaden the investor base beyond the core traditional institutional investors (e.g. banks, pension funds, insurance companies, mutual funds). New types of investors that are increasing their relevance in debt managers’ policy agenda include foreign investors, retail investors, the Diaspora and Islamic investors. Issues addressed in the panel included: what is the rationale for expanding beyond the traditional investor base? Is it only diversifying risk or are there also other policies involved such as financial inclusion objectives? Is this trend introducing new types of risks and costs that debt managers need to take into account? Are the new types of instruments and investors having an impact on segmenting markets and therefore on the development of stable and liquid domestic bond markets?
Presentations:
Broadening the investor base - the case for Hungary
Broadening the investors base: practical examples from Brazil
Breakout Session 1: Is the crisis a call for closer coordination among monetary policy, fiscal policy and debt management?
The current financial crisis has presented central banks with the challenge of finding a transmission mechanism for expansionary monetary policies that can stimulate the pace of economic activity. With short-term interest rates already close to zero and a financial system unwilling or unable to lend to companies and households, some central banks have intervened in the markets, buying long-term government securities to drive down long-term interest rates. Recent discussions about the prospect of high public debt/GDP ratios in many advanced economies as well as the persistence of large fiscal deficits have raised concerns among both monetary authorities and public debt managers about the possibility of “fiscal dominance". This session explored the relationship among debt management, monetary policy and fiscal policy in a crisis environment. The discussion addressed how countries have approached the reformulation of these relationships and the concerns that may arise about the future when central banks move to a more restrictive monetary policy stance at a time when public debt levels are high.
Presentations:
“Benign neglect” of the long-term interest rate
Closer coordination between debt policy and monetary policy?
Breakout Session 2: Overcoming obstacles to building public debt management capacity
This session focused on how to develop debt management capacity, in light of common constraints countries face, such as low technical capacity, high turnover, and limited access to analytical tools. Some countries have been able to surmount these obstacles, and learning from successful examples of institution building across a diverse range of countries is critical to avoiding mistakes going forward. The workshop included a discussion of the Debt Management Performance Assessment (DeMPA), Medium Term Debt Management Strategy (MTDS) and reviewed how reform plan tools can be applied in improving debt management.
Presentations:
Overcoming obstacles to building public debt management capacity - case of Moldova
Overcoming obstacles to building public debt management capacity - case of Indonesia
Implementing debt management reform in Jamaica
Breakout Session 3: Analytical tools supporting debt management strategy development: In-house or off-the-shelf tools?
This session explored how some countries developed their own analytical models to support the development of their medium term debt management strategies, including discussion of the main challenges they faced in developing risk models. Questions that were addressed included: how complex/simple should these models be? How can analytical tools support the choice of medium term strategy and the development of annual funding plans? How useful or necessary are analytical models and what are their constraints? The session also included an example of an application of the Medium Term Debt Management Strategy Toolkit developed jointly by The World Bank and the International Monetary Fund.
Presentations:
Developing analytical models for public debt management: notes from Turkish experience
Application of the MTDS deterministic scenario model
Approaches to cost/risk model development
Breakout Session 4: Improving governance in public debt management
This session reviewed best practices related to public debt management governance arrangements and discussed how different models might be applied in low income vs. middle and high Income countries. Other questions discussed included: How to structure the reporting link between the Head of the DMO and the Minister of Finance? What are some of the lessons of dealing with auditors and legislative bodies?
Presentations:
Public debt management law: recent experience of Cyprus
Public debt management framework- Republic of Serbia
Role of SAIs in Strengthening Sovereign Debt Management
Breakout Session 5: Selecting among different financing proposals for public sector investments: a practical approach
This session discussed the criteria used by countries to choose among different proposals from bilateral and multilateral sources as well as private sector in order to finance public sector investments. Topics included: i) the development of a framework to assess external and domestic financing sources; ii) how to compare the costs and risks arising from financing proposals; iii) how to take into account other considerations such as political relations, the expertise of the lenders in the sector or the additional services provided; iv) aligning project financing decisions with the debt management strategy; and v) what kind of procedures should be developed for documenting the financial decisions. The session provided examples of choices countries have made and the lender perspective.
Presentations:
Mobilizing resources for project finance
Selection of financing proposals for project loans - Republic of Moldova
Governance arrangements in the Republic of Serbia
Vietnam public debt management
Breakout Session 6: The second step in debt management IT systems: from debt registering to supporting the design and monitoring of a debt management strategy
A reliable debt recording system ranks first in the set of IT concerns sovereign issuers have. This session explored how to develop an IT system that supports the design of a debt management strategy, as well as risk management and the monitoring of the strategy. Are there off-the-shelf solutions in the market? What are the main challenges in developing an IT system in-house?
Presentations:
IT systems developed in the debt management office of Guatemala
Development of debt management IT systems in Peru
An appraisal of IT systems for debt managers: the case of Nigeria
Survey on Debt Management Practices and Concluding Remarks
The World Bank is conducting a short survey of debt management practices. The findings will shed light on the establishment and conduct of debt management strategies around the globe, improving our understanding of the progress being made in this critical area. The Forum was an opportunity to briefly share some preliminary results of this survey and ask countries for their participation. We are still receiving surveys and analyzing the results, and a paper with the main findings will be released soon.
