MEFMI Member Countries Urged to Adopt Debt Management Strategies

MEFMI member countries have been urged to develop and publish Medium Term Debt Management Strategies (MTDS) regularly to guide government’s debt management operations and enhance transparency. This appeal was made by the Secretary to the Treasury in the Ministry of Finance of Zambia, Mr. Fredson Yamba, during the official opening of the joint MEFMI/IMF/World Bank regional workshop on MTDS and Annual Borrowing Plan (ABP) held from 4 to 15 November 2019 at Intercontinental Hotel in Lusaka, Zambia.

The main objective of the workshop was to impart knowledge and skills to participants on the use of the IMF/World Bank MTDS Analytical Tool (AT) for developing a medium debt management strategies and the key principles of developing an ABP.

In his opening remarks, Mr. Yamba said that the workshop was both timely and relevant for most countries in the MEFMI region, noting that it was taking place at a time when public debt has increased substantially over the past decade, thereby re-igniting debate about long term debt sustainability. He said that the increase in public debt has increased the debt vulnerabilities including those arising from exchange rate depreciation, high interest rates and high roll over risks. Consequently, debt service obligations of governments have risen substantially or are expected to increase going forward. In this regard, Mr. Yamba urged MEFMI member countries to adopt medium term debt management strategies to guide government’s borrowing operations in order to minimise the associated costs and risks.

The workshop was facilitated by resource persons from the IMF (Miriam Tamene), World Bank (Andre Proite and Frederico Presciuttini) and Ms. Cristina Dimande of the MEFMI Secretariat. PowerPoint presentations were used to deliver the workshop, covering the following topics:

• Overview of the MTDS framework and description of the revised AT;
• Identifying the objectives and scope for the debt management strategy;
• Debt management and macroeconomic framework (fiscal policy, monetary policy, balance of payments, real sector);
• Market Rates (interest rate and exchange rates);
• Funding sources and investor base;
• Formulating alternative strategies; and
• Annual borrowing plan.

The workshop programme also provided for practical sessions to reinforce the knowledge and skills gained during the lectures. The exercises included (i) key excel functions for public debt data preparation; (ii) calculating cost and risk exposure indicators of debt; (iii) yield curve analysis and exchange rate projections. Participants were also assigned into 6 (six) groups to prepare the debt management strategies for their respective countries.

The main output of the workshop was enhanced capacity of participants to use the IMF/World Bank MTDS analytical tool, to development debt management strategies. A total of 28 officials from nine (9) MEFMI member countries drawn from Central Banks and Ministries of Finance, Planning and Economic Development in the MEFMI region were trained. MEFMI expects these officials to use the knowledge acquired during the workshop, to prepare debt management strategies and borrowing plans for their respective countries.