Financial Planning-Part-2 Policies- Tarun Das

8/14/2019 Financial Planning-Part-2 Policies- Tarun Das

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Financial Planning Methodology and Policies Tarun Das

Financial Planning Methodology and PoliciesPart-2: Policies

________________________________________________________________

Prof. Tarun Das1, Ph.D.Glocom Inc. (USA)

Strategic Planning ExpertADB Capacity Building Project

On Governance Reforms

________________________________________________________________

Ministry of FinanceGovernment of MongoliaUlaanbaatar, Mongolia.

January 2008

.

1Formerly Economic Adviser, Ministry of Finance and Planning Commission of theGovernment of India, and Professor (Public Policy), Institute for Integrated Learning inManagement (IILM), New Delhi. For any clarifications [email protected]

MOF, Govt. of Mongolia Glocoms Inc. (USA)1
mailto:[email protected]:[email protected]


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Financial Planning Methodology and PoliciesProf. Tarun Das

CONTENTSPart-1: Methodology

1. Introduction and Scope1.1 Objectives of Financial Planning1.2 Components of Financial Planning

1.2.1 Reallocation of budgetary resources1.2.2 Budgetary Planning for the future1.2.3 Nominal number planning versus ratio planning1.2.4 Independence of fiscal and financial authorities1.2.5 Financial control systems and mechanisms

1.3 Status of Fiscal Planning in Mongolia1.3.1 The larger role of the government1.3.2 New public sector management

2. Public Finance Management in Mongolia 2.1 Determination of policies and priorities

2.2 Allocation of public resources2.3 Establishment of mechanisms for financial control2.4 Uniformity of accounting standards and fiscal statistics2.5 Internal and concurrent audit system2.6 Ex Ante Financial Control

3. Relation Between Financial Planning and Budget Planning3.1 Budget planning and Strategic Planning3.2 Public Sector Management and Finance Act (PSMFA 2002)3.3 Progress of Implementation of PSMFA during last five years

4. Methodology for Financial Planning for 2009-20114.1 Macro-economic framework4.1 Methodology for Financial Planning4.3 Financial Planning for 2009-2011

Annex: Financial Accounting Tables prescribed by IMF GFSM-2001

Selected References



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Part-2: Policies

5. Policies for Financial Planning and Risk Management5.1 Risk Management for Natural Disaster

5.1.1 The credit system5.1.2 Risk transfer instruments5.1.3 Insurance and development bonds

5.2 Management of Contingent Liabilities

5.2.1 Contingent liability- definitions and measurement5.2.2 Fiscal risk matrix for Mongolia5.2.3 Lessons from international best practices5.2.4 Management of contingent liabilities

5.3 Management of Public Debt

5.3.1 Public debt of Mongolia5.3.2 Debt sustainability and fiscal deficit5.3.3 Risk management systems for public debt

(a) Independent and integrated Public Debt Office(b) Composition and functions of the Public Debt Office(c) Transparency in risk management(d) Basic principles f risk management(e) Risk management framework(f) Assessment of risk

5.4 Management of External Debt

5.4.1 Various risks of external debt5.4.2 Risks for different modes of capital transfer5.4.3 External debt sustainability measurement5.4.4 Risk management policies for external debt5.4.5 Stress tests

(a) Standard stress tests(b) Indicators of debt distress episodes(c) Determinants of debt distress(d) Quality of institutions and policies(e) Indicators of debt and debt service thresholds(f) Debt distress classifications

5.4.6 International best practices for debt management

Selected References



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Financial Planning Methodology and PoliciesProf. Tarun Das, Strategic Planning Expert

Part-2: Policies

5. Policies for Financial Planning and Risk Management5.1 Management for Natural Disaster

One of the major objectives of the ex-ante Financial Planning is to deal withcontingent liabilities of the government and risk management for unforeseenevents such as droughts, floods, earthquakes, land slides and other naturaldisaster. Risk management and emergency response need to be clearlydistinguished. Risk management calls for ex-ante planning and investments toreduce vulnerability. Emergency response involves ex-post expenditures forreconstruction, rehabilitation and restoration of public infrastructure affected bynatural disaster, which can be greatly reduced through ex-ante planning andinvestments in prevention and mitigation. While the occurrence of natural eventscan not be predicted precisely and prevented fully, there is a possibility to reducethe degree of vulnerability of populations through risk management. This can beachieved in two ways: (i) planning with the purpose of the identification andreduction of risk by integrating prevention and mitigation measures into nationaldevelopment and financial plans and programs and (ii) financial protectionprovided by transferring risk partly to the private sector or spreading it over time.The latter can be achieved by strengthening both life and non-life insuranceinstitutions and allowing foreign and private investment in insurance funds.However, this requires development of appropriate rules and regulations andstrengthening the independent regulatory authorities.

5.1.1 The Credit System

The development of an efficient savings and credits system through thedevelopment banks, commercial banks, co-operative banks, savings banks,informal and formal non-banking financial institutions, and micro-creditinstitutions would contribute to the mobilization of the resources needed tofinance investments in prevention, mitigation, rehabilitation and reconstruction.The system of contingent credit mechanism makes it easier to obtain financing inthe event of a disaster. In the case of a contingent credit, in exchange for anannual fee to a general insurance company, the right is obtained to take out aspecific loan amount post-event that has to be repaid at contractually fixedconditions. In order to tackle the adverse impact of severe dzuds in Mongolia, ifany in future, a system of contingent credits or crop insurance or herds insurancecan be developed.



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5.1.2 Risk Transfer Instruments

Risks can be transferred by creating suitable risk transfer instruments andmechanisms currently in use in developed countries, especially insurance. Since

insurance premiums are a function of prevention and mitigation measures takenby the insured party, the establishment of insurance mechanisms increasesawareness of the need to invest in such measures. Financial protection againstnatural disasters through insurance mechanisms is attractive as it offers theopportunity of transferring part of the risk to others, while avoiding the need forborrowing to deal with an emergency. Financing through ex ante credits offerseven more incentives to mitigate risk because risk transfer instruments offeropportunities to contain moral hazards or adverse selection problems.

