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Public Debt Middle Office WG Report

Public Debt Middle Office WG Report

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Published by Professor Tarun Das

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Published by: Professor Tarun Das on Jul 11, 2009
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FIRST DRAFT OF THE WORKING GROUP REPORT ONTHE NEED FOR A MIDDLE OFFICE FOR PUBLIC DEBTMANAGEMENT
(as circulated in the Fifth Meeting of the Working Group on January 19, 2001)
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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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INDEXReport of the Working Group
1.Introduction12.Debt Position of the Central Government13.Central Government Debt Management34.International Experience45.Recommendations5AnnexuresI.Constitution of the Working GroupII.Central Government Debt2.1Definition of Public Liability2.2Debt Position of the Central Government2.3Debt Burden of the Central Government2.4Net Liability of the Central Government2.5Contingent Liabilities of the Central Government2.6Legal Ceilings on Central Government DebtIII.Existing Structure for Public Debt ManagementIII.1Internal Public Debt ManagementIII.2Other Domestic Liability ManagementIII.3External Public Debt ManagementIII.4Missing Links in Middle Office Functions for Public DebtManagementIII.5Co-ordination among Debt Management ActivitiesIV.International Experience and Best Practices in Public Debt Management4.1Approach in Study of Best International Practices4.2Risk Management Framework for Government Debt4.3Institutional Structure for Public Debt Management4.4Scope of Role and Functions of Debt Offices4.5Organisational Structure4.6Governance - Legal Framework and Accountability4.7Coordination with Fiscal Policy Authority and Monetary PolicyAuthority4.8Capacity Building in Sovereign Debt ManagementV.Summary Recommendations by the Commonwealth Secretariat on BestInternational Practices in Sovereign Debt ManagementVI.List of Select Debt Offices Visited by the Working Group
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