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
Coord with monet. Policy -D2
Coord with monet. Policy -D3
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
Debt admin and data security-D2
Debt admin and data security-D3
Debt admin and data security-D4
Segreg, capacity & BC-D1
Segreg, capacity & BC-D2
Segreg, capacity & BC-D3
Debt Records-D1
Debt Records-D2
Reporting-D1
Reporting-D2Reporting-D3
Minimum of C Below Minimum
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%
Minimum of C Below Minimum
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