11. Government and Public Sector Debt Statistics
- International Monetary Fund
- Published Date:
- June 2003
11.1 The Guide recommends that the collection of data on a government’s external debt be linked to the work of those responsible for managing the government’s debt position, for the purposes of administrative efficiency and quality control. Those responsible for government debt are invariably a government debt office, either within the ministry of finance or constituted as a separate agency within the government sector, or the central bank, or another government agency. For reasons outlined in the previous chapter, it is also important that the agency responsible for government data cooperate, as appropriate, with any other agencies involved with the compilation of external debt data.
11.2 It is critical to the smooth functioning of a government debt office that the compilation, recording, and dissemination of debt data be undertaken in a timely and comprehensive manner. Proper records of debt are an absolutely essential foundation for effective debt management, and the availability of accurate and up-to-date data indeed determines how effectively the debt office can carry out its other functions—be they operational or analytical. The range of these functions is described in the appendix to this chapter.
11.3 Comprehensive and timely data allow the debt office to monitor the evolution of a country’s external liabilities and its debt-service obligations over time; can provide early warning signals of possible debt-servicing problems; and serve as essential inputs for government budget preparation, for approval by parliament, for execution, as well as for compiling balance of payments and IIP statistics and for making projections. The debt office should be adequately resourced to properly carry out the tasks of compiling and recording data on all government borrowings. It is recommended that the compiler of external debt statistics, if outside the debt office, utilize these data rather than develop alternative sources.
How Should Data Be Collected and Compiled by the Debt Office?
11.4 To establish a proper debt record, detailed information about all loans (and other types of borrowing such as bonds, export credits, etc.) and all related transactions needs to be compiled. The debt office should capture data on all public and publicly guaranteed debt. This is why it is very important that the agency collecting information on public and publicly guaranteed debt be the same as the one in charge of servicing or ordering payments.
11.5 For those economies that may not have proper records of debt data, there may be a need to first compile a thorough inventory of existing debt in order to establish the debt stock, including any arrears that have accumulated on principal and interest. Once the debt stock is known, procedures should be put in place to obtain, on a regular basis, information on existing and new borrowing, as well as information on other transactions that affect the debt stock. There may be a need to establish formalized institutional arrangements for the comprehensive and timely flow of information to the debt office. Table 11.1 gives a list of the types of detailed information that should be compiled. This table is explained in more detail below.
|Type of Information||Description|
|I. Details of Borrowing Instrument|
|Purpose of borrowing||Descriptive title|
|Agreement date||Date agreement has been signed|
|Type of instrument||Type of borrowing instrument|
|Effective date||Date borrowing becomes effective|
|Type of borrowing||Whether single currency or multi-currency or multi-tranche|
|Amount borrowed||Original amount borrowed or revised amount after cancellation or enhancement|
|Currency of borrowing||Original currency, and currencies of disbursement and repayments|
|• Borrower||Whether government, public enterprises, or private sector|
|• Implementing agency||Agency in charge of implementing project|
|• Creditor||Name and type of creditor (multilateral, bilateral, etc.)|
|• Disbursement agency||Name, if different from lender|
|• Creditor insurer||Name and country|
|Guarantee status||Borrowing by public enterprises or the private sector guaranteed by government, and|
|Insured||Whether borrowing is insured by export guarantee agency in creditor country and|
|Economic sector||Economic sector receiving borrowing|
|Use of funds||Whether to finance a project, etc.|
|Disbursement period||Period during which disbursement is to take place|
|Method of disbursement||Such as direct disbursement or reimbursement|
|Expected disbursement pattern/profile||Forecast of how the borrowing will be disbursed|
|Actual disbursement||Currencies and amount of each disbursement taking place|
|III. Borrowing Terms|
|Interest||Information on interest charged should include:|
|• Interest type: fixed or variable rate|
|• For variable rate: specify interest base/reference and margin/spread|
|• Interest period: dates of payments|
