Sovereign Debt Management Newsletter
Storkey & Co Limited
WN/1111791
What’s New
The main focus of activity over the past Trends and Challenges Training Volume 8, Issue 2
three months has again been our con- Course in Cambridge, UK from 2-5
tinuing involvement in debt manage- September 2008. July 2008
ment and capacity building assign-
In mid-June, we provided training to
ments in the Asian-Pacific region, and
around 30 members of the People’s
our ongoing contribution to the devel-
Council of Vietnam during a 3-day
opment of sound debt management Special points of interest:
workshop organised by the UNDP. This
practices internationally. The United Nations Insti-
was the first opportunity to increase
In this Newsletter, there are articles awareness of government debt and tute for Training and Re-
covering: debt management to local govern- search (UNITAR) has an-
ments in Vietnam. Given the limited nounced its e-Learning
The use of swaps for debt restructur- Course on “Basic Course
understanding among participants of
ing. on Public Debt Manage-
sound practice debt management
Commonwealth Secretariat Debt and increasing pressure on provincial
ment” to be conducted
Management Forum held in London and municipal governments in Viet-
from 8 September to 17
from 26 to 27 June 2008.
October 2008. The objec-
nam to be responsible for their own
tive of the course is to
financing/debt programs, more train-
Recent initiatives in investor relations explain concepts and
ing will be required to ensure that the
and debt publications. techniques of public debt
risk of local government debt does
management.
Central Banking Publications Gov- not become a realised contingent
ernment Debt Management: New liability for the central government.
Inside this issue:
The Use of Swaps for Debt 2
Storkey & Co Update Restructuring
ComSec Debt Management 2
Forum
Over the past 3 months, we have: completed assistance to the Minis-
try of Finance in Mongolia to Investor Relations and Debt 3
continued to assist with the Debt
strengthen public debt manage- Publications
Management and Fiscal Risk com-
ment under the IDA Governance
ponent of the World Bank and Central Banking Publica- 3
Assistance Project (GAP). tions Training Course
DFID Public Financial Manage-
ment Reform Project (PFMRP) for completed a Debt Relief Strategy Recent Developments or 3
the Ministry of Finance in Vietnam. for the Government of Nauru Announcements
through World Wide Project Man-
continued to assist the World Bank Storkey & Co Limited―
agement Services in Adelaide, SA 4
in implementing the debt man- Company Profile
under an AusAID funded project.
agement performance assessment
(DeMPA) tool across low-income provided training for the People’s Debt Management Unit 4
Publications & Websites
countries. Council of Vietnam.
Page 2 Sovereign Debt Management Newsletter
The Use of Swaps for Debt Restructuring
As Low Income Countries (LICs) We have noted that some LICs 4. Systems to record, settle, value
and Middle Income Countries and MICs have already under- (on a marked-to-market basis),
(MICs) begin to develop their Me- taken swaps. Before a swap is report, and account for the swaps
have been developed, tested
dium Term Debt Strategies introduced by the government, it
and implemented.
(MTDS), the debt managers are is recommended that ALL of the
increasingly looking to see how following five criteria be met: 5. Staff have been trained in the use
they can restructure government of swaps.
1. Laws and regulations are in place,
debt, particularly external debt. along with the necessary dele- We suspect that many LICs/MICs
Cross-currency and interest rate gated authorities to enter into that have already entered into a
swaps. swap transaction will not have
swaps provide the instruments for
such activities. The World Bank 2. Policies and procedures to moni- fulfilled all these criteria and are
provides swaps as a hedging in- tor and manage swaps have unaware of the risks that these
strument not only for individual been established and formalised instruments carry. In addition, the
IBRD loans or a portfolio of IBRD in policy/procedure manuals. use of collateralised swaps may
loans, but also for a portfolio of 3. Risk limits and controls have been be necessary given the below
non-IBRD loans. Commercial and established for each swap and investment grade credit ratings of
investment banks can also act as limit monitoring processes are in LICs and MICs. Again, the same
swap counterparties. place (counterparty/risk limits). five criteria are needed.
Before a swap is
IBRD USD Loan/EUR Swap
1. Original Loan – 30 years
introduced by the
(contracted 15 years ago) Net Flows
USD
LIBOR + 0.15%
US$50 million government, it is
IBRD Government
recommended that
2. Currency Swap – 15 years €1 = US$1.59
EUR 5.0925%
(5.11-0.0175)
EUR 5.0925%
(5.11-0.0175) €31.47 million ALL of the five criteria
Market
Counterparty
USD LIBOR
IBRD
USD LIBOR
Government
outlined above be
Net Flows
Fee payable to IBRD: ¼% of US$50m = US$125,000
met.
ComSec Debt Management Forum
The Commonwealth Secretariat capital markets; institutional ar- Details of the forum including the
(ComSec) hosted a Debt Man- rangements and capacity for programme, all the presentations,
agement Forum in London on 26 sovereign debt management; list of participants, and the final
to 27 June 2008, which was at- emerging areas of debt man- report can be found on the web-
tended by nearly 100 delegates agement for developing coun- site: www.csdrms.org
and presenters from 50 countries. tries; enhancing CS-DRMS for ef-
In addition, ComSec released a
fective debt management; im-
The broad themes covered in the new video as part of the forum
proving debt data quality, report-
forum included emerging trends Breaking the Debt Cycle which
ing and dissemination; and ca-
in sovereign debt management; has been posted on YouTube:
pacity building for debt manage-
developing a public debt man- www.youtube.com/watch?
ment.
agement strategy; accessing v=gjzery5La2o
Volume 8, Issue 2 Page 3
Investor Relations and Debt Publications
Many debt management offices The Brazilian National Treasury has highest on their Investor Relations
(DMOs) are using the internet to been very innovative by: Ranking for the most active
provide debt information and emerging countries in the sover-
sending out regular emails inform-
debt activities to investors and ing the market of new initiatives
eign debt market.
market participants. In the Janu- and monthly status reports against We have noted the video posted
ary 2008 newsletter, we set out 10 the annual debt strategy pub- on YouTube by the Common-
DMO websites that set the high- lished at the beginning of the fis-
wealth Secretariat on page 2.
est standards in this regard. cal year.
