At the opening ceremony of the jointly organised West African Institute for Financial and Economic Management (WAIFEM), the World Bank and International Monetary Fund (IMF) regional training on Medium Term Debt Strategy (MTDS) for Anglophone West African countries.
Held in Banjul from 13- 17 June, 2011 at the Kairaba Beach Hotel, brought together about thirty participants from countries of WAIFEM member central banks andf the resource persons were drawn from the World Bank, IMF and WAIFEM faculty.
According to Governor Colley, many developing countries borrow to finance projects in efforts to fast track tgeir economic development.
However, “ if this borrowing process is not properly articulated, planned and executed, debt can quickly become unsustainable and problematic, he debunked.
He then told participants that maintenance of debt at sustainable level 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 Millennium Development Goals (MGDs0, said is to deal comprehensively with the dbt problems of developing countries in a concerted manner in order to make debt sustainable in the medium to long-term.
However, debt management, he pointed out has grown in complexity in recent times attributing it to the scarcity concessionary financing as it has caused many developing countries to increasingly turn to commercial sources of debt.
He recalled that the Multilateral Debt Relief Initiatives (MDRI) have significantly reduced the debt burden in many Low Income Countries such as The Gambia adding that freeing resources tto help finance government’s investment and growth programs.
He adds: : it has thus improved credit worthiness of the country and also opened up new borrowing opportunities and financing sources including access to the international capital markets, “ said Governor Colley.
“The situation if not properly managed could lead a country to a ballooning of its debt an debt distress.” He continued: “this scenario has been compounded by the emergency of new creditors citing China, and India as good examples saying that the two countries are willing to lend at less stringent conditionalities,” he remarked.
He finally told participants that the MTDS can be a good tool for them to use as it focuses on determining the appropriate composition of the debt portfolio.
In addition, the tool enables the debt manager to analyse a debt portfolio’s cost and risk, bas well as the identification alternative strategies.
In order words, governor said the tool has a strong focus on mamaging the risk exposure embedded in the debt portfolio, specifically, potential variations in the cost of debt servicing and its impact on the budget.
Speaking earlier on, in the foot of WAIFEM director general, Baba Y. Musa derector Debt Management of WAIFEM buttressed on the points of Gambian governor saying that developing countries face various policy, institutional and operational challenges due to weak debt management capacity and lack of efficient debt markets.
He added that the MTDS is a framework developed jointly by the World Bank and IMF, provides guidance for formulating a debt management strategy for the medium term.
“It is useful for assessing the performance of a government’s cost and risk tradeoffs associated with alternative debt management strategies.”
Explaining on some of the benefits of the MTDS, Musa said it can help a country to avoid expensive mistakes through evaluation of cost-risk trade off.
This, he said: “ it identify the optimal way to meet the government financing requirements at least cost with a prudent degree of risk or risk measurement and management”
He revealed that the MTDS also help 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 countries preferred strategy.
“The MTDS help guide choice between concessional, quasi-concessional, commercial financing, these he said includes currency composition and it can also helps to achieve appropriate balance between short-tenors interest rate structure, he positioned.
Senior Economist World Bank, Madam Eriko Togo also underscore the importance of the MTDS noting that the tool can be use by government’s in balancing their debt cost.
Christian Mulder of International Monetary Fund also make a short speech and the introduction of members of the high table by Mr. Karamo Jawara programme manager, WAIFEM.