What is Debt Management and why is it important?
[Pages:20]What is Debt Management and why is it important?
Macroeconomic Working Group Original presentation: Lars Jessen
29 June 2017 Vientiane, Lao PDR
What is this?
80 70 60 50 40 30 20 10
0 2013
2014
2015
2016
2017
2018
2019
2020
2
Lao PDR, public debt/GDP
80
70
60
50
40
30
20
10
0 2013
2014
2015
2016
2017
2018
2019
2020
External Domestic
3
More background
? Debt level is relatively high :
? Risk to the debt size is high ? Risk to interest cost and the budget, relatively low due to high share
of debt with very low interest rate
? IMF Article IV, February 2017: "Lao P.D.R.'s risk of external debt distress is reclassified from moderate to high, suggesting the urgent need to tighten fiscal policy, strengthen public financial management, and develop a comprehensive medium-term debt management strategy"
? Access to concessional funding will gradually reduce ? implication is higher cost, but more financial choices
4
Structure of public debt
2010
2015
Other
countries
ADB
23%
13%
Other countries
14%
ADB
31%
WBG
Bonds
8%
0%
Bonds 12%
WBG 17%
China 20%
Japan 4%
Thailand 5%
China 45%
Japan 1%
Thailand 7%
5
Agenda
1. The macro context 2. Objectives and the debt management strategy 3. Cost and risk 4. What is the role of debt manager, and how should debt
management be organized
6
The macro context
Policy objectives and instruments
Objective
Instrument
Debt Management Fiscal Policy
To minimize cost, subject to a prudent level of risk Contingent
liabilities Improve resource allocation and achieve distributive objectives
Composition of the debt portfolio
Composition of spending and taxation. Levels of deficits and debt
Monetary Policy
Price stability
Interest rates, exchange rate or money aggregates
8
8
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