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0 0 7 Programmatic Approach for Debt Management in LICs: Programmatic Approach for Debt Management in LIC g g pp pp f f g g s: R 2 Where do we stand and next steps Where do we stand and next steps Uriel Uriel Prez Prez

  1. 0 0 7 Programmatic Approach for Debt Management in LIC´s: Programmatic Approach for Debt Management in LIC g g pp pp f f g g s: R 2 Where do we stand and next steps Where do we stand and next steps Uriel Uriel Pérez Pérez Acuña Acuña General Director of Public Credit General Director of Public Credit Ministry of Finance and Public Credit of Nicaragua (MOF) Ministry of Finance and Public Credit of Nicaragua (MOF) P G Octubre 2010

  2. Outline Outline 0 0 7 – Debt Management Performance Assessment ( Debt Management Performance Assessment (DeMPA DeMPA) ) – Missions and objective Missions and objective R 2 – Comparison 2007 Comparison 2007 vs vs 2010 2010 – How do we take advantage of How do we take advantage of DeMPA DeMPA tool tool – Next Steps Next Steps p P G – Medium Debt Term Management Strategy (MTDS) Medium Debt Term Management Strategy (MTDS) – Current Debt Strategy: General and Specific Current Debt Strategy: General and Specific Current Debt Strategy: General and Specific Current Debt Strategy: General and Specific objectives objectives – Advances in the last three years Advances in the last three years – MTDS findings MTDS fi di MTDS fi di MTDS findings – Actualization of Public Debt Strategy Actualization of Public Debt Strategy 2

  3. 0 0 7 Debt Management Debt Management R 2 Performance Assessment (D MPA) (DeMPA) P G 3

  4. – Two missions have visited Nicaragua: First on May 2007 and Two missions have visited Nicaragua: First on May 2007 and g g y y the second on September 2010 the second on September 2010 0 0 7 – Objective: Evaluate Public Debt Management Objective: Evaluate Public Debt Management Objective: Evaluate Public Debt Management Objective: Evaluate Public Debt Management R 2 • They evaluated us on 15 key performance indicators They evaluated us on 15 key performance indicators P G – Check list Check list – Gave us a better idea of what we were doing (right or Gave us a better idea of what we were doing (right or wrong) wrong) 4

  5. Comparison: Comparison: DeMPA DeMPA 07 07 vs vs DeMPA DeMPA 10 10 0 0 7 – The first evaluation was done under a pilot scheme The first evaluation was done under a pilot scheme – Results in 2007 were extremely different than in 2010 R Results in 2007 were extremely different than in 2010 R lt i lt i 2007 2007 t t l diff l diff t th t th i i 2010 2010 R 2 – Some key indicators that were evaluated A, are now Some key indicators that were evaluated A, are now P G classified as D classified as D – Way to determine grade very harsh for the new Way to determine grade very harsh for the new DeMPA y y g g y y DeMPA, it a , it a , all or nothing system all or nothing system • If one requirement is missing then the whole indicator is If one requirement is missing then the whole indicator is If one requirement is missing then the whole indicator is If one requirement is missing then the whole indicator is a failure a failure 5

  6. Comparison: Comparison: DeMPA DeMPA 07 07 vs vs DeMPA DeMPA 10 10 0 0 7 – Things Things to to consider consider: : a a low low grade grade (D (D for for example) example) indicates indicates that that the the particular particular dimension dimension does does not not meet meet the the minimum minimum requirement requirement R 2 – For For example example: : Our Our legal legal framework framework has has one one item item missing missing but but this this does does not not mean mean that that the the legal legal does does not not work work. . P G – There There is is a a big big difference difference between between rebuilding rebuilding and and starting starting over over than than making making some some key key modifications modifications – A A (D) (D) grade grade seems seems to to indicate indicate rebuilding rebuilding – Results Results could could difficult difficult the the elaboration elaboration of of a a proper proper reform reform plan plan if if findings findings are are not not clearly clearly explain explain in in the the document document sent sent to to the the authorities authorities 6