Ex-ante measures to tackle unforeseen events include prevention and mitigation,insurance, contingent credit and reserve funds. Mitigation reduces the damages,

whereas risk financing measures reduce losses by transferring risk or sharingrisk with others. Mitigation is directed towards decreasing engineering or physicalvulnerability, whereas risk financing reduces financial vulnerability (Fig. 1).

naturalhazard

exposure

engineering

vulnerability

engineering

vulnerabilitydamage financial

vulnerability

financial

vulnerability

economic

loss

mitigation ex-ante instruments

Fig. 1:Mitigation and Risk Financing

Risk transfer provides indemnification against losses in exchange for a premiumpayment. Risk is transferred from an individual to a (large) pool of risks throughinsurance/ reinsurance, reserve funds and contingent credit systems (Fig.2).Insurance and reinsurance funds bear part of the risk. In a reserve fundarrangement, liquid funds are laid aside so that the fund accumulates over theyears without unviable impact on the present budget. In case an unforeseendisaster takes place, the accumulated funds can be used to finance the losses.



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Contingent credit arrangements do not transfer risk, but rather spread itintertemporally. As explained earlier, in exchange for an annual fee, the right isobtained to take out a specific loan amount post-event that has to be repaid atcontractually fixed conditions.

+

-

Capital Accumulation

Fund Paymenta) Reserve Fund

+

-

Credit Payment

Debt RepaymentAdministrative Costs

b) Contingent Credit

+

-

Insurance Payment

Premium

c) Insurance

Flow of Funds from Three

Instruments

Fig.2- Flow of funds from three ex-ante financing instruments -Reserve Fund, Contingent Credit and Insurance

5.1.3 Insurance and development bonds

Development of insurance markets requires updating legislation and institutionalset up. Although most of the weaknesses exist on the demand side (such as thelack of enforcement of building codes and difficulties in assessing asset values,

and the generally low capacity of clients to pay premiums), supply-sideadjustments are also necessary. These include strengthening independentsupervision systems to improve monitoring of the solvency of insurancecompanies and eliminate conditions that favor anticompetitive practices.

There is also a need to establish the necessary conditions for the use ofinnovative capital market mechanisms such as catastrophe or natural calamitybonds, commodity futures and weather-related derivatives. These instruments,



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which may be of interest to international financial entities, avoid the majordifficulties related to asset valuation and loss settlement procedures, but have tobe implemented at pool or governmental levels.

The same arguments hold good for life and non-life insurance. But, catastropheor natural calamity bonds are difficult to be developed by developing countrieslike Mongolia which lack efficient money and capital markets. It may be easier forMongolia to develop other kinds of bonds such as development funds (viz.municipal, social, urban, rural, roads, infrastructure development bonds etc.) tomeet critical needs. This can be helped by international development agencies.

Another instrument that could be highly useful is to establish a contingent liabilityfund and to make budgetary contributions. Government of Mongolia has alreadyestablished such a contingent fund, road development fund and a generalDevelopment Fund.

The private sector also has the direct investment option. The community-wideformal and informal financing instruments perform a very important role at thelocal level by supplying resources, particularly in poorer areas. Regardless of thesource of financing, the implementation of these mechanisms requires closecooperation between the public and private sectors, especially in reference to theestablishment of the appropriate legal and regulatory framework.

Table-8 summarizes various sources ofex ante and ex postdisaster financing.The ex ante non-reimbursable and reimbursable financing mechanisms withoutrisk transfer include grants and credits. The corresponding risk transfer

instruments encompass insurance and natural calamity bonds, which can coverthe damage based on real losses (indemnification) or the parametric payments.

Financing instruments established ex postinclude grants, taxes, emergency andreconstruction loans, and refinancing of existing loans. In the event of a disaster,immediately available and lowest-cost financing options, such as an existingcalamity fund or catastrophe bonds, insurance and reinsurance, are generallyused first. Similarly, part of budgeted resources from the existing governmentprograms would be transferred to meet immediate emergency needs.

In some cases, existing development funds (municipal, social, urban, rural) may

also be used. Government can also impose an emergency cess or tax on theexisting tax payers. At the same time, the government would seek as muchinternational aid and donations as possible and resort to contingency credits.



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Table-8 Provisional Classification of Disaster Financing Mechanisms

5.2 Management of Contingent Liabilities

5.2.1 Contingent liabilities- definitions and measurement

Contingent liabilities are defined by the System of National Accounts 1993 ascontractual financial arrangements that give rise to conditional requirementseither to make payments or to provide objects of value. A key characteristics ofsuch financial arrangements, as distinguished from the current financial liabilities,is that one or more conditions or events must be fulfilled before a contingentliability takes place. A key characteristic that makes such liabilities different fromnormal financial transactions is that they are uncertain.

Contingent liabilities represent potential claims against the government, whichhave not yet materialized, but which could trigger a firm financial obligation orliability under certain circumstances. Several studies have shown that contingentliabilities, once materialized, can be a major factor in the build up of public sectordebt and can pose significant risks to the governments balance sheet.

Contingent liabilities are of two main types- explicit and implicit. Explicitcontingent liabilities are based upon legal and contractual commitment. Explicitcontingent liabilities include bonds or other liabilities contracted by thegovernment with put options for lenders, credit-related guarantees, performance



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guarantees, various types of government insurance schemes (e.g., againstbanking deposits, crop failure, natural disasters, etc.), or legal proceedingsrepresenting claims for tax refunds or against government providers of servicessuch as health care, education, defense, housing, etc.

Implicit contingent liabilities represent potential claims where government doesnot have a contractual obligation to provide financial support, but society expectsthe government to provide assistance because of moral considerations. Implicitcontingent liabilities include bailing out weak banks or failed financial institutionsor meeting the obligations of the subnational (state and local) governments or theCentral Bank in the event of default following systematic financial crisis.

Other implicit contingent liabilities include disaster relief, corporate sector bailouts, municipal bankruptcy, defaults on non-guaranteed debt issued by sub-national governments and state-owned enterprises or government obligations

under a fixed exchange rate regime to defend its currency peg. These risks canbe particularly significant in emerging market economies like Mongoliaundergoing financial sector and capital convertibility reforms and where theregulatory bodies and disclosure standards are weak.

5.2.2 Fiscal Risk Matrix for Mongolia

Following Polackova (1998), contingent liabilities can be best described in termsof a Fiscal Risk Matrix classifying sources of potential risks on governmentfinance into four types: direct or contingent, each of which may be explicit or

implicit. Table-9 presents a typical fiscal risk matrix for Mongolia.

Contingent liabilities are complex and not easy to quantify. There is no single anduniform framework for their measurement. The choice of a technique depends onthe type of contingent liability being measured and the availability of requisitedata and information. It is well recognized that cash based accounting systems,even supplemented by off-budget and off-balance sheet transactions, are notsuitable for managing contingent liabilities. Only the accrual accounting systemscan capture contingent liabilities as they are created. Within such systems,contingent liabilities can be recorded at full face value or maximum potential lossor expected value and expected present value of contracts.



