Front Matter

Front Matter

Author(s):
International Monetary Fund;World Bank
Published Date:
March 2015
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    Revised Guidelines for Public Debt Management

    Prepared by the Staffs of the International Monetary Fund and the World Bank

    ©2015 International Monetary Fund

    Cataloging-in-Publication Data

    Joint Bank-Fund Library

    Revised guidelines for public debt management / prepared by the staffs of the International Monetary Fund and the World Bank. – Washington, D.C. : International Monetary Fund, 2015. pages ; cm.

    Revision of Guidelines for public debt management, published in 2001 and amended in 2003.

    ISBN: 978-1-49833-066-4

    1. Debts, Public. I. International Monetary Fund. II. World Bank. III. Title: Guidelines for public debt management.

    HJ8015.G685 2015

    Disclaimer: The views expressed in this book are those of the authors and should not be reported as or attributed to the International Monetary Fund, its Executive Board, or the governments of any of its member countries.

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    Preface

    The Revised Guidelines for Public Debt Management (Guidelines) have been developed as part of a broader work program undertaken by the IMF and the World Bank to strengthen the international financial architecture, promote policies and practices that contribute to financial stability and transparency, and reduce countries’ external vulnerabilities.

    In developing the Guidelines, the IMF and World Bank staff worked in close collaboration with debt management entities from a broad group of IMF-World Bank member countries and international institutions in a comprehensive outreach process. The debt managers’ insights, which this process brought to the Guidelines, have enabled the enunciation of broadly applicable principles, as well as institutional and operational foundations, that have relevance for members with a wide range of institutional structures and at different stages of development.

    The revision of the Guidelines was requested by the G-20 finance ministers and central bank governors, at their meeting in Moscow, on February 15–16, 2013. In particular, they asked the IMF and World Bank to take stock of the existing Guidelines with a view to ensuring that they remain relevant and topical. Since their adoption in 2001, and amendments in 2003, financial sector regulatory changes and macroeconomic policy developments, especially in response to the recent financial crisis, have significantly affected the general financial landscape. This has been manifested by a greater volume of public debt issuances, unprecedented cross border capital flows in search of higher yields, and higher volatility of investor risk appetite. As a consequence, many countries have experienced significant shifts in their debt portfolios, in terms of both size and composition. Such changes have brought to the forefront a number of issues in the management of public debt that required consideration in reviewing the Guidelines.

    The main revisions reflect (1) greater clarity on the roles and accountabilities of debt managers and their responsibility for providing pertinent information to fiscal authorities on the amount of debt that can realistically be absorbed by the market; (2) enhanced communication with investors, which was considered essential especially during periods of crisis, with pertinent information on debt composition and related risk indicators being periodically provided to minimize uncertainty; (3) the use of collective action clauses in bond contracts for the efficient resolution of sovereign debt restructurings; (4) a more detailed consideration of risk mitigation strategies, particularly liquidity and refinancing risk, and of contingency plans, including the building of cash buffers; (5) greater emphasis on the use of stress testing, the importance of managing counterparty risk when derivatives are used, and the need to better manage and monitor the risks arising from contingent liabilities; and (6) the need to enhance the liquidity of the domestic bond market, while impediments that inhibit the development of domestic government bond markets, such as limited diversification of the investor base, should be promptly identified and addressed, as well as the need to consider flexibility in issuance programs, especially in times of crisis.

    Accordingly, the 2001 Guidelines, along with their 2003 amendments, have been reviewed to reflect evolving developments since their introduction. The 2014 update of the Guidelines was prepared by Luc Everaert, Michael Papaioannou, and Eriko Togo of the IMF and by Phillip Anderson, Sudarshan Gooptu, Abha Prasad, and Rodrigo Cabral of the World Bank. Valuable inputs and suggestions for revising the Guidelines were provided by a working group of public debt managers, chaired by Lars Hörngren, Chief Economist, Swedish National Debt Office, and by the Organisation of Economic Co-operation and Development. The working group comprised representatives from Argentina, Bangladesh, Belgium, Brazil, the Comoros, Denmark, the Gambia, Germany, India, Italy, Jamaica, Korea, the People’s Republic of China, Russia, Sierra Leone, Spain, Sudan, Sweden, Turkey, the United States, Uruguay, and Vietnam. Also, Thordur Jonasson, Guilherme Pedras, and Emily Simmons of the IMF and Anderson Caputo Silva and Indhu Raghvan of the World Bank provided invaluable comments and support. Two broad consultative meetings on the review were held in Washington, DC, on June 19 and October 15, 2013.

    The IMF and World Bank staff greatly appreciate the efforts of all who contributed to the successful completion of this project.

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