As part of its on-going efforts to strengthen debt management, the Ministry of Finance in Zambia requested the World Bank for technical assistance to update Zambia’s Medium Term Debt Management Strategy (MTDS) that was developed in 2009. In response, a joint World Bank/IMF/MEFMI/UNCTAD MTDS mission visited Zambia from 16^th to 24^th July 2014 to train Zambian officials on a structured approach to debt management strategy formulation. Training on the MTDS Analytical Tool and assessment of the alternative debt management strategies took place at the World Bank country office during the first three days and later at the Southern Sun Hotel in Lusaka.

This is one of the first activities to be financed under the second phase (2014-2018) of the World Bank’s Debt Management Facility (DMF) for low income countries grant, under which MEFMI is an implementing partner. During the first phase (2008-2013), the DMF had supported capacity building activities such as the Debt Management Performance Assessments, development of debt management reform plans and formulation of debt management strategies. Phase II has been expanded to include capacity building on debt sustainability analyses and capital markets development.

The main objective of the mission was to help build analytical capacity of Zambian officials to execute a structured approach to debt management strategy formulation. Specifically, the mission trained officials on application of the World Bank-IMF MTDS Analytical Tool for developing a Medium-Term Debt Management Strategy for Zambia. This included the provision of training in the preparation of debt data and in the quantitative analysis of (i) Cost and risks of the existing debt as at end of 2013, and (ii) Cost and risk tradeoffs on alternative borrowing strategies under different scenarios of interest rates and exchange rates.

The mission also discussed the possible outline of a medium term debt management strategy to guide the Zambian authorities in preparing the strategy document.

The MTDS training participants were drawn from the Ministry of Finance’s Departments of Investments and Debt, Budget, and Economic Management, as well as from the Financial Markets and Balance of Payments Departments of the Bank of Zambia.   A total of 15 participants attended the workshop, of which 6 were female, representing 40 percent of the total.

The mission team comprised Lars Jessen (mission leader) and Wael Monsour, (both from the World Bank), Mirriam Tamene and Helen-Marie Cadoret from the IMF, Diego Rivetti from UNCTAD and Stanislas Nkhata from MEFMI.

The following topics were covered during the training:

• Debt data preparation and      manipulation using MS Excel;
• Setting objectives and scope      of debt management;
• Assessment of the current      debt management strategy, including the costs and risk characteristics;
• Assessment of the potential      sources of funding;
• Determining the baseline      macroeconomic projections;
• Assessment of the main      structural factors in the economy that may have a bearing on the preferred      borrowing strategy;
• Assessment of the costs and      risks of the alternative debt issuance strategies;
• Reviewing the implications of      the preferred strategy on the fiscal and monetary policy objectives,      including the feedback effects, and;
• MTDS drafting and approval      processes.

Participants gained knowledge and practical skills for developing a debt management strategy using the MTDS Analytical Tool. It is envisaged that the participants will use the knowledge and skills to review and update Zambia’s debt management strategy that was developed in 2009. A draft MTDS Aide Memoire was submitted to the Permanent Secretary responsible for Budget and Debt Management in the Ministry of Finance to guide the review and update of the 2009 strategy.

A working team of trained staff from the Ministry of Finance and the Bank of Zambia is expected to review and update the 2009 debt management strategy for Zambia upon collection of additional information for the analysis. The goal of the government is to finalize the strategy by the end of October 2014.  

MEFMI will continue to provide technical assistance to the Zambian officials on the use of the MTDS analytical tool.