  7. How do we take advantage of How do we take advantage of DeMPA DeMPA tool: tool: 0 0 7 • The evaluation gives you overall picture of your debt The evaluation gives you overall picture of your debt management capacities management capacities R 2 • DeMPA DeMPA allows you to identify positive and negative allows you to identify positive and negative indicators indicators – With this mind you can structure a reform plan With thi With this mind you can structure a reform plan With thi i d i d t t t t f f l l P G – Begin with the easy ones to fix and then start with the Begin with the easy ones to fix and then start with the hard ones ( These might be were third parties are hard ones ( These might be were third parties are involved, for example modifications of laws) involved, for example modifications of laws) 7

  8. Next Steps: Next Steps: • The evaluation will be submitted to us by the end of The evaluation will be submitted to us by the end of O t b O t b October, approximately. October, approximately. i i t l t l 0 0 7 • MHCP technical team will revise and later discuss with MHCP technical team will revise and later discuss with R 2 the WB team the WB team • Elaborate a reform Plan with the assistance of WB Elaborate a reform Plan with the assistance of WB P G • Things that will be taken into account ASAP: Things that will be taken into account ASAP: – – DSA Analysis ( we are currently working on this topic with IMF local team) DSA Analysis ( we are currently working on this topic with IMF local team) y y ( ( y y g g p p ) ) – Actualization of Debt Strategy using MTDS tool Actualization of Debt Strategy using MTDS tool – – Suggestions to the WB: During the mission Suggestions to the WB: During the mission´ ´s, the teams could work closer together. s, the teams could work closer together. Currently, WB obtains information and afterwards writes report. This does not allow Currently, WB obtains information and afterwards writes report. This does not allow y, y, p p the Government to find additional information that could change the Grade, this could the Government to find additional information that could change the Grade, this could eliminate the element of surprise . . eliminate the element of surprise 8

  9. 0 0 7 Medium Term Debt Strategy Medium Term Debt Strategy R 2 (MTDS) P G 9

  10. Our National Our National Public Public Debt Debt Strategy Strategy 2008 2008- -2011 2011 was was approved approved by pp pp by the y the President President of of the the Republic Republic in p in 2008 2008 0 0 7 • General Objective of the Strategy: General Objective of the Strategy: R 2 – Guarantee Central Government Financial needs Guarantee Central Government Financial needs according to our Economic Program according to our Economic Program P G – Reduce cost with prudent level of risk Reduce cost with prudent level of risk – The strategy will initiate the process to take our level of debt The strategy will initiate the process to take our level of debt with respect to GDP towards sustainability (Nominal/GDP with respect to GDP towards sustainability (Nominal/GDP between 40 and 50 percent) between 40 and 50 percent) between 40 and 50 percent) between 40 and 50 percent) 10

  11. Specific Objectives: Public Debt Management Strategy Specific Objectives: Public Debt Management Strategy 0 0 7 • External Debt Objective: External Debt Objective: – Maximize Maximize concessionality concessionality and conclude HIPC initiative and conclude HIPC initiative R 2 • Internal Debt Objective: Internal Debt Objective: P G – Develop the Internal Debt Market Develop the Internal Debt Market • Though the issuance of standardized government Though the issuance of standardized government instruments instruments • This will eventually create a new option for funding the This will eventually create a new option for funding the y y g g Central Government deficit (current situation) Central Government deficit (current situation) 11

  12. Advances in the implementation of our strategy: Advances in the implementation of our strategy: 0 0 7 • Auction process modernized (electronic and dematerialize instruments) Auction process modernized (electronic and dematerialize instruments) • • Instruments standardized ( 1, 3, & 5 year paper) Instruments standardized ( 1, 3, & 5 year paper) Instruments standardized ( 1 3 & 5 year paper) Instruments standardized ( 1 3 & 5 year paper) R 2 • This has allowed us to met our year needs: US$ 45.0 in 2008, This has allowed us to met our year needs: US$ 45.0 in 2008, US$118.4 in 2009 and US$ 121.0 in 2010. US$118.4 in 2009 and US$ 121.0 in 2010. US$118.4 in 2009 and US$ 121.0 in 2010. US$118.4 in 2009 and US$ 121.0 in 2010. P G • Interest are currently @ 6.00 percent (YTM) for three year paper, Interest are currently @ 6.00 percent (YTM) for three year paper, initially it was 11.53 percent initially it was 11.53 percent y y p p • Communication with market has improved, we will continue to Communication with market has improved, we will continue to strengthen this area. strengthen this area. • Confident has improved, we have maturities that go to 2013. Confident has improved, we have maturities that go to 2013. 12

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