strengthening debt management: challenges...
TRANSCRIPT
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DMF Stakeholders Forum 2011“Managing Debt: Lessons Learned and Emerging Issues”
Strengthening Debt Management: Challenges Ahead
8–9 June, 2011Berne, Switzerland
Senait N. Assefa
African Development Bank
Outline1. AfDB’s Role in Debt Management Capacity
Outline
2. Recap of linkages between debt relief and debt management
3. Trends of debt-related indicators and country experiences
4 Looking Ahead: Managing Challenges and Opportunities
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4. Looking Ahead: Managing Challenges and Opportunities
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AfDB’s role in debt management capacity
o Enhancing partnerships, coordination and harmonization• Participation in debt relief initiatives
AfDB’s Role in Debt Management
• AfDB as a Donor to the Debt Management Facility• Harmonizing policy and operational modalities on DSA/DSF and Non-
concessional Borrowing policy
o Building institutional and technical capacity to better support RMC’s needs to develop and implement effective debt management strategy
o Providing advisory and legal support• The African Legal Support Facility provides technical assistance to regional
member countries facing debt litigation (‘vulture funds’)
AfDB’s role in debt management capacity
o AfDB support to debt management provided as part of its operational support for economic governance and public financial management reforms
AfDB’s Role in Debt Management
reforms• Under ADF-11 (2008-2010) app. 22% of (app. USD 7 billion) concessional resources
went to this sector• Mostly provided through policy-based operations; typically debt debt management is
included in the overall performance assessment
o Assistance also provided through Institutional Support Projects (ISPs)• Central African republic, Burundi, Comoros, the Gambia, Guinea, Sierra Leone and
Togo
o Targeted technical assistance and capacity building support also provided through Fragile State Facility
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Recap: Linkages between debt relief and debt management
o Impact of debt relief under HIPC/MDRI • Significant decrease in stock of external public debt and debt service
Debt Relief & Debt Management
obligations• Increased spending on poverty reduction priorities• Improved fiscal space and ability to borrow
o Challenges • Debt sustainability is still a concern for several countries that have received
debt relief– huge unmet financing needs– rapid build up of non-concessional debt– undiversified economic base; vulnerability to external shocks
• Weak debt management capacity• Slow pace of policy and governance reform, especially in fragile states
Trend in Risk of Debt Distress Classification, ADF-countries (2005-2010)
Debt Relief & Debt Management
Debt sustainability remains a challenge for a large number of African LICs despite debt relief
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12
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2 7 7 7
81
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3 3 4
6
1816
14 14 13 2 1 1 1 1 2
10
15
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25
Hi h Ri k i9
129 9 9
11
5 4 4 5 53
1 2 2 1 12
13
7
2
0
5
2005
2006
2007
2008
2009
2010
2005
2006
2007
2008
2009
2010
2005
2006
2007
2008
2009
2010
Completion Point Decision and Pre‐Decision Point Non‐HIPCs
High Risk or inDebt Distress
Moderate Risk
Low Risk
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…. Nonetheless, several African LICs are making progress in debt policy and management
Trends in Debt Policy
CPIA Rating: Fiscal and Debt Policy3.60
3.10
3.20
3.30
3.40
3.50
CP
IA R
ati
ng
3.00
3.10
2005 2006 2007 2008 2009 2010
Year
Fiscal Policy Debt Policy Avg
…as well as in public sector management
Trends in Debt Policy
Governance Rating - Public Sector Management3.5
3.0
2.5
2005 2006 2007 2008 2009 2010
Quality of budgetary & f inancial mgt Quality of public administration
Transparency, accountability & corruption
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Country Experiences: Decision/Completion Point countries
o Joint AfDB-World Bank mission to Guinea Bissau in 2010 proposed a debt management and analysis capacity building Action Plan for the Public Debt Office
D bt t k id tifi d
Country Experiences
o Debt management weakness identified• lack of IT skills and equipment (specialized debt management software)• limited knowledge in concept and analytical foundations of debt management;
language issues• lack of Debt information recording, reporting and communication with creditors
o Proposed Action Plan aims to strengthen identified weaknesses and financing needs
o Potential short and long-term benefits• generation of savings of foreign exchange by better accounting and control of
obligations and through active liability management• better debt management can increase efficiency in the use of development
resources (development effectiveness)
Country Experiences: Pre-decision HIPCs/Fragile States
o Support for debt management is important in preparing countries to meet HIPC eligibility criteria and develop a sound macroeconomic
Country Experiences
program
o Grant resources for technical assistance and capacity building support available through the AfDB Fragile States Facility• Sudan: increased focus on debt relief issues in recent months • Zimbabwe: current efforts include hybrid arrears clearance strategy
(Zimbabwe Accelerated Arrears Clearance and Reengagement Strategy)
o Partnership with (sub)-regional institutions is critical, especially where DFIs have policy constraints
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Looking Ahead: Managing Challenges and Opportunities
o Operational and policy coordination at country level• debt management resources; DSAs and other analytical products; non-
concessional borrowing policies; range of financing products etc
Looking Ahead
concessional borrowing policies; range of financing products, etc.
