1. The Guidelines are designed to assist policymakers in considering reforms to strengthen the quality of their public debt management and reduce their country’s vulnerability to domestic and external shocks, irrespective of whether they are structural or financial in nature. Vulnerability is often greater for smaller and emerging market countries because their economies may be less diversified, have a smaller base of domestic financial savings and less developed financial systems, and may be more susceptible to financial contagion through capital flows. Nevertheless, events since the global financial crisis in the late 2000s demonstrate that larger and developed economies are vulnerable too. The Guidelines should therefore be considered within the broader context of the factors and forces affecting a government’s financial position more generally, and the management of its balance sheet. Governments often manage large foreign exchange reserves portfolios, their fiscal positions are frequently subject to real and monetary shocks, and they can have large exposures to contingent liabilities and to the consequences of poor balance sheet management in the private sector. However, irrespective of whether financial shocks originate within the domestic banking sector or from global financial contagion, prudent government debt management policies, along with sound macroeconomic and regulatory policies, are essential for containing the welfare and output costs associated with such shocks.
4. Public debt management is the process of establishing and executing a strategy for managing the government’s debt in order to raise the required amount of funding at the lowest possible cost over the medium to long term, consistent with a prudent degree of risk. It should also meet any other public debt management goals the government may have set, such as developing and maintaining an efficient market for government securities.
10. The main objective of public debt management is to ensure that the government’s financing needs and its payment obligations are met at the lowest possible cost over the medium to long term, consistent with a prudent degree of risk.
49. The main objective of public debt management is to ensure that the government’s financing needs and its payment obligations are met at the lowest possible cost over the medium to long term, consistent with a prudent degree of risk. Prudent risk management to avoid risky debt structures and strategies (including monetary financing of the government’s debt) is crucial, given the severe macroeconomic consequences of public debt default and the magnitude of the ensuing output losses. These costs include business and banking insolvencies as well as the diminished long-term credibility and capability of the government to mobilize domestic and foreign savings. Box 1 provides a list of the main risks encountered in public debt management.