BRIEF July 11, 2019

DeMPA: Frequently Asked Questions (FAQ)

What is the rationale for the DeMPA?

The DeMPA is a public good, designed to help countries improve central government debt management capacity. The DeMPA accomplishes this through a comprehensive evaluation of the strengths and weakness of current debt management performance, identifying areas where institutions, legislation, practices, and capacity deficits contribute to less-than fully effective management of government debt and related economic policies. The DeMPA was developed to address the particular challenges that low-income and other developing countries face with regard to public debt management. Low-income countries (LICs) are particularly vulnerable to debt distress given their heavy reliance on external sources of finance, their often narrow export bases and undiversified economies, and their susceptibility to economic and other shocks.

The rationale for the DeMPA grew out of the fact that over the past decade, many LICs have benefited from debt relief, including debt rescheduling from bilateral creditors as and relief under the Heavily Indebted Poor Country Initiative (HIPC) 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. Moreover, many post-HIPC and MDRI countries are becoming more active in non-concessional credit markets, without being fully equipped with the capacity to evaluate the cost-effectiveness and terms of such borrowing. In addition, weak internal controls, governance structures, and institutional arrangements make them vulnerable to re-accumulating debt burdens that may impair development and social objectives. The DeMPA aims to identify areas where debt management practices and policies can be strengthened in order to reduce vulnerabilities.

The Executive Board of the World Bank, representing its 186 members, has endorsed the use of the DeMPA tool to assess debt management performance in low-income and other developing countries. When requested by the country authorities, the results of the assessment can serve as the basis for the design of detailed and sequenced capacity-building and reform programs.

What countries have undergone DeMPA assessments?

The DeMPA has been applied across a wide range of low- and middle-income countries in Africa, Asia, Latin America and the Caribbean, and Central Europe. The DeMPA indicators were field-tested in five developing countries from multiple regions in FY 2007—i.e., Albania, Guyana, the Gambia, Malawi, and Nicaragua. This helped to calibrate the indicators, while taking into account differences that exist across regions and countries at different stages of development.

What is the scope of issues covered by the DeMPA program?
The DeMPA is focused on central government debt management functions and closely related activities, such as the issuance of loan guarantees and on-lending, and cash-flow forecasting and cash balance management, and related aspects of macroeconomic management more broadly. The DeMPA does not cover the management of total public debt, such as the debt of state-owned enterprises, if these are not guaranteed by the central government. However, because the obligations of central governments generally include reporting on total nonfinancial public sector debt and loan guarantees, the quality of the reporting of such liabilities are included in the Debt Reporting indicator (DPI-15).
Can the DeMPA be applied to levels of government other than the central government-e.g., state or local governments?
While the DeMPA tool is designed to evaluate central government debt operations, the framework is both comprehensive and sufficiently flexible to be applied at the sub-national level with certain modifications. In this context, a sub-national DeMPA tool and guide are being developed.
Are there links between the PEFA and the DeMPA frameworks?
The scoring methodology of the DeMPA is modeled after the Public Expenditure and Financial Accountability (PEFA) framework’s indicators. While PEFA indicators cover critical issues across the entire spectrum of public financial management practices, the DeMPA focuses on government debt management exclusively, but in greater depth. In this context, the assessment of the PEFA and DeMPA can differ even in areas where there is direct overlap between the two tools. Areas of overlap include the managerial structure for contracting loans, the issuance of loan guarantees, and debt data recording and reporting. Strong links are also found between PEFA indicators on audit and fiscal planning and the DeMPA indicators on audit and coordination with macroeconomic policies.
Is World Bank support conditional on DeMPA results?
The DeMPA has no direct link to conditionality or the allocation of resources to recipient countries. The DeMPA is conducted solely for the benefit of the country authorities to highlight strengths and weaknesses in central government debt management in order to improve internal capacity.
What are the confidentiality policies surrounding the DeMPA? What policies govern the disclosure and publication of DeMPA reports?

The DeMPA is undertaken on a confidential basis at the request of client countries. The DeMPA report and its contents are strictly confidential, and no information resulting from the assessment is shared outside of the World Bank departments responsible for the evaluation without the explicit permission of the government.

Disclosure of the final DeMPA report and its contents is strictly voluntary and based solely on the wishes of the country authorities. The World Bank makes no presumption regarding the government’s willingness to disclose the findings of the DeMPA. To date, several governments that have undertaken DeMPAs have chosen to make the results public, which has served as a catalyst for reform and for attracting external support and resources for technical assistance in areas identified as priorities. The assessment can also be published on the World Bank’s website, if the government so chooses.