|• Basis for interest calculation (conversion factor: daily/monthly/semiannual/annual, etc.)|
|• Months: actual number of days or 30-day month|
|• Days in interest year (360/365)|
|Commitment fee||Rate levied on undisbursed (full or partial) amount|
|Penalty fees||Charges for late payment of interest and principal|
|Other fees||Such as agency fee, management fee, front-end fee|
|Principal||Maturity: repayment period/profile|
|Type of repayment: bullet, equal or annuity-based, etc.|
|IV. Actual Debt-Service Payments||For each payment (of interest, principal, other charges) made:|
|• Date, currency, and currency of transaction; amount of transaction in original currency, currency of transaction, domestic currency, and perhaps U.S. dollar and SDR|
|For multicurrency borrowing: equivalent amount paid in borrowing currency|
|V. Exchange Rate||Exchange rates on each transaction date for relevant currency vis-à-vis the local currency|
Exchange rates for end of period (daily, weekly, month, quarter, year)
|VI. Interest Rates||Prevailing variable interest rates of base/reference rate used by the creditor for each interest period|
|VII. Debt Restructuring||• Changes in terms as a result of debt reorganization, through rescheduling, refinancing (voluntary or involuntary), write-off, etc.|
|• Date required:|
|–Debt concerned; arrears, consolidation period|
|–Debt-relief terms (debt forgiveness, reschedule)|
|–Terms for rescheduled debt (applicable interest rate, repayment profile)|
|–Transactions on actual debt-service payments or for rescheduled debt|
|–Other transactions from buyback or conversion/swap|
|VIII. Financial Derivatives||• Transactions arising from financial derivatives contracts|
|• Positions measured both in market value and notional amounts in forwards (including swaps) and options|
11.6 For the purposes of the debt office and its functions, data compilation should be undertaken on an instrument-by-instrument basis, tranche by tranche, and in its original currency. For each borrowing instrument, there are basically three types of information that need to be compiled: (1) the core information on details and terms that will produce the amortization and disbursements tables; (2) data on actual disbursements, as well as the changes in the committed undisbursed amount if, say, there are cancellations and/or increases (for example, with a project loan); and (3) actual debt-service transactions. There are other types of information required, and these are described below (under the heading “Additional Data Requirements”).
11.7 If the debt instrument is tradable, and nonresidents are allowed by the government to purchase it, additional information will be required in order to attribute ownership by residency. This information may come from a different agency, which is responsible for capturing information on the nonresident ownership of traded securities. Methods of capturing information on nonresident ownership of traded securities are set out in Chapter 13.
Basic Details and Terms of the Borrowing
11.8 Basic information on each debt instrument should normally be available from the loan or credit agreement or related documentation, a copy of which should be deposited—preferably under legal statute—with the debt office for all public or publicly guaranteed debt instruments. As well as compiling data on the amount committed and the currency, where possible, details are also required on the borrower, the creditor and creditor category (government, bank, multilateral institution, etc.), the disbursement agency, the implementing agencies, and the currencies of disbursement and debt service. Data on the purpose or the end use of the amount borrowed (institutional sector and use of funds) are also important for analyzing the sectors that have benefited from the borrowing, while the guarantee status of the debt instrument will help assess the exposure of the government through the extension of guarantees to other borrowing entities.
11.9 In addition to the above, details on the terms of the borrowing should also be compiled, especially any grace period and the maturity date(s), interest rates (variable or fixed) and any fees that are to be paid, and the dates for payments of interest and the type of repayment profile of principal. Information on the terms allows the debt office to forecast the debt-service requirements for each borrowing instrument. In the case of bonds, information such as the issue price and the yield would need to be captured as well.
11.10 The debt office will also need to compile information on disbursements, including actual and expected disbursements. From such information, to the extent possible, accurate projections of debt service can be made. Clearly, actual disbursements affect the total of the undisbursed amounts and, in many cases, the expected future pattern of disbursement. Data on disbursements can usually be obtained from project-implementing agencies and creditors (on an instrument-by-instrument basis or for groups of instruments).
