July 28, 2017
PRESS OFFICER: Lucie Mboto Fouda
Phone: +1 202 623-7100Email: MEDIA@IMF.org
On July 10, 2017, the Executive Board of the International Monetary Fund (IMF) discussed the staff report: “The Medium-Term Debt Management Strategy: An Assessment of Recent Capacity Building.”
The report updates the Board on the changes that have been made to the Medium-Term Debt Management Strategy (MTDS) framework and its associated toolkit, and on the evolution of technical assistance. The value and effectiveness of capacity building efforts (hands-on and online, including training, short-term technical assistance missions, and the posting of long-term experts) is assessed using qualitative and quantitative metrics. The report suggests that both the framework and TA delivery methods should continue to be updated and refined, while maintaining core functions.
Background:
Recognizing that sound debt management is critical to both macroeconomic stability and the development and functioning of the financial sector, the Boards of the IMF and World Bank endorsed the development of the MTDS framework (see Public Information Notice No. 07/60, May 30, 2007). They also mandated a program of technical assistance (TA) to help countries build capacity in this area. Since then, the Fund, in collaboration with the World Bank and supported by a range of donors, has delivered a large volume of MTDS-based technical assistance to numerous countries, with a focus on middle- and lower-income countries. The Boards of the two institutions have periodically reviewed the work program and achievements in this area.
Executive Board Assessment
Executive Directors welcomed the opportunity to review the progress made in strengthening the debt management capacity of low-income developing countries (LIDCs) and emerging market developing countries (EMDCs), and the contribution of the Fund and the World Bank, as well as other development partners. The heightened and more complex debt-related vulnerabilities facing many countries have increased the importance of sound debt management practices supported by an appropriate medium-term debt management strategy (MTDS).
Directors welcomed the contribution of MTDS capacity building efforts to safeguarding sound debt management, which is critical to macroeconomic and financial stability. They recognized the large volume and diversity of the TA delivered, and appreciated the new modes of delivering TA, such as peer learning and online training, including in languages other than English. Directors underscored the benefits of adapting the scope of technical assistance (TA) and methods of TA delivery to changing countries’ needs, in close consultation with national authorities. They appreciated the strong and sustained support from a range of donors. Directors underlined the usefulness of promoting greater regional, international, and peer-to-peer cooperation, including through the use of a broader pool of trainers. They emphasized the importance of maintaining the ability to meet TA demand, which may intensify as many debt managers face new refinancing and exchange rate risks, for example, owing to the impending redemptions of large volumes of Eurobonds and local currency bonds.
Directors stressed the need for the MTDS framework and the associated analytical tool (MTDS AT) to continue to evolve with changing countries’ needs and the evolution of markets and instruments. They encouraged the further development of the MTDS, in particular with macro-financial focused scenarios and market risk indicators, while striking the right balance between enhancing the MTDS AT and retaining its simplicity and transparency.
Noting the strong linkage between effective debt management and a resilient macroeconomic framework, Directors agreed on better integrating the MTDS framework into the Fund’s macro-financial surveillance and programming, especially where macro-critical, and particularly for program countries. In this connection, they underscored the linkage to debt sustainability analysis and the Low-Income Countries Debt Sustainability Framework. Directors recommended addressing contingent liability risks in the MTDS analysis, where relevant. In addition, cost-benefit assessment of engagement could be useful to help inform priorities and strategies on which to focus going forward.
Most Directors recognized the benefits of a longer-term programmatic approach to building institutional capacity in debt management, although this may not be suitable for all countries. Directors advised pragmatism, with those countries that need sustained technical assistance adopting a programmatic approach, while allowing others to request stand-alone TA. Strong country ownership, especially at the senior policy and sub-national levels, remains essential to ensure the success of capacity building efforts.
Directors looked forward to further updates, as needed, on the progress in MTDS capacity building and implementation.
