Debt Managers Urged to Develop Strategies in the Wake of COVID-19 Impact

As the COVID-19 pandemic evolves, governments continue to face significantly increased financing requirements as a result of policy responses to the crisis. Due to heightened risk aversion, it may be very costly or even impossible for some sovereign issuers in the region to access the global debt market in this environment. Furthermore, foreign grants from international financial institutions and advanced economies to developing countries are expected to decline further due to the disruptions caused by the pandemic on the global economic activity. As a result, sovereign issuers may need to raise resources on the domestic capital market to meet their increased funding requirements yet local currency bond markets in the region are shallow in terms of liquidity and investor base. In this regard, debt managers need to develop strategies to ensure governments’ financing needs are met without markets disruptions.

As part of its efforts to support member countries, MEFMI hosted a webinar to discuss the impact of COVID-19 on domestic debt markets, assess alternative policy responses, and explore strategies that debt managers can adopt to ensure governments’ immediate financing requirements are met while supporting orderly functioning of debt markets.

A total of 82 officials drawn from 19 countries participated in the webinar. A majority of these participants were officials in MEFMI client institutions while others included those from technical cooperating partners, civil society, academia and independent consultants.  The webinar was facilitated by four (4) resource persons, comprising Mr. Mike Williams (Independent Consultant and former Chief Executive Officer of the UK Debt Management Office), Mr. Cappitus Chironga (MEFMI Accredited Fellow from the Central Bank of Kenya), Arnold Bagubwagye (Bank of Uganda), and Jacob Mkandawire (Bank of Zambia).

The webinar raised awareness on the key considerations for sovereign debt managers and policy makers when confronted by volatile funding markets and increasing financing requirements. These included adapting issuance techniques, modifying maturities, liability management operations, aligning borrowing plans/issuance calendars, improving investor relations, and enhancing coordination with cash managers and central banks. In addition, participants learnt from the experiences shared by Kenya, Uganda and Zambia on how they effectively responded to the impact of COVID-19 on their domestic debt markets. This information is critical in shaping their responses to similar challenges.

As a way forward, MEFMI plans to provide technical assistance to client institutions so that granular issues are discussed in sufficient detail and relevant policy advice is given based on country-specific circumstances.

Prepared by Tiviniton Makuve