11.11 Because different types of borrowings can be disbursed in various ways, the task of compiling disbursement data can be complex. For instance, in the case of project loans, disbursement can take the form of advances to the borrowing entity, direct payment by the lender to suppliers of goods and services, or on the reimbursement basis after the borrower has already paid the suppliers. The timing of the disbursement under these methods is different. Under the advances approach, it is the periodic payments by the lender to the borrowing government that constitutes disbursement; under the direct payment approach, it is the moment when the lender pays the supplier; and under the reimbursement approach, it is when reimbursements are made to the borrowing government. The debt office must keep track of these transactions and reconcile its records at regular intervals with information maintained by the project-implementing agencies.
11.12 All data on debt-service payments need to be compiled on a regular and timely basis. Information such as principal repayments, interest payments, commitment fees, service fees, and other fees and charges (including penalty fees) will not only allow the debt office to ensure that payments due are made on time, but also enable it to track those debt instruments that are in arrears. Debt-service data can be obtained from statements sent by creditors. For government loans, information can also be provided by those responsible for making the payments, such as the accountant general or the foreign payment department in the central bank. Debt service on public enterprises’ debts can be obtained directly from the borrowing entity or through a unit in the ministry of finance, which monitors this category of debt. Data for private debt that is guaranteed by the government can be obtained through a reporting mechanism agreed upon when guarantees are originally sought.
11.13 Where the debt office is at the center of the government’s financial administration and public sector control system, the debt office itself orders the payment for budget execution, triggering at the same time the formal accounting procedures within the government for public debt service. This framework, known as an Integrated Financial Management System (IFMS), is frequently implemented in projects financed by the World Bank, or other regional development banks, through loans for modernization of the public sector. This interface with the budget execution is not only on the expenditure side—that is, debt service—but also on the revenue side; when a deposit in the treasury accounts is made from the proceeds of a debt instrument, the debt office alerts the budget and the treasury of the availability of resources.
Additional Data Requirements
Exchange rates and interest rates
11.14 Given that debts can be contracted in various currencies, it is important that the debt office collects and maintains information on the relevant exchange rates for all currencies in which borrowing has taken place, and those related to financial derivatives contracts in foreign currency. This information should be compiled on a regular basis, including for dates on which transactions have occurred and for end-periods (month, quarter, year, and, for certain short-term instruments, perhaps weekly). This is necessary because the disbursements and the debt-service operations should be recorded in the original currency, the currency of transaction (if different from the original one), and the domestic currency. For those instruments bearing variable interest rates, all relevant base rates should be compiled for each interest period, thus enabling the debt office to project the debt-service requirements with respect to these instruments. If data on exchange and variable interest rates are to be compiled on a daily basis, it is highly convenient to have a specialized computerized service on-line to obtain this information.
Changes in debt instrument amounts and debt restructuring
11.15 Information on any changes to individual debt instruments such as enhancements or cancellation of the amount, or a reorganization of the debt through rescheduling, debt forgiveness, refinancing, or prepayments should also be compiled. Indeed, in this Guide a change in the terms of a loan agreement results in a new instrument being created. For instance, for countries that have completed the Paris Club round of discussions, all relevant information on the restructuring provided in the Agreed Minute, the bilateral agreements, and billing statements (with respect to rescheduled debt) should be compiled. Similarly, information on debt reduction given through discounts on debt buybacks should be maintained. Debt office representation at the negotiation processes would help ensure that this kind of information is correctly recorded.
Data on financial derivatives transactions
11.16 Though financial derivatives are not debt per se, they have implications for debt management. For those countries where borrowers use financial derivatives to manage their risk exposures, data on transactions arising from these contracts should be compiled and recorded, as well as positions on outstanding contracts, in both market value and notional amounts. Because financial derivatives can create additional external liabilities, their market value needs to be monitored on an ongoing basis. Any direct increase in debt-service costs arising from hedging using financial derivatives (for example, commission expenses) should be registered.
How Should Information Be Stored?
