Commonwealth’s debt management system used in 55 countries

In a similar global economic environment to today, a crisis in the early 1980s left many developing countries reeling, mainly because of an inability to manage their own debts. Consequently, in 1985, the Commonwealth Secretariat created a system which helps countries directly address this problem.

“At the time of the debt crisis of the 1980s, the emphasis was on external debt as many countries had built up significant external debt liabilities but did not have a system to monitor these liabilities in a comprehensive manner,” said Jose Maurel, Director of Special Advisory Services at the Secretariat. “The Commonwealth Secretariat Debt Recording and Management System, often referred to as CS-DRMS, therefore, bridged this gap by providing countries with a tool by which their external debt can be recorded and monitored.”

From its introduction, the use of CS-DRMS has grown exponentially from two user countries to over 55 today at more than 80 government ministries or agencies like central banks, both inside and outside the Commonwealth. In addition to the English version of the system, a French version is being used in eight countries.

Statistical Officer for the Central Bank of Belize, Karen Carbis, credits the software’s success with it being user-friendly and having readily available reference materials in hardcopy and hotline support via the web.

The Central Bank of Belize, which has been using the system for 21 years, supports the Ministry of Finance, which has overall responsibility for external debt management, by managing the CS-DRMS database for all external, domestic and private sector debt.

Ms Carbis said: “We are now in a better position of having a hands-on understanding of the scope of our debt, which helps us to manage our debt portfolio in a more effective manner.”

She continued: “The most significant improvement is that the Bank can now accurately find out our outstanding debt at any given time through the effective and efficient tracking and forecasting.”

At the Bank of Botswana, its Deputy Director Matthew Wright said that while the country only has a small external debt portfolio, supervision of their private sector has become more complicated over the years.

“We are actively involved in trying to upgrade our standards of statistics collection. It [CS-DRMS] is used to supplement our balance of payments survey. While our survey does provide the facility to cover loans, CS-DRMS provides a superior method because you can make projections simply.”

Mr Maurel explains that it has become important to update CS-DRMS intermittently in order to keep up with the changing needs of its user countries.

The first change was in the early 2000s, when the functionalities of CS-DRMS were expanded to include recording and managing domestic debt, which by that time had eclipsed external debt as a source of borrowing in many developing countries. “This ensured that the system would provide an integrated solution to information needs on public debt management as a whole,” said Mr Maurel.

“The second change was a shift in the nature of assistance sought by debt managers, from debt data issues to analytical issues in debt management including risk consideration, which tells us that the effort put in by international organisations in debt data, collection, recording, has started to bear fruit.”

Responding to this change, CS-DRMS has been equipped with a powerful analytical tool that helps users in external debt portfolio analysis, evaluate terms for new borrowings and in sensitivity analysis reflecting various risk scenarios. This can better inform debt managers about the cost and risks associated with their debt strategy.

Technical assistance is also offered to debt managers across various member countries in the use of CS-DRMS for effective debt management. Such courses cover various aspects of debt management, from debt data recording and compilation and reporting of debt statistics, to debt analysis. There is a constant enhancement of the capacity-building programme to keep up with current demands.

In April 2008, CS-DRMS was further enhanced to include a securities auctioning system, which is expected to assist countries in domestic debt management right from the pre-insurance stages of government debt securities through to redemption of such liability. This is expected to aid countries in their effort to develop their domestic capital market.

“All these enhancements to CS-DRMS were possible due to the feedback from debt officers in various countries. But, we need to do some more work in this area in order for it to cater more fully to the needs of the user countries, supporting day-to-day operations, analytical functions, as well as statistical responsibilities,” added Mr Maurel.

Secretariat Links:

• Special Advisory Services