Unitar Tarun Das Lecture-4
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Transcript of Unitar Tarun Das Lecture-4
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UNITAR Lecture-2 External Debt - Tarun Das 1
Management of Public Debt-Legal and institutional set up
Presented by
Tarun Das
Economic Adviser, Ministry of Finance, India and
Resource Person for UNITAR
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1-A Institutional set up forsovereign debt management
Country Under Min of Located Located
Finance or in the Elsewhere
Treasury Central Bank
1.Australia
2.Austria
3.Belgium
4.Canada
5.Denmark
6.Finland
7.France
8Germany
9.Greece
10.Ireland
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1-B Institutional set up forsovereign debt management
Country Under Min of Located Located
Finance or in the Elsewhere
Treasury Central Bank
11. Italy
12. Japan
13. Netherlands
14. New Zealand
15. Potugal
16. Spain
17. Sweden
18. Swizerland
19. United kingdom
20. United States
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1-C Institutional set up forsovereign debt management
Country Under Min of Located Located
Finance or in the Elsewhere
Treasury Central Bank
21. Argentina
22. Brazil
23. China
24. Colombia
25. Hungary
26. India
27. Korea
28. Mexica
29. Thailand
30. Turkey
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2-A Institutional arrangementfor annual debt borrowing
Country Limit on Ceiling on Institutional
annuaL in the arrangement
borrowing Central Bank
1. Belgium Yes No MOF
2. Canada Yes No MOF3. Finland Yes No MOF
4. France Yes No MOF
5. Germany Yes No MOF
6. Greece Yes No MOF
7. Hungary Yes No MOF8. India Yes No MOF
9. Italy Yes No MOF
10. Mexico Yes No MOF
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2-B Institutional arrangementfor annual debt borrowing
Country Limit on Ceiling on Institutional
annuaL in the arrangement
borrowing Central Bank
11. Morocco Yes No MOF
12. New Zealand Yes No MOF13. USA No Yes MOF
14. UK Yes No MOF
15. Austria Yes No Autonomous
16. Ireland Yes No Autonomous
17. Portugal Yes No Autonomous18. Sweden Yes No Autonomous
19. Denmark No Yes Cent.Bank
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-A Legal framework for debt office
Country Limit on domestic debt Decides newlimits
1.Belgium Limit on borrow.cost Parliament
2.Canada Yes,Borrowing
Authority Act
Parliament
3.Germany Yes, by Budget Law Parliament
4.Greece No, except for T-Bills
5.India Yes, by Budget Law Parliament
6.Japan Yes, by Budget Law Parliament
7.Mexico Yes by Federal Law Congress
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UNITAR Lecture-2 External Debt - Tarun Das 8
-B Legal framework for debt office
Country Limit on domesticdebt
Decides newlimits
8.Nether-
lands
Implicit limit Parliament
9. NewZealand
No legal limit MOF
10.Swit-zerland
No legal limit Parliament
11.Turkey Only for govt.bonds Parliament
12.UK Yes -
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-C Legal framework for debt office
Country Limit on domestic debt Decides newlimits
13.Australia Yes DMO
14.Austria Yes by Financial Law Parliament
15.Ireland No legal limit -
16.Sweden Only for foreign exch -
17.Denmark Yes, on outstandingdebt Parliament
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4-A Autonomy of Debt Office
Country Degree of autonomy Under1.Belgium Not independent MOF
2.Canada - MOF
3.Germany Independent MOF4.Greece - MOF
5.Japan Not independent MOF
6.Mexico Independent MOF7.Netherlands Independent MOF
8.New Zealand Not independent MOF
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UNITAR Lecture-2 External Debt - Tarun Das 11
4-B Autonomy of Debt Office
Country Degree of autonomy Under9.Switzerland Not independent MOF
10.Turkey - MOF
11.UK Independent MOF12.Australia - MOF
13.Austria Not independent MOF
14.Ireland Independent MOF15.Sweden Independent MOF
16.Denmark Not independent MOF
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5-A Institutional set-up for foreign currency debt
Country Central govt Local govt SOEs
China MOF Not allowed SOEs
India MOF Not allowed SOEs
Indonesia MOF Not allowed
Korea MOF Local govt SOEs
Singapore None
Thailand DMO/MOF None MOF
Argentina MOF Local govt
Chile MOF Not allowed MOF
Colombia MOF Local govt MOF
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5-B Institutional set-up for foreign currency debt