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5.2.3 Lessons from International Best Practices

The issue of managing contingent liabilities in an emerging economy likeMongolia is to be seen in the broader context of economic development.Provision of government guarantees per see is not bad. But, problems ofcontingent liabilities arise when the risks inherent in such liabilities are notproperly assessed and quantified, and adequate provision is not made for thepossible impact of such risks.

There is no fundamental difference between the risks associated with directGovernment loans and risks associated with Government guarantees. In bothcases, the Government has to use taxes to pay back lenders. In some cases,guarantees can be better than direct loans because guarantees can be made

more explicit and can cover only sub sets of risks, while the rest of the risks canbe assigned to the private operators and insurance companies. But Governmentshould make proper appraisal and use discretion while granting guarantees.

5.2.4 Management of contingent liabilities

Explicit contingent liabilities may represent a significant balance sheet risk for agovernment. However, unlike most government financial obligations, contingentliabilities have a degree of uncertainty. They are exercised only if certain eventsoccur, and the size of the actual fiscal outgo depends on the structure of thecontingent liabilities.

Sound public policy requires that a government needs to carefully manage andcontrol the risks of their contingent liabilities. The most important aspect for thisis to establish clear criteria as to when contingent liabilities will be used and touse them sparingly. In a well-managed program, the government debt office maybe called on to assist in evaluating the governments cost and risks under thecontingent liabilities, and to recommend policies for managing these risks.

Experiences of the industrialized countries suggest that more completedisclosure, better risk sharing arrangements, improved governance structures forstate-owned entities and sound economic policies can lead to substantialreductions in the governments exposure to contingent liabilities.

An emerging country like Mongolia can adopt several public policy measures tocontain the risk of contingent liabilities. These include the following:

1. As an initial step towards risk management, it is necessary to promotedisclosure and accountability with regard to explicit contingent liabilities. Acentralised unit may be set up in the Department of Fiscal Policy andCoordination in the MOF to identify and measure the magnitude and



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associated risk of all contingent liabilities. However, disclosure of implicitcontingent liabilities could result in greater moral hazard costs for thegovernment if the stakeholders take this disclosure as a commitment orindication that the government is likely to provide future financial assistance in

the case of defaults.

2. In its Code of Good Practices on Fiscal Transparency, the IMF hasrecommended that countries should disclose the central governmentcontingent liabilities in their Budget documents, provide a brief indication oftheir nature and extent, and indicate the potential beneficiaries. The Codesuggests that best practice in the area would involve providing an estimate ofthe expected cost and the degree of risk for each contingent liability whereverpossible and the basis for estimating expected cost and risk.

3. Best management practice for contingent liabilities is to make adequate

provision for expected losses and to hold additional assets against the risk ofunexpected losses. In cases where it is not possible to derive reliable costestimates, the available information on the cost and risk of contingentliabilities should be summarized in the notes to the Budget tables or thegovernments financial accounts.

4. It is useful that the said centralised unit designs and issues contingent liabilityinstruments and monitors the associated risk exposures, and ensures that thegovernment is well informed of these risks.

5. Once the concepts, definitions, methodology and data problems have been

resolved and key organisational challenges addressed, a computerizedrecording system for management of debt and contingent liability could beintroduced. Ministry of Finance, Mongolia is using the UNCTAD DebtManagement and Financial Analysis System (DMFAS) for recording andmonitoring external debt. The same system can be easily extended formanagement of internal debt and contingent liabilities.

6. A guarantee fee must be charged for all guarantees. The fee needs to bedetermined on the basis of the cost of borrowing plus the cost of provisioning.Guarantee fees collected should not be taken as general revenues; rather bekept in a separate contingency fund or contingent liability redemption fund.

The revenue from the guarantee fee will enable adequate reserves to be builtup over time. The government still may have to allocate some initial capitalfrom general revenues into the Reserve Fund in the event that the contingentliability is called prior to the build up of sufficient reserves. The Government ofMongolia has already established such a Contingency Fund.



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7. Sound risk sharing arrangements would include providing termination datesor sunset clause for the contingent claims, pricing the contingent liability on arisk adjusted basis and charging the beneficiaries accordingly.

8. Risks associated with contingent liabilities can be reduced by promotingsound governance rules for managing sub-national entities and state-ownedenterprises, and making them accountable for managing their own risks.

9. It is equally important to improve the supervision and regulation of thebanking and insurance system and capital markets, including the use of suchinstruments as mandatory risk limits and minimum capital adequacy norms.Stronger accounting and disclosure requirements for private corporations areimportant mechanisms for limiting the likelihood that a systemic crisis mightoccur, and will limit the governments exposure if it does.

10. The odds for the occurrence of a financial crisis and so the risk of implicitcontingent liabilities can be reduced by sound macro-economic policies,complemented by appropriate legal, regulatory and institutional set-up foreffective prudential regulation, monitoring, surveillance and supervision of thefinancial system and improved corporate governance. However, these entailstructural reforms with an unavoidably long-time scale.

5.3 Management of Public Debt

5.3.1 Public Debt of Mongolia

Mongolias public debt at around 55 percent of GDP is not high as judged byinternational standards, and it does not pose any problem for financing debtservices as the Government of Mongolia has maintained a surplus on currentfiscal account for the last few years. However, government revenues are highlydependent on mineral taxes and are subject to risk in volatility of internationalprices of minerals, particularly copper and gold. Although there is surplus onminerals account, there is a significant deficit on non-minerals balance. One ofthe major challenges for the government to maintain fiscal sustainability is toreduce non-minerals deficit over time by widening tax base to include serviceswhich now account for about 55 percent of Mongolian GDP but remains relativelyunder-taxed. It is also necessary to strengthen tax administration for personal

and corporate income taxes and value added tax. At present the personal incometax is ten percent at all levels of income which does not satisfy the basic equityfor a tax system. It may be necessary to make it progressive while strengtheningthe tax administration to deal with tax evasion. On the expenditure side, theremay be a need to set limits on rise of salaries, subsidies and social securities ashave been explained earlier in financial planning.



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5.3.2 Debt Sustainability and Fiscal Deficit

Debt sustainability is closely related to the fiscal deficit, particularly to the primarydeficit (i.e. fiscal deficit less interest payments). Sustainability requires that there

should be a surplus on primary account. It also requires that the real economicgrowth should be higher than the real interest rate. Countries with high primarydeficit, low growth and high real interest rates are likely to fall into debt trap.Economic theory states that high fiscal deficit spills over current account deficit ofthe balance of payments. Persistent and high levels of current account deficit isan indication of the balance of payments crisis and needs to be tackled byencouraging exports and non-debt creating financial inflows.

