UNCTAD DMFAS programme – Strengthening debt management in support of good governance

Concerns regarding rising levels of debt and vulnerabilities in developing economies have drawn attention to problems with the completeness and transparency of debt statistics. There is broad consensus across the international community, including the G20Group of Twenty -—
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—- and the United Nations General Assembly -—
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—-, that enhancing information sharing could help to avoid new episodes of debt distress.

Mandated by the UN General Assembly -—
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—- and UNCTAD member States -—
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—-, the UNCTAD DMFASDebt Management and Financial Analysis System Programme programme -—
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—- advises developing economies in debt management and helps them to record and report reliable debt statistics for policy making. UNCTAD works on the recording, reporting and monitoring of debt statistics (the ‘downstream’ areas of debt management) and complements the work of the World Bank and the IMFInternational Monetary Fund, which primarily focus on data sustainability analysis and medium-term debt strategies (‘upstream’ debt management). The DMFAS programme follows a four-year strategic plan, currently focusing on the Programme’s comparative advantages in technical assistance in the area of operational debt management, from debt data recording and statistical reporting up through basic debt analysis -—
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The Programme is funded through bilateral donor contributions, cost-sharing by beneficiaries, which has steadily increased over the past 10 years, and UNCTAD’s regular budget. The current donors include Germany, Ireland, the Netherlands, Switzerland and the European Union. Donors consider the DMFAS programme crucial for improving debt management:

Sustainable debt is important for sustainable development

Timely and comprehensive statistics on the levels and composition of debt are a prerequisite not only for the effective management of public liabilities but also for identifying risks of debt crises and limiting their impact -—
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—-, and even more so in the face of challenges raised by the COVID-19COVID-19 is an infectious disease caused by the strain of coronavirus SARS-CoV-2 discovered in December 2019. Coronaviruses are a large family of viruses which may cause illness in animals or humans. In humans, several coronaviruses are known to cause respiratory infections ranging from the common cold to more severe diseases such as Middle East Respiratory Syndrome (MERS) and Severe Acute Respiratory Syndrome (SARS). The most recently discovered coronavirus causes coronavirus disease COVID-19 -—
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—-. pandemicCommonly described by the WHO as ‘the worldwide spread of a new disease’, no strict definition is provided. In 2009, they set out the basic requirements for a pandemic: • New virus emerges in humans
• Minimal or no population immunity
• Causes serious illness; high morbidity/mortality
• Spreads easily from person to person
• Global outbreak of disease.
The US Centre for Disease Control uses a similar approach, but with a reduced set of criteria. It is very difficult to gauge whether the spread of a disease should be termed an outbreak, epidemic or pandemic. In other words, when to declare a pandemic isn’t a black and white decision -—
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—-. and climate change -—
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—-. Reliable debt statistics contribute to the formulation of financial policies and strategies, and consequently to improvement of financial stability and governance.

The DMFAS programme contributes directly to the achievement of SDGSustainable Development Goal 17 of the 2030 Agenda, more specifically, its target 17.4 of the 2030 Agenda as it assists “in attaining long-term debt sustainabilityA country’s capacity to finance its policy objectives through debt instruments and service the ensuing debt -—
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—-. through coordinated policies aimed at fostering debt financing, debt relief and debt restructuring”. Training workshops, capacity-development and software tools enable better debt management and reporting that help developing countries to improve their financial policies. The work also contributes indirectly to poverty reduction (SDG 1) as better debt management and debt relief can help to take steps towards economic recovery for heavily indebted poor countries.

DMFAS offers software, training and advisory services

The DMFAS programme offers countries a set of practical solutions for the management of public liabilities and the production of debt statistics. These include:

• DMFAS debt management and financial analysis software designed to meet the operational, statistical and analytical needs of debt managers and public debt strategies. This includes training in the installation, maintenance and use of the software.
• Capacity development in debt management skills through modules on debt data validation, statistics, debt portfolio analysis and operational risk management.
• Advisory services, including needs assessments and advice on technical, administrative, legal and institutional debt management. This includes assistance interfacing the DMFAS database with countries’ integrated financial management systems.

Currently, 58 countries and 83 institutions around the world use DMFAS software for debt management. The software has been continuously improved and is now in its sixth edition since 1982. The software is available in four languages (English, French, Russian and Spanish).

DMFAS has trained experts from 67 countries in debt management

Table 1 shows the number of officers that have benefited from training in debt management procedures and best practices between 2011 and 2021. In total, in over ten years, 6368 people from 67 countries were trained by DMFAS. In addition, on average 370 experts participated in each UNCTAD Debt Management Conference held every second year since 2011.

Since 2016, DMFAS has systematically recorded detailed statistics on DMFAS activities. In the six years from 2016 to 2021, 380 workshops have been provided, to over 4200 participants. These participants were from 67 different countries and 42 per cent were female (see table 2).

Increasing DMFAS debt coverage facilitates debt management

Debt data recorded with the DMFAS software are easier to manage and report transparently to support financial policy and stability. The DMFAS software facilitates the recording of both external and domestic debt. The DMFAS programme uses a 90 per cent threshold to determine whether a country has comprehensive coverage of their government external debtExternal debt is understood as outstanding amount of those actual current, and not contingent, liabilities that require payment(s) of principal and/or interest by the debtor at some point(s) in the future and that are owed to nonresidents by residents of an economy -—
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—-.; i.e., if a country has at least 90 per cent of external debt instruments covered in the DMFAS system it is considered comprehensive. The same 90 per cent threshold is set for government domestic debt.

Figure 1 shows that over the last ten years, a consistently high proportion of DMFAS countries had comprehensive data on external debt. In 2021, 93 per cent of countries using DMFAS had comprehensive external debt instruments recorded in DMFAS database.

Figure 1 also shows an increasing number of countries using DMFAS to record domestic debt. The number of countries with comprehensive data on domestic debt also increased over the time period, but the figure shows that it takes some time for new DMFAS users to develop a more comprehensive debt database. In 2021, 71 per cent of countries using DMFAS had comprehensive domestic debt records in DMFAS database.

DMFAS helps to improve transparency and quality of debt reporting

The DMFAS programme also supports its clients in disseminating debt statistics and performing debt analysis. The programme does this by offering initial and follow-up capacity development modules. For example, a first module helps countries to develop their first debt statistics bulletin; a second helps them to review and improve the content of the existing publications.

Both the number of DMFAS user countries that publish debt statistics bulletins and that publish debt portfolio reviews on a regular basis has increased during the last ten years (see figure 2), despite a setback in 2020 mainly due to the disruptions related to the COVID-19 crisis. Over the ten years, countries publishing debt statistics have increased from 26 to 42 and countries publishing debt analysis have increased from 12 to 37.

More integrated operation risk management with DMFAS

Several countries have asked that the DMFAS debt management operations be integrated with other financial management systems, such as those typically used by treasury departments and budget departments. The latest version of DMFAS software includes this facility, improving the accuracy and timeliness of debt servicePayments made to satisfy a debt obligation, including principal, interest and any late payment fees -—
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—-. payments and debt data. As a result, the number of countries where DMFAS is integrated with other financial management information systems has increased from 8 countries in 2006 to 18 countries in 2021 (figure 3). The decrease in 2020-2021 was mainly due to the need to upgrade interfaces while countries are updating to DMFAS 6 system.

References

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