Debt Management

December 16, 2016

Debt Sustainability Challenges in Resource-Rich Developing Countries


A Guest Blog Post Authored by David Mihalyi at NRGI

Readers of the PFM Blog will be interested in a new article by the Natural Resources Governance Institute on debt sustainability challenges in resource-rich countries. The Institute has submitted comments to the IMF and World Bank on how their debt sustainability framework can better address the challenges that many developing countries are facing in light of low commodity prices.

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August 30, 2016

Innovative Financial Instruments for Fighting HIV/AIDS

Innovative Financial Instruments for Fighting HIVAIDS

Posted by Taz Chaponda[1]

The International AIDS Conference in July 2016 reported a resurgence of the disease, particularly in Africa and South Asia[2]. The number of people becoming infected every year, which had been dropping, has now stalled and is rising in some countries. Just under 2 million people become HIV positive every year; as the epidemic continues to grow, the cost of keeping people alive continues to rise. UNAIDS has reported that funding from donor governments fell last year for the first time in five years, from $8.6bn in 2014 to $7.5bn in 2015. This raises questions about the efficacy of current funding models, and the implications for fiscal sustainability in those low-income countries that have a large proportion of the population on HIV/AIDS treatment.  Most of these countries are in Africa and Asia.

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June 14, 2016

The Fiscal Ship

The Fiscal Ship

Posted by Brendan Mochoruk and David Wessel[1]

How to use a computer game to elevate public debate over the U.S. Federal deficit? The mission of the Hutchins Center at the Brookings Institution is to improve both the quality of fiscal and monetary policy and public understanding of it. Finding ways to explain fiscal realities to people who know that the federal debt is important but never get to the end of any newspaper story on the subject can be difficult. Mention the federal budget and eyes glaze over.  

Our challenge was to engage these people, young and old, so that they are better informed citizens. We wanted them to understand that the U.S. doesn’t face a big problem with this year’s budget deficit or next, but that the federal budget is on an unsustainable course. We wanted to remind them that fiscal policy is not just about the numbers, but also about what role government plays in the economy.  And we wanted to show them that it’s possible – not easy, but possible – to pursue their own priorities for the government (reducing inequality, shrinking government, fighting climate change, bolstering national defense) while stabilizing the federal debt.

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March 20, 2015


1421 - St Elizabeth Flod

Posted By Vitor Gaspar, Richard Hughes, and Laura Jaramillo

Fortune, wrote Machiavelli five hundred years ago in The Prince, is like a violent river. She “shows her power where virtue has not been put in order to resist her and therefore turns her impetus where she knows that dams and dikes have not been made to contain her.” Managing the ebb and flow of government’s fiscal fortunes poses similar challenges today. We need a risk-based approach to fiscal policymaking that applies a systematic analysis of potential sources of fiscal vulnerabilities. This method would help countries detect potential problems early, and would allow for institutional changes to build resilience.


January 27, 2015

Book Announcement: Reconstructing Iraq's Budgetary Institutions: Coalition State Building After Saddam

  Savage, J.D
Posted by James D. Savage, University of Virginia

The invasion of Iraq led to a costly nine-year state-building and reconstruction effort. Reconstructing Iraq's budgetary institutions proved to be a vital element of the state-building project, as allocating Iraq's growing oil revenues to pay salaries and pensions, build infrastructure, and provide essential public services played a key role in the Coalition's counterinsurgency strategy.  Employing a historical institutionalist approach, this book first explores the Ottoman, British, and Ba'athist origins of Iraq's budgetary institutions. The book next examines American pre-war planning, the Coalition Provisional Authority's rule making and budgeting following the invasion of Iraq in 2003, and the mixed success of the Coalition's capacity-building programs initiated throughout the occupation. The budgetary process introduced by the Coalition offered a source of institutional stability in the midst of insurgency, sectarian violence, economic uncertainty, and occupation. This book explores the problem of "outsiders" building states, contributes to a more comprehensive evaluation of the Coalition in Iraq, addresses the question of why Iraqis took ownership of some Coalition-generated institutions and not others, and helps explain the nature of institutional change.

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January 09, 2015

Efficient Debt Management through SALM

Balance Sheet







Posted by Yasemin Hurcan and Fatos Koc[1]

A recent paper by Fatos Koc discusses the benefits and challenges of adopting a sovereign asset and liability management (SALM) framework in debt management.[2] The paper draws on the experience of countries such as New Zealand, Denmark and Turkey, all of which have adopted the SALM approach, in various forms.

