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Management of Public
Debt- Legal andinstitutional set up
P r e s e n t e d b y
Dr Tarun Das
Economic Adviser
Ministry of Finance
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1-A Institutional set up forsovereign debt management
Country Under Min of Located Located
Finance or in the Elsewhere
Tre asury 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
Tre asury Central Bank
11. Italy 12. Japan 13. Netherlands 14. New Zealand
15. Potugal 16. Spain 17. Swe den 18. Swizerland 19. United kingdom 20. United States
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1-C Institutional set up forsovereign debt management
Country Unde r M in of Loca te d Loca te dFina nce or in the Else whe re
Tre a sury Ce ntra l Ba nk
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 Institutionalarrangement for annual debt
borrowingCountry Limit on Ceiling on Institutional
annuaL in the arrangement
borrowing Centra l Bank
1. Belgium Yes No MOF
2. Canada Yes No MOF
3. Finland Yes No MOF
4. France Yes No MOF
5. Germany Yes No MOF6. Greece Yes No MOF
7. Hungary Yes No MOF
8. India Yes No MOF
9. Italy Yes No MOF
10. Mexico Yes No MOF
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2-B Institutionalarrangement for annual debt
borrowingCountry Limit on Ceiling on Institutional
annuaL in the arrangement
borrowing Centra l Bank
11. Morocco Yes No MOF
12. New Zealand Yes No MOF
13. USA No Yes MOF
14. UK Yes No MOF
15. Austria Yes No Autonomous16. Ireland Yes No Autonomous
17. Portugal Yes No Autonomous
18. Swe den Yes No Autonomous
19. Denmark No Yes Cent.Bank
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3-A Legal framework for debtoffice
Country Limit on domestic
debt
Decides
new limits1.Belgium Limit on borrow.cost Parliament
2.Canada Yes,BorrowingAuthority 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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3-B Legal framework for debtoffice
Country Limit on domesticdebtDecidesnew limits
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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3-C Legal framework for debtoffice
Country Limit on domesticdebtDecidesnew limits
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 outstanding
debt
Parliament
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4-A Autonomy of DebtOffice
Country Degree of
autonomy
Under
1.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.NewZealand
Not independent MOF
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4-B Autonomy of DebtOffice
Country Degree of
autonomy
Under
9.Switzerland
Not independent MOF
10.Turkey - MOF11.UK Independent MOF
12.Australia - MOF
13.Austria Not independent MOF14.Ireland Independent MOF
15.Sweden Independent MOF
16.Denmark Not independent MOF
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5-A Institutional set-up for foreign currencydebt
Country Central govt Local govt SOEs
China MOF Not allowed SOEsIndia 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
i i l f f i
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5-B Institutional set-up for foreign currencydebt
Country Central govt Local govt SOEs
Mexico MOF Local govt MOFPeru 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 bestpractices
1New Zealand -The New ZealandDebt Management Office (NZDMO
2 Australia- The Australian Office ofFinancial Management (AOFM)
3 Ireland- The National TreasurManagement Agency (NTMA)
4 The Maastricht Treaty of theEuropean Union
5 Fund-Bank Conditionality6 Heavily Indebted Poor Country
(HIPC) Initiatives
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7.1 Debt management objectivesand 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 ofbenchmarks for risk
management(% of respondents)
1.Countries establishing guidelines forrisk management 45%
2. Countries establishing benchmarksfor foreign currency debt 24%
3.Countries establishing benchmarks forportfolio performance 21%
4. Countries establishing benchmarksfor domestic currency debt 13%
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7.3 Risk managementguidelines
(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 interest
rate 18%
(e) Debt matching reserves 12%
(f) Others 18%
t
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. . na yt catechniques for
undertaking riskanalysis (%)(a) Not using any analytical
techniques 32%
(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 forestablishingbenchmarks5.
(a) Lack of debt management policy 23%
(b) Lack of debt management
expertise
23%
(c) No access to financial markets 13%
(d) Lack of debt monitoring 10%
(e) Difficult economic environment 10%
(f) Others 21%
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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 and options
7%
7. Constraints for using derivatives
( Lack of technical knowledge 71%
( Undeveloped financial markets 17%
( Legal constraints 12%
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7.8 Sovereign Debt
Management8. Institutions managing the
foreign currency debt
( Ministry of Finance 51%(Jointly by the Ministry of Finance
and the Central Bank 30%
( Central Bank 11%( Independent Debt Office 95
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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 and
independently by the CB 24( Debt Management Committee 18
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7.10. Highest authorityfor approval of debt
Authority Dom.debtExt.debt
( Finance minister/ Governor of the CentralBank 72% 49%
( Parliament 6% 21%( Interministerial board 8% 12%
( President/ Prime Minister6% 9%
( DG of independent authority 8% 9%
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7.11 Average time takenfor 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 guaranteesfor IBRD loans 68%
( Central govt bears fully the exchange raterisk for IBRD loans41%
( Central govt shares partially the exchangerate risk11%
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7.13. Efficiency ofMiddle 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 forexternal 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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