assessment of a range of alternative strategies day 4...assessment of a range of alternative...
TRANSCRIPT
IMF-WB Workshop on Medium Term Debt Management Strategy (MTDS)
Assessment of a range of alternative strategies
Joint Vienna Institute, Vienna, Austria
February 23 – 27, 2015
IMF-WB Workshop on Medium Term Debt Management Strategy (MTDS)
Illustrative Strategies
IMF-WB Workshop on Medium Term Debt Management Strategy (MTDS)
Evaluating Strategies: cost and risk trade-off
• Step1: Simulate range of candidate viable and realistic strategies under specific baseline
• Step 2: Have already defined the set of alternative strategies and alternative scenarios – the stress tests
• Step 3: Consider outcome under alternative conditions / stress test
• Step 4: Compare the outcome under baseline and stress test for each strategy
• Step 5: Rank performance and determine the preferred strategy
IMF-WB Workshop on Medium Term Debt Management Strategy (MTDS)
Assessing performance
• Need to be critical in the assessment– Consider ex ante the possible ranking / effects of stress
scenarios…– Which strategy is likely to be least costly?
– What risk exposures are likely to increase with each strategy?
– Why do expectations differ from outcomes?
• Need to determine in advance indicators and cost/risk levels
IMF-WB Workshop on Medium Term Debt Management Strategy (MTDS)
Recall Cost and Risk Indicators
• Cost?
– Interest
– Interest / Revenues or Interest / GDP
– Interest + Adjusted Principal
– Debt / GDP
Which measures are relevant for the specific economy?
• Risk?
What is the reasonable level of risk?
IMF-WB Workshop on Medium Term Debt Management Strategy (MTDS)
Measurement of risk
Baseline Scenario
Risk Scenario 1
Time
Cost
Risk1,X
Cost1,X Costbaseline
Time
IMF-WB Workshop on Medium Term Debt Management Strategy (MTDS)
Borrowing Strategies
S1 S2 S3 S4
% of Total % of Total % of Total % of Total
External Domestic External Domestic External Domestic External Domestic
Types of Debt All IDA All T-bills All Eurobonds All Domestic Bonds
External 100 100
Multilateral Concessional
100
Eurobonds 100
Domestic 100 100
Domestic < 1yr 100
Domestic > =10yr 100
7
IMF-WB Workshop on Medium Term Debt Management Strategy (MTDS)
S1: All IDA S2: All T-billsS3: All Eurobonds S4: All 10Yr -20Yr T-Bond
Outcomes: Changes in debt outstanding
IMF-WB Workshop on Medium Term Debt Management Strategy (MTDS)
Outcomes: Redemption profiles
S1: All IDAS2: All T-billsS3: All EurobondsS4: All 10Yr -20Yr T-Bonds
IMF-WB Workshop on Medium Term Debt Management Strategy (MTDS)
Outcomes: Debt/GDP
S1: All IDA S2: All T-billsS3: All Eurobonds S4: All 10Yr -20 Yr T-Bonds
IMF-WB Workshop on Medium Term Debt Management Strategy (MTDS)
Outcomes: Interest/GDP
S1: All IDA S2: All T-billsS3: All Eurobonds S4: All 10Yr -20 Yr T-Bonds
IMF-WB Workshop on Medium Term Debt Management Strategy (MTDS)
Outcomes: PV Debt/GDP
S1: All IDA S2: All T-billsS3: All Eurobonds S4: All 10Yr -20 Yr T-Bonds
IMF-WB Workshop on Medium Term Debt Management Strategy (MTDS)
Outcomes: PV Debt / GDP
S1: All IDA S2: All T-billsS3: All Eurobond S4: All 10Yr T-Bond
IMF-WB Workshop on Medium Term Debt Management Strategy (MTDS)
Evolution of outcomes through time
S1: All IDAS2: All T-billsS3: All EurobondsS4: All 10Yr -20Yr T-Bonds
IMF-WB Workshop on Medium Term Debt Management Strategy (MTDS)
Other cost risk indicators
Can we think of other relevant indicators?
IMF-WB Workshop on Medium Term Debt Management Strategy (MTDS)
Resolving a conflict between indicators?
• Consider wider set of indicators?
• Consider more closely how well the strategies meet other objectives
• Consider how they perform relative to identified priorities for mitigate macro vulnerabilities
• At the end of the day … need to use judgment
IMF-WB Workshop on Medium Term Debt Management Strategy (MTDS)
Implied Issuance Patterns
Is this viable?
How realistic are the strategies being analyzed?
What do these decisions imply for the rest of the economy?
Is this compatible with the monetary policy stance?
Total Gross Financing in USD
2011 2012 2013 2014 2015
S1 All IDA 16,241 8,036 8,407 5,228 4,359
S2 All T-bills 16,241 24,177 32,604 38,434 43,650
S3 Eurobonds 16,241 9,076 10,089 7,685 7,445
S4 Domestic bonds (>=10yr)
16,241 9,770 11,069 8,941 8,886
IMF-WB Workshop on Medium Term Debt Management Strategy (MTDS)
Drawing conclusions
• Quantitative tools help inform decision-making by allowing producing a ranking of candidate strategies on a consistent basis
• However:
– The quality of outputs is only as good as the quality of the inputs
– Decisions need to be made in line with the pre-set objectives and take constrains into account
IMF-WB Workshop on Medium Term Debt Management Strategy (MTDS)
Questions?