The SALM framework is based on a balance-sheet approach. It is designed to identify and effectively manage the key financial exposures of the public sector as a whole. SALM entails monitoring and quantifying the impact of movements in exchange rates, interest rates, inflation, and commodity prices on both sovereign assets and liabilities in a coordinated way. On the liability side, the aim is to minimize debt service costs subject to a prudent level of risk. On the asset side, the aim is to accumulate an adequate level of net foreign assets, including foreign exchange reserves, in order to conduct effective monetary and foreign exchange policies, and provide a buffer against external shocks.

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December 10, 2014

Sovereign Debt Management Forum


Posted by Greg Horman[1]

The World Bank hosted its biennial Sovereign Debt Management Forum in Washington, D.C. on December 3-4, 2014. Representatives of over 60 countries, officials of the World Bank and other international agencies, and participants from the private sector discussed the latest developments in public debt management and government borrowing.

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July 20, 2012

Signs of Fiscal Progress: Will It Be Enough?

Posted by Carlo Cottarelli and previously published on iMFdirect

We’ve just updated our latest assessment of the state of government finances, debts, and deficits in advanced and emerging economies.

Fiscal adjustment is continuing in the advanced economies at a speed that is broadly appropriate, and roughly what we projected three months ago. In emerging economies there’s a pause in fiscal adjustment this year and next, but this too is generally appropriate, given that many of these countries have low debt and deficits.

The improvement in fiscal conditions in many advanced economies is welcome, but it’s going to take more than lower deficits to get countries under market pressure out of the crosshairs.

Signs of Progress

There are clear signs of fiscal progress in advanced economies. The deficit will decline in about three quarters of advanced economies this year, and in almost 90 percent of them next year. Debt ratios are also starting to come down: we project one-third of advanced economies to have a declining debt ratio this year and half of them to do so next year.

The progress in deficit-cutting in Europe means less fiscal tightening will be needed in the future, reducing the fiscal drag on growth: in 2011–12 the fiscal tightening in the euro area will amount to a cumulative 2½ percentage points of GDP, while in 2013–14 it is projected to be one third of this, which is good news for growth.

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June 10, 2011

America’s Public Debt: Destination clear, but ooh what route to take???

Posted by Carla Sateriale[1]

At a Capitol Hill seminar last Tuesday here in Washington DC, four former Congressional Budget (CBO) directors shared their perspectives on how the US Congress could squeeze the federal deficit to temporarily avoid a breach of the debt-ceiling, which, if no action is taken, is expected to reach its allowed limit on August 2nd. The panel consisting of Alice Rivlin, Rudolph Penner, Robert Reschauder, and Douglas Holtz-Eakin, who collectively have 22 years of experience in directing the CBO, perhaps more importantly also discussed the long-term prospects and remedies for US public finances, which are hampered seemingly not by a lack of agreed fiscal targets, but more by a lack of concrete measures that are politically acceptable to both parties.

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February 01, 2011

The Long and the Short of It—Government Debt Plans in 2011 and Beyond

By Carlo Cottarelli

As we said in the just-published Fiscal Monitor update, fiscal policy this year in some leading advanced economies is shaping up to be quite different from what was expected just last November.

The United States and Japan are delaying their earlier plans to reduce their public deficits, choosing instead to provide further support to their economies. The change in plans is even more remarkable if you look at the cyclically adjusted balance. You can see this in the charts. Some of the change in the fiscal stance with respect to our earlier projections is attributable to the somewhat better than projected fiscal results in 2010, a point to which I will return in a moment. Most of it, however, is due to additional stimulus measures introduced during the last two months. These two countries need to strengthen their fiscal adjustment credentials by detailing the measures they will adopt to lower deficits and debt over the medium term.

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December 13, 2010

Elements of a New CARTAC TA Program Designed to Help Strengthen Debt Strategy and Management Capacity in Member States

Posted by Michel Marion, Macro-Fiscal Advisor, and Michele Robinson, Debt Management Consultant, CARTAC

Caribbean countries are among the most heavily-indebted, middle-income countries in the world.  Indeed, more than half of the ten most heavily-indebted, middle-income countries in the world are Caribbean countries.  In addition, for many of the moderately indebted countries in the region, the weaker economic performance which accompanied the global recession and financial crisis has led to a worsening of debt indicators. The trend in the region has been towards higher debt burdens and worrying levels of debt to GDP.

The IMF’s regional technical assistance center in Barbados, CARTAC, has been supporting members’ efforts to strengthen their capacity to formulate and execute sound debt management strategies for some time through two distinct paths. TA has been provided to members in the preparation of target-based Medium-Term Fiscal Frameworks and Debt Sustainability Assessments. These two outputs combined to help fiscal authorities determine if they are on a sustainable fiscal path, which is the foundation of a sound debt strategy and prudent debt management. CARTAC has also been assisting members in a second, and more indirect way:  sponsoring the participation of representatives of member states at events put on by the Inter-American Development Bank for Debt Office managers operating in the Caribbean and Latin American regions, which has provided members a venue to network with their counterpart, compare experiences and learn about the capital markets environment they are operating in and about good regional practices.