At present, Mongolia does not face these problems. For the past few years,Mongolia has high economic growth, surplus on both domestic and externalcurrent account and very low (in fact negative) real interest rate on external debt.

These positive developments should not lead to complacency on the part of thegovernment. The main challenge will be to ensure fiscal sustainability, lowinflation rates and stability in real exchange rates by adopting strict fiscal andmonetary discipline and sound management of mineral resources. Medium termoutput is vulnerable to unfavourable weather shocks in the domestic sector andrisk of sharp fall of global prices of minerals, which may lead to fall in governmentrevenues and put constraints on social welfare and investment programsfinanced by the windfall profits tax on minerals.

Among other challenges, public investment plan needs to address theenvironmental degradation due to overuse and illegal trade in forest products and

wild life. Overexploitation of natural resources, lax control on smaller mines andfaster urbanization may lead to loss of agricultural production, shortage of watersupply, sanitation problems, traffic hazards and pollution. These issues also putconstraints for achievement of primary education and the achievement ofenvironmental targets in the Millennium Development Goals.

5.3.3 Risk Management Systems for Public Debt

Public debt needs to be managed in such a way that the required amount offinancial resources is raised at the lowest possible medium and long-term costand with a prudent degree of risk. Risks include foreign exchange and financial

crisis; change in creditworthiness and insolvency (debt distress); leading toeconomic crisis and social instability (as in the case of East Asian crisis in 1997-1999). Ministry of Finance should have a risk management framework thatidentifies and assesses the financial and operational risks for the management ofpublic debt including external debt.



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(a) Independent and Integrated Public Debt Office

International best practices indicate that there is generally an independent and

integrated public debt office dealing with both internal and external debt, and inmost of the countries such an office is situated in the Ministry of Finance.Although the MOF in Mongolia deals with management of domestic and externaldebt, there is no such well structured and integrated office. There is a need to setup an independent and integrated Public Debt Office under the Ministry ofFinance with the following functions:

To deal with both domestic and external debt To set bench marks on interest rate, maturity mix, currency mix, composition

of debt in terms of domestic debt and external debt. Identification and measurement of contingent liabilities Policy formulation for debt management Monitoring risk exposures Building Models in Assets Liability Management (ALM) framework

(b) Composition and Function of the Public Debt Office:

Public Debt Office will consist of the following independent debt offices withassociated functions:(i)Independent Front Offices, which are responsible for negotiating new loans

with multilateral and bilateral funding organisations and other sources ofinternal and external finance.

(ii)Back office, which is responsible for auditing, accounting, data consolidationand the dealing office functions for debt servicing.

(iii)(iv)Middle office, which is responsible for identification, assessment,

measurement and monitoring of debt and risk, dissemination of data and policyformulation for both short and medium term, and setting benchmarks for debtcomposition and currency-interest rate- maturity mix, and

(v)Head Office , which accords final approval for both internal and external debt.

(c)

Transparency in Risk Management: Debt management objectives should beclearly defined, documented and disclosed at all levels dealing with debtmanagement. The measures of cost and risk that are adopted should beexplained. Objectives of debt management and preferred policies and measuresshould be clearly indicated by the middle office. Equally important are the rules,regulations, institutional and legal framework for debt management. Some mayfeel that having a comprehensive debt management system as described herewill be expensive, but not having one may be more expensive.



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Table-10 Institutional Arrangement of Debt Offices and Annual Borrowing

Authority and Total Outstanding Debt Ceiling Limit

InstitutionalArrangement

Countries Limit on AnnualBorrowingAuthority

Total OutstandingDebt Ceiling Limit

Ministry ofFinance

Belgium

Canada

Finland

France

Germany

Greece

Hungary

India

Italy

Mexico

Morocco

New Zealand

United States

United Kingdom

AutonomousAgency

Australia

Ireland

Portugal

Sweden

Central BankDenmark

Source: Guidelines for Public Debt Management, SM/00/135, IMF.



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Table -11 Legal Framework for Debt Offices

Countries Limit for Domestic Borrowing Decides new limits

Ministry ofFinance

Belgium Limit on the cost of borrowing The Parliament

Canada Yes, Borrowing Authority Act The Parliament

Germany Yes, a limit is set by federallegislative authorization

(Budget Law)

The Parliament

Greece No, except for the limit to T-Bills

India Yes, a limit is set by FiscalResponsibility and Budget

Management Act 2003

The Parliament

Japan Yes, a limit is set by Budget Law The Parliament

Mexico Yes, a limit is set according to theFederal Budget

The Congress

Netherlands Implicit limit (budgeted borrowingrequirement)

-

New Zealand No legal limit MOF may alter theprogram

Switzerland No legal limit -

Turkey Only for govt. bonds the limit istwice the budget deficit

For govt. bonds, theParliament

United Kingdom Limit by the funding remit -

AutonomousAgency

Australia Yes, financial year budgetary need DMO and the Treasurer

Austria Yes, the limit is set by the FinancialLaw

The Parliament

Ireland No -

Sweden Limit only for foreign exchangefunding

-

Central Bank

Denmark Limit on the level of debtoutstanding The Parliament

Source: OECD as mentioned in Risk Management of Sovereign Assets andLiabilities, Working Paper, WP/97/166, IMF, December 1997.



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(d) Limits on Public Debt: As regards legal framework, many countries haveenacted Fiscal Responsibility and Budget Management Acts and have set limitson annual borrowing and total outstanding public debt as a percentage of GDP.

Parliament is the appropriate authority to set new limits of public debt (see Table-10 and Table-11). It will be beneficial for Mongolia to legislate similar acts withlimits on fiscal deficit, annual borrowing and total outstanding public debt.(e) Basic Principles of Risk Management: The risks in the structure andcomposition of total debt should be carefully monitored and evaluated. Specialattention may be given to risks associated with foreign-currency and short-termor floating rate debt due to exchange rate fluctuations over time. The risks shouldbe mitigated to the extent feasible by modifying the debt structure and taking intoaccount cost of doing so.

(f) Risk Management Framework: A risk management framework should help toidentify and manage the trade-offs between expected cost and risk in the debtportfolio. Cost includes financial cost of raising capital and potential cost ofbusiness loss. Market risk is measured in terms of potential increases in debtservicing costs associated with changes in interest or exchange rates.

