debt problem de mpa

DeMPA and Small States

A comparative snapshot

Edgardo FavaroSustaining Development in Small States in a Turbulent Global Economy,

July 6-7, 2009

Roadmap1. General setting

o What is DeMPA? Why have a DeMPA?o Fitting DeMPA into the big picture

2. Are small states different?o Stylized facts of small stateso DeMPA in small stateso A comparative analysis

3. Concluding remarks

What is DeMPA – An OverviewAnalytical tool with following attributes:

What is DeMPA – the PIs Governance and Strategy Development DPI-1 Legal Framework DPI-2 Managerial Structure DPI-3 Debt Management Strategy DPI-4 Evaluation of Debt Management Operations DPI-5 Audit Coordination with Macroeconomic Policies DPI-6 Coordination with Fiscal Policy DPI-7 Coordination with Monetary Policy Borrowing and Related Financing Activities DPI-8 Domestic Borrowing DPI-9 External Borrowing DPI-10 Loan Guarantees, On-lending and Derivatives Cash Flow Forecasting and Cash Balance Management DPI-11 Cash Flow Forecasting and Cash Balance Management Operational Risk Management DPI-12 Debt Administration and Data Security DPI-13 Segregation of Duties, Staff Capacity and Business Continuity Debt Records and Reporting DPI-14 Debt Records DPI-15 Debt Reporting

What is DeMPA – example of dimensions within PI

What is DeMPA – scoring method

Scoring method - quantifiable scores (A to D)

i) Meet minimum requirement = Score C Important for effective debt management

ii) Absence of minimum requirement = Score D Signals an area of priority attention

iii) Sound practice = Score A (B intermediate for more granularity)

iv) Not rated – if process/system does not exist (e.g., derivatives)

So what? - motivation for DeMPA

• HIPC and MDRI debt relief – opened space for new debt

• Mounting fiscal deficits

• Current volatile and uncertain financial environment

institutional framework necessary to manage public debt prudently

DeMPA and the big picture

DeMPA: Follow-up actions

Possible follow-ups

Training/TA examples

Scope and distribution of DeMPA assessments as of end-May

Small states – stylized facts

Small states– indebtedness

Small states– indebtedness

What about our DeMPA sample?

Small economies – indebtednessCorollary:

More urgent need to build debt management capacity.

Key question:

How to operationalize given small market size and lacking capacity?

DeMPA in small states: basic statistics

DeMPA in small states (sample: 6)

DeMPA outside small states (sample: 21)

Comparing DeMPA outcomes: across countries for each PI

PIs

Comparing DeMPA outcomes: across PI for each country

Small states PI Outside small states PI

Max 8 (53%) 14 (93%)Min 2 (13%) 1 (7%)Median 30% 40%Average 30% 44%

• an average small state has 30% of its PI above the minimum requirement (4.5 PI out of 15)

• an average outside small state has 44% of its PI above the minimum requirement (6.5 PI out of 15), but larger variability

PI ratings: >D

Concluding remarks