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September 20, 2010

Long-Term Trends in the Public Finances of the G-7 Economies

Posted by Andrea Schaechter

Today’s record public debt levels in most advanced economies are not only a direct fall-out from the global crisis. Public debt has ratcheted up over many decades. It has been used in most of the G-7 countries as a one-way shock absorber—rising in bad times but not declining much in good times. A recent paper by Cottarelli and Schaechter (2010) looks at the long-term trends in public finances in G-7 economies and reviews policies to address the formidable challenge of reducing debt ratios at a time when age-related spending will put additional pressures on public finances.

Higher public debt and larger public sectors – What are the causes

Following World War II, the public debt burden in the G-7 countries on average declined rapidly during the 1950s and 1960s, as strong growth helped lift its weight in the countries that had won the war (while public debt had already been eroded by inflation in the countries that lost it). In 1974, the trough was reached with an average gross general government debt-to-GDP ratio of 35 percent. Since then public debt has ratcheted up on average for the G-7 economies. By 2007, ahead of the crisis, the average debt ratio had more than doubled to over 80 percent of GDP (Download Figure 1). An exception to the strong upward debt trend among the G-7 countries was Canada, where, as a result of a major fiscal correction in the 1990s, the debt burden was lowered by over 35 percentage points. On average, however, the G-7 countries entered the crisis with historically high levels of public debt. As a result of the crisis, and largely reflecting revenue losses as well as the drop in output—and only in part stimulus measures—public debt is projected to rise to about 110 percent of GDP by end-2010.

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August 16, 2010

New FAD Technical Note & Manual on the Interaction Between Government Cash Management and Other Financial Policies

Posted by Mike Williams

TNM_10-13_cover 1
Good government cash management matters. It matters not only from the fiscal and budgetary perspective of cost effectiveness and efficiency, but also because of the benefits it can bring to other financial policies—in particular to debt management, to monetary policy, and to the development of the local financial markets. This interaction between cash management and other financial policies is the focus of a new IMF Fiscal Affairs Department (FAD) Technical Note and Manual.

There is a growing understanding of what constitutes good practice in government cash management. Guidance is available from FAD on the core components: the development of the Treasury Single Account (TSA) and cash flow forecasting and management. Although this TNM touches on those issues, I have written it primarily for governments and their advisers looking to develop a more sophisticated cash management function, and specifically to move towards more active cash management. 

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July 05, 2010

Full Disclosure of Government Debt, and How it Can Go Wrong

Posted by Yang-Hyun Jin 

The more the issue of fiscal adjustment comes to the attention of the public, the more important is the full disclosure of the government or public debt. Just in follow up to the previous post, government or public debt should not be confused with public sector debt which includes the debt of publicly-owned corporations. Government or public debt to GDP ratios are often used as targets of government fiscal policy or even part of fiscal rules that are  enshrined in law, Constitution or International Treaty. The Maastricht Treaty of course famously limits in principle government debt to GDP of eurozone members to a maximum of 60 percent. 

To have sufficient information on the exact amount of government or public debt is not only a starting point for fiscal adjustment but also a criterion for measuring the success of consolidation efforts. In some countries, the authorities adhere to the accepted standards of disclosure as fully as possible. In other countries, however, the authorities’ attitude toward full disclosure of public debt information is more evasive. This is especially the case when full disclosure has political or market consequences.

This blog argues that it is important to respect the criteria and definitions of government/public debt, and not evade full disclosure, but that evasion can and does take place. It examines the definition of public debt and how that information should be reported.

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July 02, 2010

New Online Public Debt Database

Posted by Claudia Dziobek

The World Bank and The International Monetary Fund are joining efforts to present public sector debt statistics in an online centralized database. It is designed to complement the existing quarterly external debt statistics (QEDS) database. The new database is expected to come online in December 2010.

Purpose of the Public Sector Debt Statistics Centralized Database

The main purpose of this database is to facilitate timely dissemination of debt data of the public sector of members of the IMF’s General Data Dissemination System (GDDS) and, over time, the Special Data Dissemination Standard (SDDS). By presenting such data (and related metadata) in a central location, the database will support macroeconomic analysis and cross-country comparisons.

