FOREWORD
The need for a comprehensive strategy for public debt management has beenfelt for some time because of high fiscal deficits, the consequent increase in debt burden of the Central Government and the absence of an integrated approach towardsdomestic and external public debt management.As a major step towards putting in place an effective system for public debtmanagement, a Working Group has been constituted to examine the need for anintegrated “middle office” for public debt management. The role of the “middleoffice” envisaged is to make analysis, provide advisory support and managementinformation system inputs for debt management decisions. The issue was examined inthe context of effective public debt management of the country keeping in view the possible long-term requirements. Given the wide array of issues involved, the Grouphas restricted its focus on the institutional structure, risk management requirementsand best international practices. The recommendations made in this regard, for settingup a centralized middle office, should be viewed as the starting point towards creationof a strong institutional system for prudent public debt management.The recently introduced Fiscal Responsibility and Budget Management Bill2000, which encompass stipulating limits on public debt as a proportion of GDP, besides other ceilings on fiscal indicators, have created conducive conditions for capacity building for public debt management. The initiative of the Group, as outlinedin its recommendations, is also in tune with recent efforts by international financialinstitutions like the World Bank and IMF to identify as to what constitutes sound practices for sovereign debt management.The setting up of the Working Group and its Report was made possible byfunding from the Institutional Development Fund Grant of the World Bank, aimed atstrengthening the debt management capacity of the country. The Group is indebted tothe valuable insights provided by Mr. Graeme Wheeler and Mr. Fred Jenson from theWorld Bank, Mr. Nihal Kappagoda for his consultancy report on best international practices, and Dr. Raj Kumar, from the Commonwealth Secretariat, London for complementing Mr. Kappagoda’s efforts. The Group also had the benefit to beenriched from different officials of select debt offices visited. The Working Groupwould like to acknowledge contributions made by Mrs. Usha Thorat from the ReserveBank and Mr. Alok Chaturvedi from the Ministry of Finance. On behalf of the Group,I would also take this opportunity to place on record special appreciation for thetechnical inputs provided on the subject by Mr. Arindam Roy from the Ministry of Finance. The Group is indebted to officials from External Debt Management Unit inthe Ministry of Finance for rendering valuable assistance and providing secretarialsupport for the Group.
(Arvind Virmani)
Tuesday, January 30, 2001
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