The use of Webcasts and You-
Over the past year, we have sending invitations to participate
Tube to provide debt information
noted that some DMOs and inter- in web-based conference calls.
and debt activities in video for-
national agencies involved in providing a questionnaire to mat should be the next major de-
debt management are making evaluate their publications. velopment in investor relations
wider use of the internet to keep
As a result, the Institute of Interna- and provide the potential to in-
investors, market participants and
tional Finance (IIF) ranked Brazil corporate an interactive format.
debt practitioners informed.
Central Bank Publications Training Course
Central Banking Publications (CBP) the UK Debt Management Of- The four-day program of
will hold their fourth annual 4-day fice, Danish National Bank, interactive roundtables
training course on Government Agence France Trésor, Hungary’s
Government Debt Management encourages delegates to
Debt Management: New Trends
and Challenges at King’s College Agency (ÁKK), and renowned quiz the presenters, raise
Cambridge from 2-5 September. practitioners and academics in issues and discuss solutions.
their field.
Key themes to be covered during
Company Director, Ian
this four-day (three nights) residen- Specific topics include cash
Storkey, will chair the course
tial course by an experienced management, public-private
having taken over from Mike
panel of experts from across the partnerships, Asset-Liability Man-
Williams who chaired the pre-
globe are effective debt man- agement (ALM) frameworks for
vious three courses. For course
agement strategies and domestic effective debt management,
details refer to CBP’s website:
bond market development. domestic interest rate swaps and
Speakers include senior officials of performance measurement. www.centralbanking.co.uk
Recent Developments or Announcements
The World Bank's Economic Policy The conference, which is by invi- We have noted that the Indone-
and Debt Department will host a tation only, is expected to attract sian Directorate General of Debt
conference on "Debt Relief and around 200 participants and will Management (DGDM) has re-
Beyond: A World Bank Confer- cover a wide range of topics re- cently completed the English ver-
ence on Debt and Develop- lated to debt relief and debt sus- sion of their website, although
ment". The conference will take tainability. The last Sovereign most of the documents are still in
place on October 30-31, 2008 in Debt Management Forum was Bahasa. This is a commendable
Washington, DC, immediately held in October 2006. Details effort for DGDM and one that has
following the World Bank's Sover- should be available shortly on the taken considerable effort. The
eign Debt Management Forum to World Bank website: website address is:
be held on October 27-29.
www.worldbank.org www.dmo.or.id/en/
Storkey & Co Limited
WN/1111791
Storkey & Co Limited is an international man-
Ian Storkey agement consultancy providing independent
Director specialist advice on government debt manage-
90 Larsen Crescent ment to central and sub-national governments.
PO Box 51096 The company employs or works in partnership
Tawa with recognised experts who have considerable
Wellington 5249, New Zealand international experience in the finance markets
Phone: +64 (04) 232-4594 and in public sector debt, cash and risk man-
Fax: +64 (04) 232-9465 agement. With their extensive project and
change management expertise, they have de-
Mobile: +64 (021) 414-510
veloped an international reputation for deliver-
Email: info@storkeyandco.com
ing the highest quality practical solutions.
Web: www.storkeyandco.com
These experts have gained practical experi-
ence from working in a government debt office
and on technical assistance projects interna-
tionally for all the major donor agencies.
Since the company was established in early
2001, assignments have been undertaken in
Australia, Canada, Cambodia, Ethiopia, Fiji,
Ghana, Guyana, India, Indonesia, Laos, Lithua-
nia, Malawi, Mauritius, Mongolia, Nauru, New
Zealand, Nicaragua, Papua New Guinea, Philip-
pines, Solomon Islands, Thailand, The Gambia
and Vietnam.
Debt Management Unit Publications & Websites
Key publications released by Latvia Debt Management Strategy 2008 Vietnam External Debt Bulletin No 2
DMUs over the past 3 months:
Latvia Central Government Debt Man- Also Released:
Belgium Annual Report 2007 agement Quarterly Bulletin Q2/2008
ComSec Newsletter May 2008
Czech Republic Quarterly Review Jun Lithuania General Government Debt 2007
2008
ComSec June 2008 Forum papers
New Zealand Economic and Financial
Finland Quarterly Review Jun 2008 Overview 2008 A full list of DMO/DMU websites
is on our website as well as rele-
Greece Public Debt Bulletin No 48 & 49 Portugal IGCP Annual Report 2007
vant Ministry of Finance/Central
Indonesia Central Government Debt Sweden SNDO Annual Report 2007 Bank websites and sub-national
Qtr IV 2007 government websites in Austra-
Sweden Central Government Borrowing
lia, Canada and the USA.
Ireland NTMA Annual Report 2007 2008:2
Israel Form-18K 2007 Sweden Financial and Risk Policy for 2008
Japan Debt Management Report 2008 Turkey Public Debt Management Report
May, Jun and Jul 2008
Japan Japanese Government Bonds
Jul 2008 UK DMO Annual Report 2007-08
Jordan Public Debt Bulletin Mar 2008 UK DMO Quarterly Review Apr-Jun 2008
UK DMO Guide to Gilts version 6