11.17 A debt office should store information in an efficient and comprehensive computer-based debt-management system (CBDMS) that can undertake a number of tasks and so support both operational and policy functions. Table 11.2 sets out the typical tasks that a CBDMS should be able to undertake. A good CBDMS can also be used to store and retrieve information on private sector external debt.
|Debt recording [loan-by-loan]||A CBDMS should be able to maintain a comprehensive inventory of loan information:|
|• Records of loan agreement details—loan title, borrower, creditor, amount, currency, purpose, sector, conditions attached, creditor bank, other parties, etc.|
|• Records of loan terms—effective date, final maturity date, conditions preceding effectiveness, disbursement pattern, commitment fees, interest rate, other fees, repayment profile, prepayment conditions, other loan development details, etc.|
|• Records of actual disbursements—i.e., records of actual loan drawdowns|
|• Records of actual debt-service payments—commitment charges, interest payments, principal payments, agency/management fees, other loan charges|
|• Records of debt-related data—exchange rate, interest rate, and macroeconomic variables|
|• Support day-to-day debt operation functions-ensuring that payments due are paid in time, monitoring arrears, and following up on delays in loans disbursement that can lead to undue payment of commitment fees|
|Debt reporting [loan-by-loan and on aggregate basis]||A CBDMS should be flexible enough to produce a variety of debt reports that meet the requirements of users both within and outside the country:|
|• Summary reports showing basic details of individual loans or group of loans based on any possible selection criteria|
|• Summary reports on loan utilization rates—for single loans, groups of loans, or entire loan portfolio|
|• Reports on debt stock based on selection criteria such as currency composition, creditor composition, maturity structure, etc.|
|• Reports on debt-service profile (historical and forecast) based on selection criteria—for example, debt service falling due to specific creditors or group of creditors within a given period, debt arrears, etc.|
|• Reports for direct use in the balance of payments statistics, IIP framework, Government Finance Statistics, International Finance Statistics, and Global Development Finance Statistics, etc.|
|Debt analysis||A CBDMS should be able to perform basic debt analysis:|
|• Portfolio analysis—to carry out sensitivity tests to determine, for example, effect of variation in exchange rates and interest rates on future debt-service profile|
|• Analysis on the impact of new loan offers—test the impact of new loan proposals on the debt-service profile|
|• Analysis of the impact of debt-rescheduling or refinancing proposals on the debt-service profile|
|• Using macroeconomic data to compute standard debt indicators—in both nominal and present-value terms|
|• Compute the grant element of loans as well as the present value of debt|
|• Perform basic economic simulations using macroeconomic data|
|• Allow debt managers to use risk-management techniques|
|Linkages with other packages||A CBDMS should be flexible enough to interface with other systems:|
|• Export debt data electronically to commonly used applications such as Excel and Lotus spreadsheets|
|• Provide linkages to other systems for specific analysis/reporting—such as the World Bank DSM Plus and Debtor Reporting System|
|• Import data such as exchange rates and interest rates from external sources|
|• Interface with integrated financial management systems (IFMS). This is a paramount utilization of the CBDMS, playing the role of public credit module, in complement to the budget, treasury, public accountancy, and cash-flow for the public sector|
How Can the Debt Office Validate Data?
11.18 Data validation is essential in ensuring the compilation of reliable, comprehensive, and timely external debt data that are essential for the management and formulation of a country’s micro- and macroeconomic policies and strategies. For this reason, the Guide recommends that procedures be put in place at various stages of the data compilation and recording process to ensure that all data captured are properly validated and reconciled with other data sources. Although data provided to and supplied by the different institutions and departments—both international and domestic—should be checked for mutual consistency, these data may not be identical. But the data validation process should ensure that where differences do exist, the underlying factors for the differences are identified and explained to users of the data.
11.19 Among the various procedures and actions that can be followed are:
Verification by supervisors of data extracted from debt instrument agreements, other documentation, and statements and recorded in data entry sheets;
Systems that have built-in validation procedures to check for inconsistencies at the time of the recording of the information in debt recording and management systems;
Description of procedures for treating different types of debt and their components, including sources of data in a Debt Procedures Manual—a “how-to” manual that accumulates knowledge and passes on experiences;
Periodic reconciliation of data obtained from one source with other sources of information—for instance, data on debt-service payments can be checked with records kept by the foreign payment department in the central bank; loan balances could also be verified with creditors and debtors on a regular basis;
An audit mechanism that is consistent with the general rules of public finance control.
