Debt Management Stakeholder’s Conference – Oslo, Norway – March 5-6, 2008

Posted by Brian Olden

A Debt Management Stakeholders’ Conference, organized by the World Bank and the Norwegian Ministry of Foreign Affairs, was held in Oslo on March 5-6, 2008. It was attended by over 100 delegates including country authorities, donors, and the main technical assistance service providers in low income countries (LICs). The Norwegian Minister of the Environment and International Development was the keynote speaker at the event.

The purpose of the conference was to bring together all relevant public and private sector stakeholders and: (i) present new tools to assist LICs in their efforts to develop their debt management capacity, including the joint Bank-Fund medium-term debt management strategy (MTDS) and the Bank’s debt management performance assessment (DeMPA); and (ii) more generally discuss the scaling up of technical assistance (TA) on debt management and the scope for improving coordination among the various providers. The rationale for the Joint World Bank/IMF initiatives can be examined by reading the Joint World Bank/IMF Board Paper on Strengthening Debt Management Practices and further details of the initiative can be found at the World Bank’s website on Capacity Building for Debt Management in Low-Income Countries. An upcoming posting is also planned to further explain the objectives of these initiatives in more detail:

At the conference, there was general agreement on the need for LICs to further develop debt management capacity and it was acknowledged that despite improvements in many countries several key challenges remain. In particular, many countries face a new environment characterized by greater access to new forms of market-based external financing. While this is welcome, it raises new risks to debt sustainability and requires a strengthening of debt management capacity. Both donors and LICs identified the key challenges as:

• Developing medium-term debt strategies.
• Addressing the fragmentation of institutional responsibilities and raising the importance of the debt management function.
• Strengthening risk management.
• Improving staff training and retention.
• Developing domestic debt markets.

Views among participants diverged, however, about the extent of needs in some areas. Some TA providers argued that considerable progress had already been made and that future work should build on this rather than starting the process all over again. A couple of country authorities and bilateral donors indicated that there could also be some difficulty in convincing their decision makers of the importance of sound debt management and the need to prioritize resources towards capacity building in this area.

There was also agreement on a number of principles for future work, in particular the need for a demand-driven approach and for greater coordination in service delivery, although not necessarily on how to achieve it. Some LICs aired their frustration at the proliferation of initiatives, and donors stressed the need for activities in this area to be in line with the Paris Declaration on aid effectiveness.

The joint Fund-Bank MTDS TA initiative, which is currently being rolled-out was generally well-received. Participants agreed that this instrument would fill a gap and was a natural complement to the debt sustainability framework, which seems to have been mainstreamed. They welcomed the Fund and the Bank’s intention to involve other TA providers in the roll-out of the MTDS. Some commentators did voice concern however, that the DeMPA might overlap significantly with existing self-assessment tools. The DeMPA has been developed using a similar methodology to the existing Public Expenditure and Financial Accountability (PEFA) Framework Assessment.

The Bank stressed that it could contribute to coordination. In particular, through its proposed debt management facility for LICs (DeMFLIC) which could finance TA involving various providers. This proposal was well received by a number of donors, who may agree to finance it, but was also greeted with skepticism by some TA providers, who stressed the potential conflict of interest for the Bank (as a manager of the facility and provider of TA). A number of LICs and TA providers wondered if this facility would indeed raise additional financing or just divert existing funding. Other suggestions to facilitate coordination were made, such as institutionalizing stakeholders’ conferences or the sharing of activity plans by TA providers.

Participants—particularly donors—expect the Fund to play a prominent role in the area of debt management and debt sustainability in LICs. They supported the Fund’s representatives call for a comprehensive approach to debt issues, in which debt management should be closely articulated with fiscal, monetary, and exchange rate policies. They concurred that the Fund was uniquely placed to provide this perspective and help raise the profile of debt management with LIC decision makers.

Comments

[debt management plan]

In order to have An opinion on improvements in the present approaches to debt restructuring, it will be useful to identify what possible incremental steps for improvement would be. It is vital to get a buy-in from all stakeholders in the process. The plan is to listen to each of their concerns in separate meetings and then bring all stakeholders together in a final meeting to ensure wide ownership of the process. In view of the financial crisis, some of the issues which need consideration are the balance between new loans, debt restructuring and debt for development as a tool of crisis prevention and management. Moreover, a review of debt sustainability frameworks which capture the new realities and ensure sustainable growth of developing countries in the medium- and long-term, has acquired a fresh urgency.