(g) Assessment of Risk: Another task of the Public Debt Office is to identifymeasure and monitor risk. There are various models for risk assessment:

To conduct stress tests of the debt portfolio based on economic and financial

shocks.

Simple scenario models used by the World Bank and IMF.

To project future debt services over medium and long term.

To list key risk indicators over time.

To summarize costs and risks for alternative strategies and debt portfolio.

5.4 Management of External Debt5.4.1 Various Risks of External Debt

External debt constitutes about 95 percent of public debt and is subject to variousrisks such as liquidity risk, exchange rate risk, market risk, convertibility risk,interest rate risk and yield risk (see Box-1).

At present, external debt service ratio at 2 percent of exports does not pose anyproblem for the Mongolian economy, but in future debt sustainability may be atrisk if there is sudden fall of international prices of Mongolias major exports orunexpected rise of prices of major imports. Significant falls in the global prices ofcopper, coal, gold and cashmere and substantial rise of prices of petroleumproducts may affect adversely the current account of the balance of paymentsand may lead to the problem of external debt servicing for Mongolia.



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Box 1. Risks for External DebtA. External Market-Based Risks

(A1) Liquidity risk. Shortage of revenues, cash and foreign exchange to repay debtand make interest payments. East Asian financial and foreign exchange crisis during1997-1999 is the best example of liquidity crisis.(A2) Interest rate risks. While fixed interest rate has the advantage of having fixedinterest payments over time, there may be a substantial loss in a regime of fallinginterest rates. Solution lies to have a proper mix of variable and fixed interest rates.

(A3) Rollover risk. The risk that debt will have to be rolled over at an unusually highcost or in extreme cases that it cannot be rolled over at all. To the extent that rolloverrisk is limited to the risk that debt has to be rolled over at higher interest rates, it may beconsidered a type of market risk.(A4) Credit risk. Central government on-lends external debt to Aimags, local

governments and public sector enterprises. Losses may arise if these investmentsdonot have sufficient yields to repay debt and pay associated interests.(A5) Currency risk. Currency risk arises when there is substantial depreciation of thedomestic currency in terms of the currencies in which external dent is denominated.(A6) Settlement risk: Refers to the potential loss that the government could suffer as aresult of failure to settle, for whatever reason other than default, by the counterparty. (A7) Convertibility risk: Easy convertibility of the domestic currency may lead tocapital flight at the slight anticipation of crisis.(A8) Budget/ Fiscal Risk: Fiscal risk may arise from unanticipated shortfalls inrevenue or expenditure overruns. Government should consider both budget and off-budget liabilities and try to minimize contingent liabilities.

B. Operational and Management Risks

(B1) Operational Risk is the risk that arises from improper management systemsresulting in financial loss. It is due to improper back office functions includinginadequate book keeping and maintenance of records, lack of basic internal controls,inexperienced personnel, and computer failures. Probability of default is high withinadequate operational and management systems.(B2) Control system failure risks arise due to outright fraud and money launderingbecause of weak control procedures, inadequate skills, and poor separation of duties.(B3) Financial error risk. Incorrect measurement and accounting may lead to largeand unintended risks and losses.

C. Country specific and political risks influence foreign investment by themultinational companies. Political and economic stability, scale economies, lowerwages, fiscal incentives, high yields, trade openness and open door policy for foreigninvestment stimulate non-debt creating financial flows. Foreign capital is also attractedby countries which allow free repatriation of capital and profits, and donot insist onappropriation of private capital in public interest.

Source: Tarun Das (2006a)



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Debt sustainability basically implies the ability of a country to service all debts internal and external on both public and private accounts- on a continuous basiswithout affecting adversely its prospects for growth and overall economicdevelopment. It is linked to the credit rating and the creditworthiness of a country.

5.4.2 Risks for Alternative Modes of Capital Transfer

Capital inflows to Mongolia had been mainly in the form of concessional loansfrom multilateral and bilateral countries. There is very small reliance on non-debtcreating flows or other modes of capital due to underdeveloped capital and bondmarkets. Such a system may not be sustainable for a long time and there is needto diversify foreign capital market.

Major alternatives to concessional financial assistance include the following:(a) Syndicated bank lending

(b) Bond lending(c) Financing through new instruments such as derivatives consisting of

interest and exchange rate swaps and options(d) Foreign Direct Investment (FDI)(e) Foreign portfolio investment in equities(f) Foreign quasi-equity investments such as joint ventures, licensing

agreements, franchising, management contracts, turnkey contracts, andall kinds of Built-Operate-Transfer (BOT) agreements.

While bond lending and lending through new instruments together withsyndicated bank lending are forms of general obligation finance in the sense that

the lender provides money to be repaid on terms independent of the success ofinvestment made with the funds, financing by other alternatives (i.e., FDI, foreignportfolio investment and foreign quasi-equity investment) involves risk-sharingand responsibility sharing. For example, under FDI an investor is entitled to ashare of the distributed profits of a firm and an investor also shares in theresponsibility of managing the firm. Portfolio investment is similar, except that itdoes not encompass sharing management responsibility.

Unlike other capital flows, FDI is a package that embodies capital along withtechnology and managerial, marketing and technical skills. Presence ofmultinationals promotes greater efficiency and dynamism in the domestic sector

and widens external trade. Training gained by local employees and theirexposure to modern organizational system and international best practices arevaluable assets for the host country.

These sources of foreign capital can be assessed in terms of expected cost,degree of risk-sharing and degree of managerial participation in the project(Table-12). The major advantages of foreign direct investment, foreign portfolioinvestment and foreign quasi-equity investment are that they involve risk sharing,



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sharing of managerial responsibilities and the promotion of a more efficient useof resources. Foreign portfolio investment, in addition, has a favorable impact onlocal capital markets.

Table-12: Relative risks of alternative sources of capital

Modes of capital Expected Cost Risk-sharing Management-sharing(1) (2) (3) (4)

1.Bank lending High Low Low

2.Bond Lending Medium Low Low

3.Market derivatives Medium Medium Low

4.Foreign Direct Investment High High High

5.Foreign Portfolio Equity Medium Low Low

6.Quasi-Equity Investment Medium High Medium

5.4.3 External Debt Sustainability Measurements

There are broadly two approaches to determine debt sustainability of a country.One is to develop a comprehensive macroeconomic model for the medium term

particularly emphasizing fiscal and balance of payments problems, and anotheris to assess various risks associated with debt and to monitor various debtsustainability ratios over time.