The classifications and definitions are harmonized with those used in other statistical manuals, such as the System of National Accounts 2008 (SNA2008), Government Finance Statistics Manual 2001 (GFSM2001), and Balance of Payments and International Investment Position Manual (BPM6). The Public Sector Debt Statistics Guide is being prepared. Draft chapters are available at

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May 26, 2010

Prioritizing PFM Reforms: A Robust and Functioning Accounting and Reporting System is a Prerequisite

Posted by Sanjay Vani, Lead Financial Management Specialist, World Bank 

Much has been written about prioritizing and sequencing PFM Reforms, including Allen Schick’s often-quoted 1998 article, Why Most Developing Countries Should Not Try New Zealand's Reforms.  While working on the OECD-DAC Report on the Use of Country Systems in PFM a year or two ago, I was struck by how much more we know about what does not work than about what does work. For example, almost all PFM professionals would agree that introducing a medium-term budget formulation or performance budgeting in an environment of poor budget execution is not likely to be effective; and attempting performance audit without agreed performance benchmarks and proper systems to record and track performance is equally unlikely to be effective.

Here I would like to develop a hypothesis that, I am convinced, deserves serious attention from the community of PFM professionals. The hypothesis is this:  NO significant PFM reforms are likely to succeed unless a robust and functioning accounting and reporting system is in place.  In other words, a robust and functioning accounting and reporting system is a prerequisite to other PFM reforms.

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May 14, 2010

IMF Fiscal Monitor: Navigating the Fiscal Challenges Ahead

Posted by Michel Lazare  


Today, the IMF's Fiscal Affairs Department published the third issue of the "Fiscal Monitor" -- a twice yearly publication launched in July 2009.

The Fiscal Monitor's goal is to provide enhanced coverage of critical fiscal issues from a global and cross-country perspective. It is aimed at government and central bank policymakers, opinion leaders in business and economics journalism, researchers, and financial sector analysts and decision makers.

The format of this current issue has been changed to provide a more comprehensive analysis of fiscal developments and policies in advanced, emerging, and low-income economies.  From now on, the Fiscal Monitor will be part of the IMF's series of World Economic and Financial Surveys, along with the World Economic Outlook and the Global Financial Stability Report. This change signals the importance that the Fund gives to timely, comprehensive, and high-quality cross-country analysis of fiscal trends and issues.

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March 22, 2010

Pakistan: Monitoring Implementation of the Fiscal Responsibility and Debt Limitation Law

Posted by YangHyun Jin 

As posted earlier, Fiscal Responsibility Legislation has during the present global crisis become popular as an instrument to anchor fiscal policy. While some legislation focuses on accountability and transparency issues, and others on fiscal process (i.e., are budget totals agreed on in advance of the detailed budget discussion), a main characteristic of many laws is the setting of limits to the main fiscal aggregates. The aim of this post is not to discuss the logic or best model of the FRL approach but rather the practical issues of implementation. Fiscal monitoring is crucial. Pakistan represents a country with a clear fiscal objectives and compliance reporting type fiscal framework in its FRL. The annual Fiscal Policy Statement (FPS) has played an important role in raising the awareness of fiscal policy objectives and guiding the country to better fiscal discipline and long-term economic growth. 

In 2005, Pakistan adopted a Fiscal Responsibility and Debt Limitation (FRDL) Act 2005. To monitor implementation of the law, the Ministry of Finance publishes an annual “Fiscal Policy Statement” and an annual “Debt Policy Statement”. The latest available pertain to 2009-10. The FPS summarizes overall fiscal developments during the past fiscal year and provides clear and comprehensive review of performance of the legal requirements of the FRDL. The FPS also analyzes whether there has been any deviations from the fiscal targets and if federal government policies have remained in conformity with the principles of sound fiscal and debt management.

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March 08, 2010

Fiscal Exit Strategies

Fuad Hasanov 

As the global crisis is winding down and recovery is taking hold in many countries, policy makers are asking themselves what the best exit strategy is from the significant policy interventions that have taken place over the past 18 months. That is not a simple question as there has been an array of fiscal, monetary, and financial crisis interventions. Moreover, the cyclical unwinding of policy measures is intertwined with structural fiscal challenges.

Basic questions for all countries, however, are: when should policymakers unwind crisis-intervention measures, which policies should be unwound first, and when should fiscal retrenchment begin in earnest? Two recently-published IMF Board papers—“Exiting from Crisis Intervention Policies” and “Strategies for Fiscal Consolidation in the Post-Crisis World”—provide a useful framework to address these questions.

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February 25, 2010

How to Account for Europe’s Debt

Posted by Marc Robinson 

The financial pages have over recent weeks been full of stories about the accounting “innovations” used by Greece and other European countries to artificially lower their reported deficits. However, the accounting strategies in question – in particular swaps and securitization – were banned by the EU years ago, and can no longer be used to push deficit numbers down. The real story is the continuing scope for creative accounting around Maastricht debt figures – that is, the debt measure used by the Europeans to measure national debt against the (now greatly exceeded) limit of sixty percent of GDP under the Stability and Growth Pact (SGP).

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