Appendix: Functions of the Government Debt Office
11.20 Effective debt management by a government involves seven basic functions (Table 11.3): policy, regulatory, resourcing, recording, analytical, controlling, and operating (including active portfolio management). The policy, regulatory, and resourcing functions (known as the executive debt-management functions) are undertaken at a very senior level, i.e., Board of Ministers or a subset of it, and as such might be viewed as establishing the “rules of the game” by the highest levels of government. Hence, direction and organization are given to the whole debt-management system. Once this framework has been decided upon, it is the government debt office that undertakes the other operating functions, implementing and executing the set of agreed “rules of the game” mainly through the controlling/monitoring and the controlling/coordinating functions.
|Public Debt||Private Debt (depending on economy)|
|Policy and regulatory|
|Recording and operations||Primary market|
|Active portfolio management|
11.21Policy, regulatory, and resourcing. These functions deal with the formulation of debt-management objectives and strategy including the setting up of debt sustainability levels. A strategy may, for instance, impose statutory limits or overall guidelines on how much borrowing can be done by the public sector and/or by the economy as a whole, which in many cases is approved by the parliament. These functions also cover the institutional arrangements that govern the determination, raising, and disbursement of funds, and the related debt service, as well as the application of laws and regulations that govern debt management at the policy and operational levels. The resourcing function ensures that the recording, analytical, controlling, and operating functions pertaining to public debt management are performed by qualified staff and involves recruiting, hiring, motivating, training, and retaining staff.
11.22Recording, analytical, and operations. The recording function deals with the recording framework for all relevant debt-management information and with those activities related to the raising of loans, the budgetary and reserves provision of debt-service payments, and the servicing of debt. The analytical, or statistical, function utilizes the information provided by the recording function. At the aggregate level, the analytical function involves macroeconomic analysis to explore the various options available, given economic and market conditions, and determining the future structure of the external debt. The operating function involves negotiation, utilization of loan proceeds, and the servicing of debt.
11.23Controlling/monitoring and controlling/coordinating. The monitoring function covers the entire range of activities involved in the maintenance of debt statistics and their analysis. This function helps ensure that policy objectives are realized and assists in the determination of debt-management policies. The controlling/monitoring function must ensure, among other things, that the terms of new borrowings fall within the guidelines set by the senior level; that funds are being utilized on time and appropriately; and that repayments are made according to schedule. At the aggregate level, the controlling/coordinating function is essential in ensuring that operational debt management is in accordance with executive debt-management actions (that is, the policy and regulatory functions performed at the most senior level).
11.24Active portfolio management. This function covers the day-to-day active management of the debt portfolio. This function takes into account market developments, such as in interest rates and exchange rates, which affect the portfolio in terms of desired performance and risk. Formally, active portfolio management pertains to the operations function, but given its specificity it is best to consider this work separately.
11.25 The location and organizational structure of a government debt office (typically referred to as a debt-management unit) will vary among countries. The differences between developing and developed countries are due to the differences in sources of financing. That is to say that the organizational structure is different if the country is mainly a borrower of International Development Association (IDA) funds or if the country is issuing bonds in the international financial market.
11.26 For most developing countries, the debt-management functions are not assumed by a single office but dispersed across several institutions. A schematic representation of these functions can be found in Figure 11.1. A common structure has a debt office in the ministry of finance, focusing on public domestic and external debt, with the central bank overseeing private debt, and often taking on the operational functions related to government debt as its financial agent. Ministries of planning and finance and the central bank each make economic forecasts that provide the framework for debt management. A high-level coordinating committee steered by the ministry of finance (or the prime minister’s office or a ministry of economic coordination) takes charge of debt strategy and policy, which should be embodied in the overall macroeconomic targets. In some developed countries, however, an independent government debt office conducts debt operations based on objectives set by the government as part of asset-liability management operations. Ireland, New Zealand, Sweden, and the United Kingdom have set up such structures that delineate separate objectives for debt management and monetary management. No matter what the structure, each country should have a transparent framework for the efficient conduct of all debt office functions.