strengthening debt management: challenges...

11
6/15/2011 1 DMF Stakeholders Forum 2011 “Managing Debt: Lessons Learned and Emerging Issues” Strengthening Debt Management: Challenges Ahead 8–9 June, 2011 Berne, Switzerland Senait N. Assefa African Development Bank Outline 1. 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 1 4. Looking Ahead: Managing Challenges and Opportunities

Upload: others

Post on 06-Mar-2020

2 views

Category:

Documents


0 download

TRANSCRIPT

Page 1: Strengthening Debt Management: Challenges Aheadsiteresources.worldbank.org/INTDEBTDEPT/Resources/468980-1170954447788/3430000...“Managing Debt: Lessons Learned and Emerging Issues”

6/15/2011

1

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

1

4. Looking Ahead: Managing Challenges and Opportunities

Page 2: Strengthening Debt Management: Challenges Aheadsiteresources.worldbank.org/INTDEBTDEPT/Resources/468980-1170954447788/3430000...“Managing Debt: Lessons Learned and Emerging Issues”

6/15/2011

2

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

Page 3: Strengthening Debt Management: Challenges Aheadsiteresources.worldbank.org/INTDEBTDEPT/Resources/468980-1170954447788/3430000...“Managing Debt: Lessons Learned and Emerging Issues”

6/15/2011

3

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

30

12

4

2 7 7 7

81

3

3 3 4

6

1816

14 14 13 2 1 1 1 1 2

10

15

20

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

Page 4: Strengthening Debt Management: Challenges Aheadsiteresources.worldbank.org/INTDEBTDEPT/Resources/468980-1170954447788/3430000...“Managing Debt: Lessons Learned and Emerging Issues”

6/15/2011

4

…. 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

Page 5: Strengthening Debt Management: Challenges Aheadsiteresources.worldbank.org/INTDEBTDEPT/Resources/468980-1170954447788/3430000...“Managing Debt: Lessons Learned and Emerging Issues”

6/15/2011

5

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

Page 6: Strengthening Debt Management: Challenges Aheadsiteresources.worldbank.org/INTDEBTDEPT/Resources/468980-1170954447788/3430000...“Managing Debt: Lessons Learned and Emerging Issues”

6/15/2011

6

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, )

Page 7: Strengthening Debt Management: Challenges Aheadsiteresources.worldbank.org/INTDEBTDEPT/Resources/468980-1170954447788/3430000...“Managing Debt: Lessons Learned and Emerging Issues”

6/15/2011

7

Thank You!

Extra slides

2011 African Economic Outlook:

Africa and Its Emerging Partners

Page 8: Strengthening Debt Management: Challenges Aheadsiteresources.worldbank.org/INTDEBTDEPT/Resources/468980-1170954447788/3430000...“Managing Debt: Lessons Learned and Emerging Issues”

6/15/2011

8

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

14

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

15

Use the increased policy space to strike out better deals (in trade, FDI and development assistance)

Page 9: Strengthening Debt Management: Challenges Aheadsiteresources.worldbank.org/INTDEBTDEPT/Resources/468980-1170954447788/3430000...“Managing Debt: Lessons Learned and Emerging Issues”

6/15/2011

9

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

16

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

Page 10: Strengthening Debt Management: Challenges Aheadsiteresources.worldbank.org/INTDEBTDEPT/Resources/468980-1170954447788/3430000...“Managing Debt: Lessons Learned and Emerging Issues”

6/15/2011

10

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

18

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

19

Page 11: Strengthening Debt Management: Challenges Aheadsiteresources.worldbank.org/INTDEBTDEPT/Resources/468980-1170954447788/3430000...“Managing Debt: Lessons Learned and Emerging Issues”

6/15/2011

11

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

20

www.africaneconomicoutlook.org

21