Why does the DeMPA tool use letter grades?
The DeMPA’s scoring methodology is consistent with that used in the context of the Public Expenditure and Financial Accountability (PEFA) framework. Individual dimensions considered by the DeMPA are scored on a scale of “A” through “D”, with a score of “C” indicating that the minimum requirements for the dimension in question have been met. The practice of scoring enables evaluators and country authorities to monitor progress over time, and helps to benchmark country performance and capacities against sound practices and minimum requirements for debt management.
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 recognized internationally as a 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.

In order to avoid a biased assessment, the DeMPA is designed as an independent and impartial evaluation of debt management practices by a team of external evaluators who are experts in the area of sovereign debt management and macroeconomics. Having developed the DeMPA methodology and undertaken a wide range of assessments to date, the World Bank’s DeMPA program offers countries both substantial experience in this field, as well as objective quality control, including access to a large pool of internal and external debt management experts that both undertake the assessments and provide quality assurance and supplemental input via peer reviews and consultations. The resulting transparency of an outside evaluation provides donors and other development partners with a coordinated and consistent way of identifying priority areas for assistance, facilitating increased donor support to priority areas.

What countries are eligible for the World Bank’s DeMPA program? What are the financing arrangements in place?
The DeMPA program is a demand-driven process, and countries must request a DeMPA before the World Bank can consider it as a candidate. The DeMPA methodology is applicable to all developing countries, and there are no restrictions as to which developing countries can participate in the program. At present, the World Bank DeMPA program is financed in part by a multi-donor trust fund (the Debt Management Facility), which provides full financing for assessments undertaken in low income and IDA-only countries. The cutoff for IDA eligibility for FY10 is $1,135 (2008 GNI per capita), and the historical ceiling for IDA eligibility for FY10 is $1,855 (2008 GNI per capita). DeMPAs have been undertaken in lower middle-income countries that qualify for a blend of IDA and IBRD financing—including some former HIPCs, countries suffering from high debt levels, and post-conflict countries—that were financed by the World Bank’s budget. Countries outside of the above categories can also request a DeMPA, with financing sourced either from the World Bank Regional Teams or on a cost-recovery basis.
Is the DeMPA a catalyst for reform?

If requested by the country, the DeMPA report will serve as the basis for the design of a detailed and sequenced reform and capacity-building program. 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. In addition, the DeMPA facilitates the monitoring of progress in implementing reforms if the country schedules follow-up assessments. To date, follow-up assessments have been undertaken in several countries.

Given the World Bank’s role in capacity building and donor coordination, 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 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, Fiscal Affairs Department, and the Statistics Department), Debt Relief International, UNCTAD’s DMFAS Programme, the Debt Management Division of the Commonwealth Secretariat, 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 CEMLA, MEFMI, Pole Dette, and WAIFEM also provided comments and suggestions.
Is there a link between the DeMPA and World Bank / IMF programs?
The results of the DeMPA are confidential and are not linked to the allocation of resources to recipient countries under any World Bank or IMF program. However, the DeMPA results, if disclosed by the authorities, can constructively inform other programs and initiatives. One such initiative is the Medium-Term Debt Management Strategy (MTDS), which is a joint World Bank-IMF initiative aimed at supporting the design of medium-term debt management strategies in LICs, including through the use of tools for the analysis of the costs and risks associated with alternative debt portfolios. In certain countries where the results have been disclosed, World Bank Public Expenditure Reviews (PER) and other analytic and advisory activities have utilized the findings from DeMPA reports.
Once a DeMPA assessment has been completed, is it possible to revise scores based on improved policies and practices?
The DeMPA is an assessment of policies and practices in place at a point in time, so scores are generally not updated to take into account improvements after the fact. Subsequent assessments may be undertaken, however, depending on the country’s needs, which would then reflect any reforms or improvements in policies. That said, reforms that may be underway at the time of the assessment may be outlined in the report. Of course, the authorities have the opportunity to review the draft document before it is finalized, and any errors or omissions are corrected prior to publication.
How often can a DeMPA be conducted?
The DeMPA focuses on reforms in public financial management (PFM) which may require time to be implemented, and thus an assessment is recommended after three years.
How long does a DeMPA mission last? How many people are involved? What is the timeframe for the production of a DeMPA report?
A DeMPA mission usually takes place over a period of 10 working days, and involves a team of three experts, including a macroeconomist, a debt management expert, and an individual with regional expertise—often from an Implementing Partner (IP) of the World Bank’s Debt Management Facility (DMF). The DeMPA report is submitted for the approval to the authorities usually within 8 to 10 weeks of mission completion, depending on the time taken in the quality assurance process.
Is the DeMPA available in languages other than English?
The DeMPA Tool and Guide are also available in French, Spanish, and Arabic. Individual DeMPA reports are available in both English and an official language of the country, if English is not the official language.