Sound public debt management is the basis of financial stability

By Peter Kibet Kitur

DEMPA tool is the cornerstone of the World Bank’s global program implementation in collaboration
with other partners to assist developing countries in improving their debt management. The World Bank wants DeMPA to be an international standard just the way we have such standards as International Financial Reporting Standards (IFRS) and International Public Sector Accounting Standards (IPSAS). It (DeMPA) uses a comprehensive set of 14 debt management performance indicators (DPIs) and
it’s a methodology used to measure a country’s public debt management performance. One can know,
through it, whether a country is performing well or not in its debt management.

Debt management functions are:

  1. Governance and strategy development,
  2. Coordination with micro economic policies,
  3. Borrowing and related financing,
  4. Cash flow forecasting and cash balance management,
  5. Debt recording and operational risks management.

Public Debt Managament
Public debt is an alternative to taxes and other government revenue sources. It is government borrowings,
both domestically and externally.  Domestic debts comprise of; treasury bills, treasury bonds, corporate loans, and creditors who supply goods or services and payment done later. External debts country and sustainable fiscal and monetary policies. It contributes to ensuring and managing long term and medium term debt sustainability. Debt sustainability defines the level of public debt that can be financed over determine future period of time without an unrealistically large future correction to the balance of income and expenditure. Good public debt management can also help develop domestic financial markets.

It (DeMPA) uses a comprehensive set of 14 ebt management performance indicators (DPIs) and it’s a methodology used to measure a country’s public debt management performance. One can
know, through it, whether a country is performing well or not in its debt management.

Objectives of Public Debt Management
In a survey which was done in the year 2000, member countries of the Organization for Economic Cooperation and Development (OECD), identified the following objectives:

  • Ensuring financing needs of government such as development of infrastructure like
    roads and hospitals,
  • Minimizing borrowing costs such as interest rates, negotiation and legal costs in obtaining the borrowings,
  • Maintaining the risks to acceptable levels such as currency exchange risks,
  • Support the development of domestic financial markets such rise of interest rates of
    loans which are likely to affect private borrowers.

The scope of DeMPA covers central government debt management activities, issuance of loan
guarantees, on lending; cash flow forecasting and cash balance management. DeMPA doesn’t
assess the ability to manage wider public debt which is guaranteed by the central government.