Coverage

Dimensions 13.1 and 13.2: CG.

Dimension 13.3: CG, except in federal states.

Time period

Dimension 13.1: At time of assessment.

Dimension 13.2: Last completed fiscal year.

Dimension 13.3: At time of assessment, with reference to the last three completed fiscal years.

Measurement guidance

Governments that fail to monitor the financial liabilities that arise from domestic, foreign, and guaranteed debt or from payment arrears, including salaries, may create unnecessarily high debt service costs and are unlikely to be able to deliver planned services. For the purpose of this indicator, debt refers to central government debt—both domestic and external. Monitoring of debt contracted by subnational government and public corporations is considered under PI-10: Fiscal risk reporting.

Dimension 13.1 assesses the integrity and comprehensiveness of domestic, foreign, and guaranteed debt recording and reporting. A system to monitor and report regularly on the main features of the debt portfolio is critical for ensuring data integrity and effective management, such as accurate debt service budgeting, making timely debt service payments, and ensuring well planned debt rollovers. Regular reporting enables the government to monitor the implementation of its debt management strategy and address any deviations that arise.

Dimension 13.2 assesses the arrangements for the approval and control of the government’s contracting of loans and issuing of guarantees, which is crucial to proper debt management performance. This includes the approval of loans and guarantees against adequate and transparent criteria by government entities as established in the primary legislation. In addition, documented policies and procedures should provide guidance for undertaking debt-related transactions. The narrative discussion on this dimension should present any evidence of compliance with the legislation and procedures and whether debt approvals and loan guarantees are consistent with the debt management strategy covered by dimension 13.3. Monitoring of liabilities arising from guarantees issued is covered under fiscal risk oversight in PI-10.

Dimension 13.3 assesses whether the government has prepared a debt management strategy (DMS) with the long-term objective of contracting debt within robust cost–risk trade-offs. Such a DMS should cover at least the medium term (three to five years), and it should include a description of the existing debt portfolio’s composition and evolution over time. The DMS should consider the market risks being managed—particularly the interest rate, exchange rate, and refinancing/rollover risks—and the future environment for debt management in terms of fiscal and debt projection. For example, this consideration may be based on a fiscal strategy as assessed in PI-15 and on assumptions made and constraints related to portfolio choice. Crucially, the DMS should indicate strategic objectives in terms of the intended direction of or quantitative targets for the major indicators of risk.

The DMS should reflect the current debt situation and should be reviewed periodically, preferably yearly, as part of the budget preparation process. The DMS should be publicly available.