Economy wide model is constructed in the Asset and Liability Management(ALM) Framework and is aimed at minimizing cost of borrowing subject tospecified risks or to minimize risk subject to specified cost. Benefits of suchmodels are quite obvious. The model can be used not only for debt managementbut also for determination of optimal growth, fiscal profiles, medium term balanceof payments etc. However, building up such models requires not only huge databut also expertise on the part of modelers for which there may be constraints in

developing countries like Mongolia. Alternatively, various debt sustainabilityindicators, indicated in Table-13 may be regularly measured and monitored.



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Table-13: Debt Sustainability Indicators

Purpose Indicators

1. Solvency ratios (a) Ratio of interest payments to exports of goods andservices (XGS)

(b) Ratio of interest payments to foreign exchange reserves

(c) Ratio of interest payments to revenue(d) Ratio of external debt to GDP(e) Ratio of external debt to XGS(f) Ratio of external debt to revenue

(g) Ratio of present value of external debt to GDP(h) Ratio of present value of external debt to XGS

(i) Ratio of present value of external debt to revenue

2. Liquiditymonitoring ratios (j) Debt service ratio: Ratio of total debt services (interestpayments plus repayments of principal) to XGS

(k) Ratio of interest payments to reserves(l) Ratio of short-term debt to XGS(m) Ratio of total imports to foreign exchange reserves.(n) Ratio of reserves to short-term debt(o) Ratio of short-term debt to total debt

3. Debt burden ratio (p) Ratio of external debt outstanding to GDP(q) Ratio of external debt outstanding to XGS(r) Ratio of debt services to GDP(s) Ratio of public debt to budget revenue

(t) Ratio of concessional debt to total debt

4. Debt structureindicators

(u) Rollover ratio- ratio of amortization (i.e. repayments ofprincipal) to total disbursements

(v) Ratio of interest payments to total debt services(w) Ratio of short-term debt to total debt

(x) Average maturity of external debt(y) Currency mix of external debt(z) Ratio of government external debt to total public debt

5. Public sectorindicators

(aa) Ratio of public sector debt to total external debt(bb) Ratio of public sector debt to GDP

(cc) Ratio of public sector debt to XGS(dd) Ratio of public sector debt to revenue(ee) Ratio of concessional debt to total external debt(ff) Ratio of concessional debt to total public debt

(gg) Average maturity of public debt(hh) Average maturity of non-concessional debt

(ii) Ratio of foreign currency debt to total public debtSource: IMF (2003) and Tarun Das (2006a)



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5.4.4 Risk Management Policies for External Debt

Although there is no unique solution to tackle various types of risk, general riskmanagement practices of the government aim at minimizing risk for government

bodies and public enterprises. These include development of ideal benchmarksfor public debt and monitor and manage credit risk exposures. Typical riskmanagement policies are summarized in Table-14.

Table-14 Policies for Risk Management

Type of RiskRisk Management Policies

1. Liquidity risk (a) Monitor debt by residual maturity(b) Maintain certain minimum level of cash balance(c) Fix limits for short-term debt

(d) Do not negotiate for huge bullet loans(e) Develop liquidity benchmarks

2. Interest rate risk (f) Fix benchmark for ratio of fixed versus floating rate debt(g) Use interest rate swaps

3. Credit risk (h) Have credit rating by major credit rating organizations(i) Have proper project appraisal before lending;

4. Currency risk (j) Fix benchmark for the ratio of domestic and external debt(k) Fix ratios of short-term and long-term debt(l) Fix composition of currencies for external debt(m) Use currency swaps and have policies for use of market

derivatives

(n) Try to have natural hedge by linking dominant currency of

exports and remittances to the currency of external debt5. Convertibility risk (o) Gradual approach towards capital account convertibility.

(p) Eencourage initially non-debt creating financial flowsfollowed by long term capital flows.

(q) Short term or volatile capital flows may be liberalised only atthe end of capital account convertibility.

6. Budget Risk (r) Enact a Fiscal Responsibility Act.(s) Put limits on debt outstanding, annual borrowing, fiscal

deficit(t) Use government guarantees and other contingent liabilities

(such as insurance and pensions etc.) judiciously andsparingly

7. Operational risks (u) Allow independence and transparency of different offices(such as front, back, middle and head offices) dealing withpublic debt

(v) Strengthen capability of different offices

8. Country specificand political risk

(w) Have stable and sound macro-economic policies(x) Have co-ordination among monetary and fiscal authorities



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5.4.5 Stress Tests

Stress tests are closely related to the debt sustainability indicators and are usefulin identifying major liquidity risks, as well as strategies to mitigate them. Stress

tests can be used to test a variety of scenarios such as the following:(a) Types of capital inflows (FDI, trade credit, other credits)(b) Periods of access to capital markets(c) Exchange rate changes/ derivative positions(d) Risks due to price and interest rate changes(e) Macroeconomic uncertainties (such as outlook for exports and imports)(f) Policy uncertainties (fiscal and monetary policies)

(a) Standard Stress Tests

(a) Revenue growth = Baseline GR 1 SD

(b) Export value growth = Baseline GR 1 SD(c) Assets value growth = Baseline GR 1 SD(d) Inflation rate = Baseline Rate + 1 SD(e) Net non-debt creating flows = Baseline Inflows 1 SD(f) One-time major nominal or real exchange rate depreciation = Baseline +

SD

(b) Indications of debt distress episodes

Debt distress indicated by recourse to any of the following forms of exceptionalfinance:

(a) Arrears: Number of years in which principal and interest arrears to allcreditors is in excess of 5% of total debt outstanding

(b) Debt rescheduling : Year of initial debt restructuring plus two subsequentyears

(c) Bailout by financial institutes(d) Normal times are non-overlapping periods of five years in which no

signs of above mentioned debt distress are observed.

(c) Determinants of debt distress

Traditional Debt Indicators

Present value of debt/exports ratio

Present value of debt/revenues ratio Present value of debt/assets ratio Debt service/exports ratio Debt service/revenues ratio Debt service/assets ratio



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Shocks Real revenue growth Real depreciations Assets value growth

(d) Quality of institutions and policies

1. Substantial value-added in looking at role of organizational quality, goodgovernance, policies and shocks in addition to traditional debt burdenindicators when assessing probability of debt distress

2. Using a common debt-burden threshold to assess sustainability for allcompanies is unlikely to be appropriate

3. There is a strong tradeoffs between quality of institutions, policies,systems of auditing and sustainable level of debt

(e) Indicative Debt and Debt-Service Thresholds (%)

On the basis of experiences of several countries, World Bank has determinedthresholds for various debt indicators for a country depending on the quality of itsdebt management policies and systems. These indicators are presented inTable-15. For example, if a countrys debt management policies and systems areconsidered to be poor, then the ratio of net present value of debt to total assetsfor the country should not exceed 30 percent. The NPV debt/ assets ratio can goup to 45 percent for a country having medium quality for debt managementsystem, while the ratio can go up further to 45 percent for a country having astrong and very efficient system for debt management policies and systems.

