debt management performance assessments in mefmi … dem… · · 2016-10-24debt management...

Debt Management Performance Assessments in MEFMI Region (Eastern and Southern Africa)

Panel Discussions at the DMF Stakeholders Conference

3rd – 4th June 2015

Manila, Philippines

Key Messages

1• DeMPA results revealed clear areas of weakness

in countries and in the region.

2

• Reforms are needed in legal framework; Audit; external borrowing; loan guarantees; cash mgt; Segragation of duties, staff capacity & BCP.

3

•Countries have positively responded to the DeMPA training and mission findings. These have triggered visible reforms in a number of countries.

Background

MEFMI currently has 14 member countries: Angola, Botswana, Burundi, Kenya, Lesotho, Malawi, Mozambique, Namibia, Tanzania, Rwanda, Swaziland, Uganda, Zambia, and Zimbabwe.

It is one the DMF Implementing Partners for the Eastern and Southern Africa Region Of the 14 member states, 12 are eligible for assistance

under the Debt Management Facility (DMF)

MEFMI has also joined the World Bank and IMF missions to non-MEFMI countries in the region e.g. Ethiopia, Sudan and Madagascar

Reforms before DeMPA

A number of countries made significant efforts to improve

debt management before the DMF:

■ Improved recording and mgt of debt using systems

provided by COMSEC and UNCTAD;

■ Improved analytical capacity especially in areas such as

DSAs;

■ Clear delineation of debt mgt functions in terms of front,

middle and back office functions;

■ Attempts at consolidation of functions into one DMO;

■ Efforts to develop domestic debt markets.

DeMPA Activities in the Region

Assessments have been conducted in 12 countries:

Burundi, Kenya, Lesotho, Malawi, Mozambique,

Namibia, Rwanda, Swaziland, Tanzania, Uganda,

Zambia and Zimbabwe.

With follow-up or reform plan missions to Malawi,

Tanzania and Zambia.

DMF has also funded regional DeMPA training for

debt managers and public sector auditors in 2008

and 2012, respectively.

Assessment Results in the MEFMI

Region

0

2

4

6

8

10

12Legal framework

Managerial structure

DM Strategy

DM Operations

Audit

Coord with fiscal policy

Coord with monetary policy

Domestic BorrowingExternal Borrowing

Guarantees, onlending &derivatives

Cash flow and Cash Balance mgt

Data admin and security

Segregation, capacity & BC

Debt Records

Reporting

Minimum of C Below Minimum

Results by Dimension

0

2

4

6

8

10

12

Legal frameworkManagerial -D1

Managerial -D2

Strategy -D1

Strategy -D2

DM Operations

Audit -D1

Audit -D2

Coord fiscal policy - D1

Coord fiscal policy -D2

Coord with monet. Policy -D1



Domestic Borrowing-D1

Domestic Borrowing-D2

External Borrowing- D1External Borrowing- D2

External Borrowing- D3Guarantees, onlending, derivative -D1Guarantees, onlending, derivative -D2

Guarantees, onlending, derivative -D3

Cash flow and Cash Bal mgt -D1

Cash flow and Cash Bal mgt -D2

Debt admin and data security-D1




Segreg, capacity & BC-D1



Debt Records-D1

Debt Records-D2

Reporting-D1

Reporting-D2Reporting-D3


Areas for Action

33%

75%

42% 42%

8%

58%

83%75%

0%

25% 25%33%

25%

67%

42%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Why these ResultsDPI

Results (C

& above)Some of the reasons for the Result

Legal framework 33%Lack of borrowing purposes or clear debt management objectives in the legislation.

DM Strategy 42%

Absence of quantitative medium term debt management strategy with guidelines for the preferred

direction of evolution of specific indicators of interest rate, refinancing and foreign exchange risks

DM Operations 42%

Non-reporting of Debt Management activities to the Parliament - only statistical reports prepared without

evaluation of strategy implementation

Audit 8% Lack of performance audits (Debt Management activities, policies and operations are not audited).

External Borrowing 0%

Lack of annual borrowing plan which includes assessment of the most beneficial or cost-effective

terms and conditions for external borrowing that are obtainable from potential creditors and markets

Absence of documented procedures which include preparation of terms sheet by the officials who

participate in the negotiations.

Guarantees, on-

lending & derivatives 25%

Absence of documented procedures for issuance of guarantees and processing of on-lending

Cash flow forecasting

and Cash Balance mgt 25%

Excess cash is not managed i.e. not invested in market or with central banks at market rates

Absence of reliable monthly forecasts disaggregated into weekly

Data admin and

security 33%

Absence of documented procedures for data recording, validation and storage of debt records,

processing payments, as well as, for controlling access to debt records

Segregation, staff

capacity & BCP 25%

Absence of written business continuity and disaster recovery plans.