o Focus on structural issues• improving economic and political governance• structural transformation of the economy • lessons from recent wave of sovereign debt crises
o Debt and development financing• diversifying development financing source• improving domestic resource mobilization through tax reforms, revenue
generating investments, domestic debt markets, sovereign wealth fund etc.
o Increasing partnerships and strategic engagement with non-DAC donors• emerging development partners provide a new source of financing for
Looking Ahead: Managing Challenges and Opportunities
Looking Ahead
• emerging development partners provide a new source of financing for development for Africa
• loans from EPs often combine concessional and non-concessional financing terms as well as focus on productive investment
• policy engagement with non-DAC donors will be key in addressing debt sustainability issues (transparency, coordination and harmonization)y ( p y, )
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Thank You!
Extra slides
2011 African Economic Outlook:
Africa and Its Emerging Partners
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Key Messages
Emerging partners have become a major driver of Africa’s growth in recent years
Not all countries have engaged equally with emerging partners
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Africa’s traditional partners are still very significant and will remain so in the years to come
To maximize the benefits from EPs, African countries should:
Coordinate their engagement strategy regionally
Improve their domestic policies
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Use the increased policy space to strike out better deals (in trade, FDI and development assistance)
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China 38%($93 bn)
Turkey 7%($16 bn)
• Any non-OECD DAC (except South Korea) and non-African country is a potential EP for
Who are the EP’sEP’s?
India14%
($34 bn)
Korea, Rep. 7%
($17 bn)
Brazil 7% ($17 bn)
potential EP for Africa
• EPs identified on the basis of trade and investment flows
Other EPs 27 %
Africa Trade Volume, 2009 % of total (US$ billion)
($ )• China (incl. HK),
India, Korea, Brazil and Turkey are leading the pack
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90%
100%
• Africa’s total trade doubled between
Dramatic Rise of EP’s…
20%
30%
40%
50%
60%
70%
80%
90% between 2000 and 2009
• Share of trade with non-traditional partners increased from 23% in 2000 to
0%
10%
20%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
TPs EPs
23% in 2000 to 39% in 2009
• China’s share tripled
Share of TP’s and EP’s in Africa’s total trade17
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TPs remain critical to Africa’s growth
62% of Africa’s trade in 2009.
83% of all ODA-equivalent flows to Africa83% of all ODA-equivalent flows to Africa between 2005 - 2010 compared to 10% from EPs
TPs
EU
OECD
Africa’s main trading partner: 40% of Africa’s trade
72% of all FDI flows to Africa during 2000‐2008
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OECD countries
72% of all FDI flows to Africa during 2000 2008 (15% from Asia)
EPs and TPs are contributing to the exploration of new resources through FDI
EPs’ and TPs’ are complementary
o e esou ces t oug
Supply affordable consumer Help to close infrastructure
EPs
pp ygoods to Africa
pgaps in Africa
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Improve the domestic policy framework to attract FDI and
The Way Forward
p o e t e do est c po cy a e o to att act a dto benefit from knowledge transfers
Develop and coordinate a regional strategy to engage with the EPs
Use the increased policy space and greater bargaining power toUse the increased policy space and greater bargaining power to interact more effectively with both EPs and TPs
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www.africaneconomicoutlook.org
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