Other thresholds have similar interpretations.

Table-15 Thresholds for Debt Indicators (in percentage)

Indicators Quality of Debt Management Policies and Systems

Poor Medium StrongNPV of debt/Assets 30 45 60

NPV of debt/XGS 100 200 300

NPV of debt/Revenue 200 275 350

Debt Service/XGS 15 25 35

Debt Service/Revenue 20 30 40

(f) Debt Distress Classifications

Low risk all indicators well below thresholds Moderate riskbaseline OK, but scenarios/shocks exceed thresholds High riskbaseline in breach of thresholds In debt distresscurrent breach, that is sustained over projection period



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5.4.6 International best practices for external debt management

(a) Legal and Institutional Set Up

As regards legal and institutional set up, International experience suggests thatcentralized debt offices in most of the countries are located under the Ministry ofFinance (MOF), only in Sweden it is located in the Central Bank, while fivecountries viz. Australia, Austria, Ireland, Portugal and Sweden have independentdebt office, not a part of either the MOF or the Central Bank (see Table-16).There is an advantage of locating the debt management office in the MOF. This isbecause MOF in general is in charge of dealing with multilateral financialinstitutions and bilateral donors. Within this institutional structure, in most of theadvanced countries, the debt offices are set up as an autonomous or separateentity within a Treasury or as a statutory unit. This enables the debt office toassume sufficient degree ofoperationalindependence.

It is observed from the legal systems in Brazil, India, Indonesia, Ireland, NewZealand, Poland, the UK and others that, as a general rule, the Minister ofFinance is entrusted with all responsibilities relating to state finance, not only inthe context of representing the state externally, but also with respect to internalmatters such as reporting to Parliament and managing the domestic debt.

The main argument for entrusting the public debt management responsibility withthe Ministry of Finance or Treasury is the proximity of location, which enables thesenior management within the Ministry of Finance to review, assess and monitorpublic debt more easily. Another factor, which prompted many governments to

locate the debt office within the Ministry of Finance, is that the public debt hasbudgetary implications in terms of payments of debt services, and co-ordinationbetween the budget office and the debt office facilitates effective management ofdebt and fiscal deficit. This arrangement, thereby, minimizes chances of anyconflict arising out of the budgetary process determining the annual borrowingrequirements and the management of such liabilities.

As regards governance of external debt, most of the countries donot allow Subnational or provincial governments to borrow directly from the external sources(see Table-17). Only the Central government borrows from multilateral andbilateral sources and then on-lends money to the states and local governments.

Government of Mongolia has also the same system of locating the debtmanagement offices within the MOF. It is necessary to continue with the systembut to strengthen its structure, debt management policies and to adopt moderntechniques for risk management.

(b) Policy Framework



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As regards policy framework, international best practices for the management ofexternal debt leads to the following broad conclusions:

(1) Management of external debt is closely related to the management ofdomestic debt, which in turn depends on the management of overall fiscal deficit.

(2) Debt management strategy is an integral part of the wider macro economicpolicies that act as the first line of defense against any external financial shocks.

(3) Nearly all of the autonomous debt management offices have adopted anorganizational structure similar to that in leading corporate treasury andinvestment banks. They divide functional responsibilities for managingtransactions into different offices within the debt management organization andestablished procedures to ensure internal control, accountability, checks and

balances.

(4) Sound governance considerations suggest that debt management functionsshould be organized as separate units given their different objectives,responsibilities and staffing needs. Usual practice is to establish separate frontoffices, middle office, back office and head office, as explained earlier.

(5) For an emerging economy like Mongolia, it is better to adopt a policy ofcautious and gradual movement towards capital account convertibility.

(6)

At the initial stage, it is beneficial to encourage non-debt creating financial flows (such as direct foreigninvestment and equity) followed by liberalization of long-term and medium-termexternal debt.

(7)There is need to have a cautious approach on external short-term credit. Inmany developing countries, like India, government does not resort to any shortterm borrowing from external sources, although the private sector is allowed toborrow short-term credit externally subject to certain conditions.

(8) Big bullet loans are bad for small economies like Mongolia, as these cancreate refinancing risk in future.

(9) It is not enough to manage the government balance sheet well, it is alsonecessary to monitor and make an integrated assessment of national balancesheet and to put more attention on surveillance of overall debt- internal andexternal, private and public. In each of the major Asian crisis economies-



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Indonesia, Korea and Thailand- weakness in the government balance sheet wasnot the source of vulnerability, rather vulnerability stemmed from the un-hedgedsort-term foreign currency debt of commercial banks, finance companies andcorporate sector.

(10) It is not sufficient to manage the balance sheet exposures, it is equallyimportant manage off balance sheet and contingent liabilities. Emerging as wellas advanced economies have experienced how bad banks can lead to largecosts to the economy and an unexpected weakening of the governmentsbalance sheet. Government guarantees of private debt or public enterprises debtcan also have similar adverse impact.

(11)It is necessary to adopt suitable policies for enhancing exports and other currentaccount receipts that provide natural hedge and the means for financing imports

and debt services.

(12)Detailed data recording and dissemination are pre-requisites for an effectivemanagement and monitoring of external debt and formulation of appropriatedebt management policies.

(13) It is vital that external contingent liabilities and short-term debt are keptwithin prudential limits.

(14) It is important to strengthen public and corporate governance and enhancetransparency and accountability.

(15) It is also necessary to strengthen the legal, regulatory and institutional set upfor management of both internal and external debt.

(16) A sound financial system with well developed debt, money and capitalmarkets is an integral part of a countrys debt management strategy.



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Table-16 Institutional Location of Public Debt Management Office

Country Under the Ministry

of Finance or

Treasury

Located within

the Central

Bank

Located elsewhere

as an autonomous

entityAdvanced Economies

Australia

Austria

Belgium

Canada

Denmark

Finland

France

Germany

Greece

Ireland

Italy

Japan

Netherlands

New Zealand

Portugal

Spain

Sweden

Switzerland

United Kingdom

United States

Emerging Economies

Argentina

Brazil

China

Colombia

Hungary

India

Mexico

Mongolia

Korea

South Africa

Thailand

Turkey Source: World Bank, IMF, OECD various documents.



