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WAIFEM course discusses medium-term debt strategy

Jun 14, 2011, 1:10 PM | Article By: Lamin B. Darboe

Over 30 participants from countries of the West African Institute for Financial and Economic Management (WAIFEM) member central banks are currently taking part in a week-long regional training course on Medium Term Debt Strategy (MTDS) for anglophone West African countries.

Organised by WAIFEM in collaboration with the World Bank and the International Monetary Fund (IMF), the training course is, among others, aimed at providing country participants with the requisite skills for developing a comprehensive debt management strategy, which aims at strengthening capacity in the methodology of medium term debt strategy.

The training session will, among others, focus on managing the risk exposure embedded in the debt portfolio, especially potential variations in the cost of debt serving and its impact on the budget.

In his keynote address, the Governor of the Central Bank of the Bank, Amadou Colley, said the training could not have been more relevant and timely, coming as it does when performance for The Gambia Country Policy and Institutional Assessment (CPIA) have just improved, and the risk of debt distress has abated from high to moderate level.

According to Governor Colley, maintenance of debt at sustainable levels while achieving growth is one of the most critical issues of overarching importance to public financial management in developing countries.

"Indeed, one of the aims of the MDGs is to deal comprehensively with the debt problems of developing countries in a concerted manner in order to make debt sustainable in the medium to long-term," he said.

The Central Bank Governor, however, added that debt management has grown in complexity in recent times as the scarcity of concessionary financing has caused many developing countries to increasingly turn to commercial sources of credit.

"Too often, in the past, many countries got into debt difficulties and debt overhang as a result of inappropriate borrowing strategies, including on the terms and structure of new debt. Many countries borrow to finance projects in efforts to fast track their economic development," he said, adding further that if this borrowing process is not properly articulated, planned and executed, debt can quickly become unsustainable and problematic.

While underscoring the efforts of the Gambia government in up-scaling public debt management, Governor Colley commended WAIFEM, the World Bank and the IMF for their technical support in building capacity of low income countries, especially in West Africa in debt and macro-economic management.

In his welcoming remarks, Professor Akpan H. Ekpo, Director General of WAIFEM, said that developing countries face various policy, institutional, and operational challenges due to weak debt management capacity and lack of efficient debt markets.

He stated that the MTDS is a framework developed jointly by the WB and IMF, which provides guidance for formulating and implementing a debt management strategy for the medium term.

According to him, the MTDS among others helps a country to avoid expensive mistakes through evaluation of cost-risk trade-off, and also enables a country to consider a range of alternative debt management strategies and assess the performance of the strategies on the basis of cost and risk to enable them to identify preferred strategies.