Guidelines help countries reduce their vulnerability to external financial shocks

• Author: Piero Ugolini; Robert Price, Mark Zelmer
• Position: IMF Monetary and Exchange Affairs Department
• Pages: 266-267

Page 266

Topics covered by draft guidelines

Debt management objectives and coordination with monetary and fiscal policies Transparency and accountability

• Clarity of roles, responsibilities, and objectives of financial agencies charged with debt management

• Open process for formulating and reporting of debt-management policies

• Public availability of information on debt-management policies

• Accountability and assurances of integrity by agencies responsible for debt management

Institutional framework

• Governance

• Management of internal operations

Debt-management strategy

Risk-management framework

• Scope for active management

• Contingent liabilities

Development and maintenance of efficient markets for government securities

• Portfolio diversification and instruments

• Primary market

• Secondary market

Meeting in September 1999, the Interim Committee of the Board of Governors of the International Monetary Fund (now the International Monetary and Financial Committee (IMFC)) called on the IMF and the World Bank to cooperate with national debt-management experts in developing a set of guidelines on public debt management to help countries reduce their financial vulnerability. The request was made as part of a search for broad principles to help governments improve the quality of their policy frameworks for managing the effects of volatility in the international monetary and financial system.

The Working Group on Capital Flows, one of three working groups established by the Financial Stability Forum (FSF) (the FSF was created to strengthen cooperation among groups involved in regulating and overseeing global markets, see IMF Survey, March 8, 1999, page 69), highlighted the rationale for the development of the guidelines as part of a broader effort to strengthen countries’ risk management and governance in the public sector and thereby reduce their vulnerability to external shocks. The value of these guidelines was reiterated in the forum’s working group report as well as by the IMFC and the Development Committee at their spring 2000 meetings in Washington.

Staff response

In response to the Committee’s request, the staffs of the IMF and the World Bank prepared Draft Guidelines for Public Debt Management. The draft guidelines derive from work, completed or in progress, that the IMF and the World Bank have done on countries’ debt-management...