Introduction
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A government's debt portfolio is usually the largest financial portfolio in the country. It often contains complex financial structures and can create substantial balance-sheet risk for the government. Large and poorly structured debt portfolios also make governments more vulnerable to economic and financial shocks and have often been a major factor in economic crises. Recognizing the important role that public debt management can play in helping countries cope with economic and financial shocks, the International Monetary and Financial Committee (IMFC) 1 requested that staff from the International Monetary Fund and World Bank work together in cooperation with national debt management experts to develop a set of guidelines on public debt management to assist countries in their efforts to reduce financial vulnerability. The IMFC's request, which was endorsed by the Financial Stability Forum, was made as part of a search for broad principles that could help governments improve the quality of their policy frameworks for managing the effects of volatility in the international monetary and financial system.
By involving national debt management authorities in the preparation of the guidelines, the process sought to strengthen countries' sense of ownership of them and helped to ensure that they are in line with sound practice. Government debt managers from about 30 countries provided input to an initial draft that was discussed by the Executive Boards of the IMF and World Bank in July 2000. Following these discussions, more than 300 representatives from 122 countries attended five outreach conferences on the guidelines in Abu Dhabi, United Arab Emirates; Hong Kong Special Administrative Region; Johannesburg, South Africa; London, United Kingdom; and Santiago, Chile. 2 The feedback provided was taken into account in the final version that was approved by the Executive Boards of the two institutions in March 2001, and endorsed by the IMFC and the Development Committee 3 at their meetings in April 2001. Since then, the guidelines have been available on the IMF and World Bank web sites in five languages (English, French, Spanish, Russian, and Arabic), and a hard copy version was published by the two institutions in September 2001. 4 The guidelines are summarized in Appendix I.
In the course of the Board discussions, the Executive Directors of the IMF and the World Bank asked their staff to prepare an accompanying document to the guidelines that would contain sample case studies of countries that are developing strong systems of public debt management. At the same time, the Boards requested that this report should not expand or add to the guidelines, but instead delineate the experiences of various countries in the form of case studies. In response, staff from the IMF and the World Bank have prepared this document, which contains 18 country case studies to illustrate how a range of countries from around the world and at different stages of economic and financial development are developing their capacity in debt management in a manner consistent with the guidelines. The diverse nature of the countries represented in the case studies is illustrated by the economic and financial indicators presented in Table I.1. The experience of these countries should offer some useful practical suggestions of the kinds of steps that other countries could take as they strive to build their capacity in government debt management.
In line with the process adopted for the guidelines, the preparation of the accompanying document has sought to foster countries' sense of ownership of the product and ensure that the descriptions of individual country practice and the lessons learned are well grounded. The 18 country case studies were prepared by government debt managers coordinated by IMF and World Bank staff. They cover both their domestic debt management and foreign financing activities. After collecting the information and preparing initial drafts of the case studies, the officials involved in preparing the case studies were invited to an outreach conference in Washington in September 2002 to discuss the conclusions drawn from the cases by IMF and World Bank staff, as well as the document as a whole.
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Table I.1. Selected Macroeconomic and Financial Indicators for Case Study Countries in 2001
Standard and Poor’s | |||||||
General | Broad | Stock market | long-term | Moody’s | |||
Nominal GDP | government | money | capitalization | debt ratings | long-term debt | ||
per capita | net debt | (M2) | (1999 data) | Foreign Local | |||
(US$) | (%GDP) | (%GDP) | (%GDP) | currency currency | ratings | ||
Brazil | 2,986 | 56 | 25 | 30 | BB- | BB+ | B1 |
Colombia | 2,021 | 47* | 31 | 13 | BB | BBB | Ba2 |
Denmark | 30,160 | 39 | 39 | 60 | AAA | AAA | Aaa |
India | 466 | 90 | 65 | 41 | BB | BBB- | Ba2 |
Ireland | 26,596 | 25 | n.a.** | 45 | AAA | AAA | Aaa |
Italy | 18,904 | 104 | n.a.** | 62 | AA | AA | Aaa |
Jamaica | 3,758 | 130*** | 44 | 38 | B+ | BB- | Ba3 |
Japan | 32,637 | 66 | 131 | 105 | AA | AA | Aa1 |
Mexico | 6,031 | 42 | 29 | 32 | BBB- | A- | Baa2 |
Morocco | 1,147 | 76 | 75 | 39 | BB | BBB | Ba1 |
New Zealand | 12,687 | 18 | 89 | 52 | AA+ | AAA | Aa2 |
Poland | 4,562 | 36 | 46 | 19 | BBB+ | A+ | Baa1 |
Portugal | 10,587 | 59* | n.a.** | 58 | AA | AA | Aa2 |
Slovenia | 10,605 | 1 | 52 | 11 | A | AA | A2 |
South Africa | 2,490 | 43* | 60 | 200 | BBB- | A- | Baa2 |
Sweden | 23,547 | -3 | 46 | 156 | AA+ | AAA | Aa1 |
United Kingdom | 23,765 | 31 | 95 | 203 | AAA | AAA | Aaa |
United States | 36,716 | 42 | 53 | 182 | AAA | AAA | Aaa |
* Gross debt as a percent of GDP.
** M2 data are not available at the national level for members of the European Monetary Union.
*** End of fiscal year 2001-02.
Source: IMF World Economic Outlook , Bankscope databases, and IMF staff estimates.
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Public debt management is the process of establishing and executing a strategy for managing the government's debt to raise the required amount of funding, pursue its cost/risk objectives, and meet any other public debt management goals the government may have set, such as developing and maintaining an efficient and liquid market for government securities.
In a broader macroeconomic context for public policy, governments should seek to ensure that both the level and the rate of growth in their public debt are fundamentally sustainable over time and can be serviced under a wide range of circumstances while meeting cost/risk...
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