Commonwealth Secretariat Debt Management Forum

A warm welcome to this Debt Management Forum.

Thanks to my colleagues in the Debt Management Section within the Special Advisory Services Division.

There is a good attendance here today with a diverse mix of Treasury, Ministry of Finance and Central Bank representatives from 44 countries, five of whom are non-Commonwealth countries - Afghanistan, Niger, Mali, Guinea and Benin.

Some of our key partners new and old are also present including the World Bank, International Monetary Fund, African Development Bank, Inter-American Development Bank, as well as regional organisations like the Macroeconomic and Financial Management Institute of Eastern and Southern Africa, Western African Institute for Financial and Economic Management and the Eastern Caribbean Central Bank.

Debt burdens are crippling. They take money away from health, education and the environment: the real priorities. For example, pre-HIPC in 2000, 21 countries owed more than they produced in a year.

There is a contract between richer and poorer countries – look at the Monterrey Consensus and the repeat around 2005 G8 Gleneagles. The North to give more support to South and South to prioritise and manage that support, and commit to using it responsibly and wisely.

There are four key pillars of what the North can bring to the South: Aid – Trade – Debt – and Harmonisation and Unconditionality as per the Paris Declaration.

People forget that it was the Commonwealth which led the world on debt relief.

The Commonwealth Finance Ministers Meeting (CFMM) in Barbados in 1987 began the process of bilateral debt relief and the CFMM in Mauritius in 1996 began the process of multilateral debt relief and HIPC.

Those early Commonwealth seeds have borne fruit in the form of US$106 billion of cancelled bilateral and multilateral debt for 41 countries.

But debt relief doesn’t just ‘happen’. It takes time, there are pitfalls and the devil is in the detail.

The Commonwealth didn’t just have the big idea – it had the tool to make it happen: the Commonwealth Secretariat Debt Management and Recording System, the CS-DRMS. This is one of the jewels in the Commonwealth’s crown – a world-leading and transforming product.

DRMS has so far withstood the test of time. It was born in the early 1980s when the debt crisis erupted. Before the idea of cancelling debt, the Commonwealth led the world on quantifying debt, as few countries knew how much they owed.

Fifty six countries use it, of which 12 are non-Commonwealth, such as China, Thailand and the latest is Equatorial Guinea. The two most recent applicants, Afghanistan and Liberia, will receive it free of charge.

The last pan-Commonwealth debt management event was in June 2006, a User Group Meeting. The focus was on practical issues regarding DRMS, to improve the software itself. This has happened. Various functionalities are improved, for example in provision of a new Auctioning System to conduct a securities auction.

Meanwhile software developments in process include integrated public debt analysis module; interfacing CS-DRMS with Integrated Financial Management Information System; an on-lending module and enhanced Reporting Tools.

However, given the growing importance of sovereign debt management in the design of macroeconomic policy, ongoing global developments and increased demand from our member countries to provide assistance on analytical issues of debt management, the Secretariat decided to expand the scope and coverage of the debt forum by giving more prominence to the analytical aspects.

Analysis becomes all the more important in the evolving global economic outlook with three global crises - food, fuel and finance - inflation up and global liquidity down, and pressure on interest rates.

This needs appropriate policy responses from debt managers. Past episodes of debt crises arising out of risky debt structures have well shown the huge economic costs it imposes on a country’s growth pursuits.

There are three reasons why this Forum focuses on analytical issues.

First, it is relevant for all shades of developing countries (emerging market economy, low-middle income country, HIPC or post-HIPC country and small state economy) – all need sound debt management policies. This Forum can help….

Second, the Commonwealth Secretariat – and all of us – are engaged in an ongoing, fast-moving and complex debate, which needs constant analysis. The debate may move, but the genuine vulnerabilities remain.

The Secretariat has long argued for faster and deeper debt relief, especially to achieve MDGs.

The Secretariat is actively engaged in the global consensus building process through its Commonwealth Minister’s Debt Sustainability Forum. This forum last met with 15 Ministers in Washington in April, focussing on achieving greater coordination.

The Secretariat is concerned about the ability of countries to manage the liabilities that they have been accumulating since their debt write-offs – they cannot afford to be caught in another vicious cycle of debt problems.

Debt management is not just resource-raising. It’s also a liability management exercise.

So debt managers must decide on their new borrowings, particularly focusing on the volume of debt, the portfolio structure and the medium-term risks. This Forum can help….

Finally, there is a generic problem. The results of capacity-building elements of debt management programmes have fallen short of expectations – for all the international help given, too little local capacity is left behind. This Forum can help….

So, in conclusion, in this Forum let us look critically at Commonwealth Secretariat and its three areas of debt management work: CS-DRMS – the software itself; capacity building initiatives and advisory support on debt management.

Give us candid feedback for an independent and fair assessment of our relevance and usefulness for our clients. We are committed to using your findings to improve our service.

I declare the Forum open and wish you successful discussions.

ENDS