IMF Policy Development and Review Department

Helping Low-Income Countries Avoid Debt Distress:

Debt Sustainability—Outreach and Training

MDB Meeting on Debt Issues

July 10, 2008

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Objectives of the DSF

Outreach and Training

Conclusions

Overview

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Objectives of the DSF

DSF-based lending and borrowing can help prevent the accumulation of unsustainable debts

For borrowers, DSAs can be a cornerstone forElaborating medium-term debt strategiesDesigning fiscal frameworks and public expenditure plans in support of sustainable progress toward the country’s development goalsFacilitating the needed coordination of fiscal, monetary, and debt management policies

The DSF helps inform creditors’ lending decisionsThis is particularly important for LICs given the scarcity of information and market price signals

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Outreach and Training

The effectiveness of the DSF ultimately depends on its broader use by borrowers and creditors

The DSF is a tool for better communication and coordination between creditors and borrowers, and among creditors

DSAs can be seen as public good, providing information when it is missing

Outreach and training is key to achieving this goal

It can take the form of sensibilization seminars, technical workshops, hands on training, technical assistance, etc.

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Outreach to Creditors

Both the Bank and the Fund have actively undertaken outreach efforts on the DSF with nearly all major multilateral and bilateral creditors to LICs

Outreach opportunities to commercial creditors have been pursued as well

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Outreach to Creditors

As a result of the outreach, an increasing number of creditors are incorporating elements of the DSF into their financing termsMultilateral creditors:

As of now, the AfDB, the IaDB, the AsDB and IFAD incorporate elements of the DSF into their own financing termsGiven the importance of these creditors, these decisions could have an important impact on the debt outlook in many LICs

Bilateral creditors: Many DAC creditors explicitly use the DSF to guide their lending termsThe dialogue with the OECD Working Group on Export Credits and Guarantees has led to their adoption, in January 2008, of a set of lending guidelines that adhere to IDA and IMF concessionality requirements for LICsThe Fund and the Bank have also begun engaging in discussions with the main emerging creditors with a view to improving in mutual understanding and information sharingA G 20 study group is working on debt sustainability and the MDGs

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Training

On the debtor side, outreach has been conducted through Article IV and other missions and efforts to involve the authorities in the DSA productionThe Bank and the Fund, in partnership with regional capacity building institutions, have organized training workshops on the DSF

Training events have been organized in partnership with CEMLA, MEFMI, Pôle Dette and WAIFEMRegional technical assistance centers have organized national workshops in collaboration with other providers in response to increasing demand

Since 2005, workshops have been organized in Africa, Asia and Latin America

During the workshops, participants benefited from presentations covering the DSF foundations and the tools developed by the Bank and the Fund to help prepare DSAsThe workshops also included extensive hands-on training, including through the preparation and discussion of case-studies Country officials (in one case MDB staff) from all post-CP HIPCs (and LICs across all the regions) attended these workshops

As a result, countries are in a better position to analyze the long-term impact of alternative financing strategies using the DSF

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Looking Ahead

Despite the significant progress achieved, sustained efforts are required to achieve or maintain debt sustainability

There is scope to further improve coordination around the DSF

The quality and timeliness of information at the debtor level and sharing of debt data, including among creditors, needs to be enhanced

– Debtor-reported information, which is the main source of data for DSAs, still suffers from weaknesses in many LICs (reliability, comprehensiveness, and timeliness issues)

The rapidly expanding number of creditors to low-income countries and the lack of information on associated amounts and terms of financing increases the risk of excessive lending

Thus, continued efforts to reach out to creditors and encourage sustainable lending, and to debtors to help improve the quality and timeliness of data, is key

The Fund and the Bank are working on a reporting framework for MDBs that would cover both debt relief and new flows

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Conclusions

Outreach on the DSF so far had a significant impact

But more needs to be done to improve coordination and the quality and timeliness of data

We would be happy to address any MDB needs in the area of DSF trainingWe count on MDB collaboration to improve the quality of information

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Thank you

cbeddies@imf.org

Completed LIC DSAshttp://www.imf.org/dsa; http://

www.worldbank.org/debt