Country Central govt Local govt SOEs
Mexico MOF Local govt MOF
Peru DMO/MOF DMO/MOF MOF
Venezuela MOF Not allowed Not allowed
Czech Rep None MOF SOEs
Hungary DMO/MOF None
Poland MOF Local govt
Russia MOF Local govt
Israel MOF Local govt SOEs
South Africa DMO/MOF Not Allowed MOF
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6 International best practices
1 New Zealand - The New Zealand DebtManagement Office (NZDMO
2 Australia- The Australian Office of Financial Management (AOFM)
3 Ireland- The National TreasuryManagement Agency (NTMA)
4 The Maastricht Treaty of the EuropeanUnion
5 Fund-Bank Conditionality6 Heavily Indebted Poor Country (HIPC)
Initiatives
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7.1 Debt management objectives
and priorities (% of respondents)
(a) Minimise financial costs and risks- 38%
(b) Funding management- 26%
Management of debt- 15%
(d)Development of financial markets-9%
(e) Others 13%
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7.2. Establishment of benchmarks
for risk management(% of respondents)1.Countries establishing guidelines for
risk management 45%
2. Countries establishing benchmarks forforeign currency debt 24%
3.Countries establishing benchmarks for
portfolio performance 21%4. Countries establishing benchmarks fordomestic currency debt 13%
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7.3 Risk management
guidelines(a) Limit currency risk 35%
(b) Avoid excessive short-term debt / tosmooth maturity profile 29%
(c) Debt in least volatile currency 24%
(d) Limit on debt with floating interestrate 18%
(e) Debt matching reserves 12%(f) Others 18%
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7.4. Analyticaltechniques
foru
ndertakingriskanalysis (%)(a) Not using any analytical
techniques32%
(b) Value-at-Risk (VAR)/ Cost-at-Risk (CAR) - 23%
(c) Debt sustainability indicators-16%
(d) Others 29%
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7.5 Constraints for
establishing benchmarks5.
( ) L ck f t t licy
( ) L ck f t t x rtis
(c) cc ss t fi ci l rk ts
( ) L ck f t it ri
( ) iffic lt c ic vir t
(f) t rs
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7.6 Sovereign Debt
Management6. Use of derivatives to hedge currency
and interest rate risks
( Currency swaps 31%( Interest rate swaps 24%
( Use of exchange commodity futures andoptions 7%
7. Constraints for using derivatives( Lack of technical knowledge 71%
( Undeveloped financial markets 17%
( Legal constraints 12%
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7.9 Sovereign Debt
Management9. Coordination of both public and
public debt
( Ministry of Finance 35( Jointly by the Ministry of Finance (MOF)
and the Central Bank (CB) 24
( Partly by MOF and partly andindependently by the CB 24
( Debt Management Committee 18
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7.10.Highest authority forapproval of debt
Authority Dom.debt Ext.debt
( Finance minister/ Governor of the
Central Bank 72% 49%
( Parliament 6% 21%
( Interministerial board 8% 12%
( President/ Prime Minister 6% 9%
( DG of independent authority8% 9%
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7.11Average time taken for
approval of external debt
( One day or less 10%
( Less than a week 13%
( More than a week, but less than three
months 65%
( More than three months 13%
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7. 12. Management of
Contingent liabilities
( Subnational entities are allowed to raise their
own funding abroad 69%( Central govt provides explicit guarantees for
IBRD loans 68%
( Central govt bears fully the exchange rate
risk for IBRD loans 41%( Central govt shares partially the exchange
rate risk 11%
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7.13. Efficiency of Middle
Office (% of respondent)
( Use of Market Information system (MIS)
76%( Access to internet 91%
( No Middle Office Unit 43%
( Distinct Middle Office Unit 43%( Middle Office placed under the direction of
the Front Office 3%
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7.14. Main constraints for
external debt management
( Lack of proper organisational structure 31%
( Macroeconomic risk 14%
( Lack of technical staff in the middle office
12%
( Lack of technical staff in the back office 6%( Lack of legal framework 6%
( Limited local debt market 6%
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Thank you
Have a Good Day