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Table-17 Institutional Framework for Borrowing External Loans

and Foreign Currency Denominated LoansCountries Central Govt. States and

Local Govt.

State Owned

EnterprisesChina MOF Not allowed,

only through MOF

Allowed directly

India MOF Not allowed,

only through MOF

Allowed directly

Indonesia MOF Not allowed,

only through MOF

Not allowed,

only through MOF

Korea MOF Allowed directly Allowed directly

Mongolia MOF Not allowed,

only through MOF

Not allowed,

only through MOFThailand MOF Not allowed,only through MOF

Not allowed,only through MOF

Argentina MOF Allowed directly Allowed directly

Chile MOF Not allowed,

only through MOF

Not allowed,

only through MOF

Colombia MOF Allowed directly Allowed directly

Mexico MOF State Owned banks MOF

Peru DMO under MOF Not allowed,only through MOF


Venezuela MOF Not allowed,only through MOF


Czech Republic None Not allowed,only through MOF

Allowed directly

Hungary DMO under MOF Not allowed,only through MOF


Poland MOF Allowed directly Allowed directly

Russia MOF Allowed directly Allowed directly

Israel MOF Allowed directly Allowed directly

South Africa DMO under MOF Not allowed,

only through MOF

Not allowed,

only through MOF

Source: Managing foreign debt and liquidity risks in emerging economies: anoverview, John Hawkins and Philip Turner, as excerpted in Managing Foreign Debt

and Liquidity Risks, BIS Policy Papers, No. 8, September 2000.

Mongolia added by Tarun Das.



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Selected References

Das, Tarun (1999a) East Asian Economic Crisis and Lessons for External DebtManagement, pp.77-95, in External Debt Management, ed. by A. Vasudevan, April

1999, Reserve Bank of India (RBI), Mumbai, India.

_______ (1999b) Fiscal Policies for Management of External Capital Flows, pp. 194-207, in Corporate External Debt Management, edited by Jawahar Mulraj, December1999, Credit Rating and Investment Services of India Ltd. (CRISIL), Mumbai, India.

_______ (2000) Sovereign Debt Management in India, pp.561-579, in Sovereign DebtManagement Forum: Compilation of Presentations, November 2000, World Bank,Washington D.C.

_______ (2002) Management of Contingent Liabilities in Philippines- Policies,Processes, Legal Framework and Institutions, pp.1-60, March 2002, World Bank,

Washington D.C.

______ (2003a) Off budget risks and their management, Chapter-3, PhilippinesImproving Government Performance: Discipline, Efficiency and Equity in ManagingPublic Resources- A Public Expenditure, Procurement and Financial ManagementReview (PEPFMR), Report No. 24256-PH, A Joint Document of The Government ofthe Philippines, the World Bank and the Asian Development Bank, PovertyReduction and Economic Management Unit, World Bank Philippines Country Office, April30, 2003.

______ With Raj Kumar, Anil Bisen and M.R. Nair (2003b) Contingent LiabilityManagement- A Study on India, pp.1-84, Commonwealth Secretariat, London.

_______ (2003c) Management of Public Debt in India, pp.85-110, in Guidelines forPublic Debt Management: Accompanying Document and Selected Case Studies, 2003,IMF and the World Bank, Washington D.C.

_______ (2005) International Cooperation Behind National Borders- A Case Study forIndia, pp.1-50, Office of Development Studies, UNDP, UN Plaza, New York, 2005.

_______ (2006a) Management of External Debt: International Experiences and BestPractices, pp.1-46, Best Practices series No.9, United Nations Institute for Trainingand Research (UNITAR), Geneva, January 2006.

_______ (2006b) Governance of Public Debt- International Experiences and BestPractices, pp.1-23, Best Practices series No.10, United Nations Institute for Trainingand Research (UNITAR), Geneva, January 2006.

_______ (2008) Accrual Accounting Rules for Government Finance Statistics, pp.1-36,ADB Capacity Building Project on Governance Reforms, Ministry of Finance,Govt of Mongolia, Ulaanbaatar, January 2008.



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Das, Tarun and E. Sandagdorj (2007a) Strategic Business Planning- objectives andsuggested structure for Mongolia, pp.1-95, ADB Capacity Building Project onGovernance Reforms, Min of Finance, Govt of Mongolia, Ulaanbaatar, August 2007.

_______ (2007b) Output costing and output budgeting, pp.1-50, ADB CapacityBuilding Project on Governance Reforms, Ministry of Finance, Govt of Mongolia,Ulaanbaatar, October 2007.

_______ (2007c) Transition from Cash Accounting to Accrual Accounting, pp.1-35, ADBCapacity Building Project on Governance Reforms, Ministry of Finance, Govt ofMongolia, Ulaanbaatar, October 2007.

________ (2008) Seven-Year (2008-2014) Action Plan for the Complete Implementationof the Provisions of Public Sector Management and Finance Act (27 June 2002) , ADBCapacity Building Project on Governance Reforms, Ministry of Finance, Govt ofMongolia, January 2008.

International Monetary Fund (2002) Government Finance Statistics Manual 2001,Statistics Department, IMF, Washington D.C., August 2002.

_______ (2003a) The Implications of the Government Finance Statistics Manual 2001for Country Work in the Fund, GFS Policy Development Taskforce, IMF, WashingtonD.C., August 2003.

_______ (2003b) External Debt Statistics- Guide for Compilers and Users, 2003, IMF,Washington D.C.

International Monetary Fund and the World Bank (2003) Guidelines for Public DebtManagement: Accompanying Document and Selected Case Studies, 2003,Washington D.C.

Ministry of Finance, Government of Mongolia (2007) Government Budget 2008,Ulaanbaatar, December 2007.

Keipi, Kari Juhani and Justin Tyson (2002) Planning and financial protection tosurvive disasters, Sustainable Development Department Tech. Studies series: ENV-139,Inter-American Development Bank, Washington D.C., Oct. 2002.

Reserve Bank of India(RBI) (1999)External Debt Management- Issues, Lessons andPreventive Measures, pp.1-372, edited by A. Vasudevan, RBI, Mumbai, April 1999.

World Bank (2000) Sovereign Debt Management Forum: Compilation of Presentations,November 2000, World Bank, Washington D.C.

Financial Planning-Part-2 Policies- Tarun Das

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