Absence of a risk champion or risk compliance unit in the MO of DMOs

Reporting 42% Non reporting of total nonfinancial public sector debt and loan guarantees.

Comparison with Global Results

33%

75%

42% 42%

8%

58%

83%

75%

0%

25% 25%

33%

25%

67%

42%

54%

60%

23%

58%

11%

62% 62%

45%

34%

19%

25%22%

16%

44%

22%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

MEFMI Area "C" Worldwide "C"

DeMPA Assessments and the Reform Plans have

led to noticeable improvements in most MEFMI

member states.

Improvements have been seen in:

■ the legal and institutional framework for public debt

management,

■ operational risk management,

■ debt sustainability analyses and

■ formulation of debt management strategies.

Some countries have made more progress.

Impact of DeMPA in the Dissemination

of sound practice

Public Debt Management Manual, which outlines the

procedures for debt administration (2011)

Medium Term Management Strategy (2010, 2013)

Debt Sustainability Analyses undertaken regularly with

assistance of MEFMI

Review of debt management legislation (2014)

A new debt management law was drafted (2014)

■ This is expected to culminate into adoption of a new more

comprehensive law

Malawi

Reorganized debt management functions alongside

Front, Middle and Bank Office

Medium Term Management Strategy (2009, 2010)

Has been validating and reconciling the debt

database

Upgraded the debt database into CS-DRMS version

2

Mozambique

Reforms in cash flow forecasting and balance management

following a DeMPA mission

Medium Term Management Strategy (2012)

Debt data validation and upgrading of a debt database in CS-

DRMS version 2.

Strengthening of debt management office through recruitment

of additional staff in MoF

Namibia

Re-organisation of debt management functions, started with

database unification and establishment of Principal DeM entity

(on-going)

Reviewing the legal framework for debt management (on-

going).

Debt Sustainability Analyses undertaken regularly

Medium debt management strategies (2011, 2013)

Improved debt reporting

Tanzania

Uganda

Re-organisation of debt

management functions,

leading to creation of a

dedicated debt

management office (2014-

2015)

Preparation of a Medium

Debt Management Strategy

(2014)

Zambia

Documentation of Debt

Management Procedures

Manual (2012)

Medium Debt

Management Strategy

(2014, 2015)

Regular debt

sustainability analyses

(2012,2013,2014)

Lesotho

Review of the debt

management legislation

started in 2013 with

assistance of the IMF

Medium Term Debt

Management Strategy

(2013) with assistance of

World Bank and MEFMI

Debt sustainability analysis

(2014) with assistance of

MEFMI

Zimbabwe

A principal Debt

Management Bill (already

approved by Cabinet);

Drafting debt

management manuals

(on going)

Upgraded debt database

to DMFAS v.6.0

Review and adoption of new laws for debt

management take long

In-adequate skills to conduct performance audits of

debt management

Misunderstanding of DeMPA objectives in some

countries i.e. worry about low ratings instead of

looking at it as a launchpad for debt management

reforms.

Challenges

The revised DeMPA methodology is expected to

continue providing the basis of reforms

The harmonization and streamlining of some DPIs

is expected to clarify some inconsistencies and

repetition in the current version. For example:o Bringing together issues of reporting in DPI 4 (Reporting

and evaluation), that were initially in two dimensions i.e.

4 and 15 brings clarity and reduce repetitions and

ambiguities

o Evaluating of the strategy is now only in DPI 3 rather

than in DPI 2 and DPI 3 in the current version

Expectations from the Revised DeMPA

Methodology

DPI 9 that requires preparation of the annual most beneficial

external borrowing terms seems not feasible in most

developing countries■ This is because most of these countries are struggling to get

financing externally and have no such luxury of selecting the

sources. The qualification of “undue political interference” included in DPI is very

judgemental and depends on what authorities would want the DeMPA

mission to understand. It is impossible to verify objectively.

The requirements to review procedure manuals frequently for example

‘every second year’ as required in most DPIs also seems not feasible. The

requirement would sound better if the requirement is to review the

procedures in line with any new developments in the practices.

The same is true for the requirement to review periodically the code-of-

conduct and conflict-of-interest

Issues for Further Consideration in

Revising DeMPA

Thank You

debt management performance assessments in mefmi … dem… · · 2016-10-24debt management...

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