PI-13. DEBT MANAGEMENT
ABOUT THE INDICATOR
This indicator assesses the management of domestic and foreign debt and guarantees. It seeks to identify whether satisfactory management practices, records, and controls are in place to ensure efficient and effective arrangements. It contains the following three dimensions and uses the M2 (AV) method for aggregating dimensions scores:
- Dimension 13.1. Recording and reporting of debt and guarantees
- Dimension 13.2. Approval of debt and guarantees
- Dimension 13.3. Debt management strategy
IMPACT ON BUDGET OUTCOMES
The size and management of debt and guarantee obligations can have a substantial impact on a country’s capacity to maintain fiscal discipline. Effective management is necessary to ensure that the cost of such obligations is minimized in the long term and that the country has the capacity to meet all obligations when they are due. 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 governments and public enterprises is considered under PI-10. Fiscal risk reporting.
Dimension 13.1. Recording and reporting of debt and guarantees
DIMENSION MEASUREMENT GUIDANCE
13.1:1. This dimension 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.
13.1:2. Assessors need to identify where debt data are recorded, what system is in place for recording and managing debt (e.g., specialized software; software used for recording both foreign and domestic debt and the government guarantees), whether it captures all debt management transactions for direct debt and guarantees; what is the time lapse between a disbursement transaction and its record in the debt system. In addition, they need to determine how the debt registry system operates, i.e., if records are reconciled and the frequency of such reconciliation.
Dimension 13.1. Scoring
|Score||Minimum requirements for scores|
|A||Domestic and foreign debt and guaranteed debt records are complete, accurate, updated, and reconciled monthly. Comprehensive management and statistical reports covering debt service, stock, and operations are produced at least quarterly|
|B||Domestic and foreign debt and guaranteed debt records are complete, accurate, and updated quarterly. Most information is reconciled quarterly. Comprehensive management and statistical reports covering debt service, stock, and operations are produced at least annually.|
|C||Domestic and foreign debt and guaranteed debt records are updated annually. Reconciliations are performed annually. Areas where reconciliation requires additional information to be complete are acknowledged as part of documentation of records.|
|D||Performance is less than required for a C score.|
PEFA Handbook Volume 1: The PEFA Assessment Process – Planning, Managing and Using PEFA