13.3. Debt management strategy
DIMENSION MEASUREMENT GUIDANCE
13.3:1. This dimension assesses whether the government has prepared a debt management strategy (DMS) with the long-term objective of contracting debt within robust cost–risk tradeoffs. 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.
13.3:2. 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.
13.3:3. Assessors will need to identify if there is a written and approved medium-term DMS, how it was undertaken, which requirements it includes and who approved it. The frequency of DMS updates is also needed. In addition, it is essential to establish if and when the DMS is publicly available (in printed, electronic, and/or other sources). It is also necessary to establish whether annual reporting of the DMS implementation and comparison with DMS objectives is undertaken and to whom it is provided. These annual reports are required to be provided to the legislature, not to be publicly available.
13.3:4. Assessors will need to obtain evidence that the annual borrowing plan is consistent with the approved DMS: the DMS should be part of the budget preparation process, and the sources of financing in the budget document should be in line with the analysis provided in the DMS. Further guidance on key elements of the DMS, the indicators likely to be assessed, and the DMS performance criteria are available in the Debt Management Performance Assessment (DeMPA) methodology 2015.
13.3:5. For the purposes of this dimension, the terms publicly reported and publicly available mean that DMS is published. For an A rating, implementation of the DMS is reported as part of the annual reporting criteria
Dimension 13.3. Scoring
|Minimum requirements for scores
|A current medium-term debt management strategy covering existing and projected government debt, with a horizon of at least three years, is publicly reported. The strategy includes target ranges for indicators such as interest rates, refinancing, and foreign currency risks. Annual reporting against debt management objectives is provided to the legislature. The government’s annual plan for borrowing is consistent with the approved strategy.
|A current medium-term debt management strategy, covering existing and projected government debt, with a horizon of at least three years, is publicly reported. The strategy includes target ranges for indicators such as interest rates, refinancing, and foreign currency risks.
|A current medium-term debt management strategy covering existing and projected government debt is publicly available. The strategy indicates at least the preferred evolution of risk indicators such as interest rates and refinancing, and foreign currency risks.
|Performance is less than required for a C score.
Pillar Three: Management of Assets and Liabilities