Guidelines for Public Debt Management
The Guidelines for Public Debt Management (Guidelines) have been developed as part of a broader work program undertaken by the IMF and the World Bank to strengthen the international financial architecture, promote policies and practices that contribute to financial stability and transparency, and reduce countries’ external vulnerabilities.
The revision of the Guidelines was requested by the G-20 Finance Ministers and Central Bank Governors, at their meeting in Moscow, on February 15–16, 2013. Since the adoption of the original Guidelines in 2001, and amendments in 2003, financial sector regulatory changes and macroeconomic policy developments, especially in response to the recent financial crisis, have significantly affected the general financial landscape. This has been manifested by a greater volume of public debt issuances, unprecedented cross border capital flows in search of higher yields, and higher volatility of investor risk appetite. As a consequence, many countries have experienced significant shifts in their debt portfolios, in terms of both size and composition. Such changes have brought to the forefront a number of issues in the management of public debt that required consideration in reviewing the Guidelines.
The main revisions reflect (i) greater clarity on the roles and accountabilities of debt managers and their responsibility for providing pertinent information to fiscal authorities on the amount of debt that can realistically be absorbed by the market; (ii) enhanced communication with investors, which was considered essential especially during periods of crisis, with pertinent information on debt composition and related risk indicators being periodically provided to minimize uncertainty; (iii) the use of collective action clauses in bond contracts for the efficient resolution of sovereign debt restructurings; (iv) a more detailed consideration of risk mitigation strategies, particularly liquidity and refinancing risk, and of contingency plans, including the building of cash buffers; (v) greater emphasis on the use of stress testing, the importance of managing counterparty risk when derivatives are used, and the need to better manage and monitor the risks arising from contingent liabilities; and (vi) the need to enhance the liquidity of the domestic bond market, while impediments that inhibit the development of domestic government bond markets, such as limited diversification of the investor base, should be promptly identified and addressed, as well as the need to consider flexibility in issuance programs, especially in times of crisis.