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OPINION June 27, 2017

In Tokyo and in search of answers of managing risk in a volatile world

Debt managers learn from practitioners and each other in a candid exchange of ideas and practices in a workshop on designing government debt management strategies.

How do I?

Around the room there were nods of understanding as the debt manager presented the context. In Uganda, she explained, the domestic debt market is nascent. It is dominated by a limited number of players, primarily commercial banks, seeking to invest in short-term instruments. A lack of savings in the economy coupled with an undiversified investor base limits the country’s ability to develop the domestic debt market at a reasonable cost. The challenge was clearly shared among the other participants, regardless of the country they came from. Many ask similar questions in their role as a debt manger. How do I overcome obstacles to developing the domestic market? How do I manage interest rate, currency and refinancing risks and what is the ideal composition of the debt portfolio? How do I quantify all of these risks and share complex information in a succinct way with officials and the public?

A unique opportunity for debt managers to discuss the common issues

The Designing Government Debt Management Strategies workshop is a unique opportunity for debt managers from around the world to discuss the answers to these questions. During the week-long workshop, 22 debt managers representing 17 countries in Asia, Africa and the Middle East came together to share their country’s experiences on the design of debt management strategies. The workshop is co-organized by the World Bank Treasury and the Japan International Cooperation Agency (JICA) as part of a long-standing cooperation between these two institutions on technical assistance on public financial management. The work of a debt manager in a developing country, or any country for that matter, can be at times a thankless job – rarely recognized in periods of macroeconomic and financial stability yet quickly prone to criticism in times of crisis. A debt management strategy that seeks to minimize cost consistent with a prudent degree of risk helps build resilience to financial shocks. Ultimately, this resilience helps to ensure economic growth and development gains are sustainable.

What I observed as an analyst with the World Bank Treasury

As an analyst in the World Bank Treasury’s Government Debt and Risk Management team, I’ve worked closely with governments on analyzing their debt portfolios. From my perspective, the debt managers walked away with new insights from the course presentations and applied exercises – thinking about interest rate and currency risks in new ways -- but also from valuable exchanges and discussion among themselves. Participants shared lessons learned on transparency, investor dialogue, and how to engage with stakeholders and inform the public. In other instances, participants whose day-to-day work is not directly related to the calculation of cost and risk exposure recognized the complexity of the debt manager’s job in their home countries.
Personally, the workshop was an extremely valuable opportunity to dive deeper into all aspects of public debt management but particularly to see the collaboration among debt management practitioners.

Tokyo provides an exciting backdrop to learn how to manage risk in a volatile world.

Among the exciting backdrop of Tokyo, the capital of a fascinating and modern country, the participants form bonds and benefit from an additional week of presentations on Japan’s development story, institutions and debt management practices – as well as the importance of prudent risk management in a country with the highest debt-to-GDP ratio in the world (240%). Debt managers face many of the same challenges from a volatile world, and workshops such as this provide an opportunity to share experiences, learn lessons from each other and together strengthen resilience.