By the DMFAS Programme
28 April 2020
| The new financial vulnerabilities and increased risks of debt distress faced by developing countries, particularly the poorest, as a result of the COVID-19 health and economic crises, reinforce the need for effective debt management as an intrinsically important component of Public Financial Management. The effective management of public resources and liabilities has become even more necessary in the face of increasing pressures on public finances. |  |
The availability of comprehensive, accurate and timely information on public debt is critical for policy decisions and risk management in the context of the pandemic. Debt data transparency is critical for effective crisis management. The absence of transparency of public debt and contingent liabilities undermines a country’s capacity to effectively manage its finances and limits the ability of the international community to provide timely and appropriate support to avoid and mitigate debt crises.
Effective debt management is also critical for the effective implementation of the emergency financing and debt moratorium measures adopted by the international community as a response to the COVID-19 crisis. The emergency response packages from the International Monetary Fund (IMF), the World Bank and Regional Development Banks are intended to assist countries to maintain debt sustainability and to allow countries to dedicate available resources to increase social, health or economic spending in response to the crisis. In addition to the G20 Debt Service Suspension Initiative for Poorest Countries, agreed on 15 April, and the announcement by the IMF that it will cancel debt service payments owed to it by the 25 poorest developing economies for the next six months of 13 April, there are calls for more substantive debt relief initiatives, including the participation of private creditors. The effective and timely implementation of already agreed and future measures will be dependent on the availability of comprehensive, accurate and timely information on public debt. Developing countries need to be able to access comprehensive and reliable public debt databases and to have the capacity to report effectively in accordance with international standards. They also need to be able to record, process and report the results of debt restructuring and eventual relief measures.
Notwithstanding these requirements, many developing and transition countries lack the appropriate human and technical capacity for handling public resources and liabilities effectively. Governments struggle with establishing reliable, comprehensive debt databases and with high quality reporting. Faced with increasingly complex debt portfolios, weaknesses in legal and institutional frameworks, staffing, skills and systems are serious challenges that undermine their capacity to ensure the availability of high quality debt data for operational, monitoring, analytical, policy- and decision-making purposes. In the context of COVID-19, these challenges are compounded by the current exceptional circumstances in which many countries have fully or partially closed governments’ buildings and debt offices have limited capacity to work remotely.
UNCTAD’s Debt Management and Financial Analysis System (DMFAS) Programme is providing developing countries with continuous support to improve their capacity to face the socio-economic challenges resulting from the COVID-19 pandemic.
Continuous support is provided through the Programme’s Helpdesk and advisory services, giving guidance on ensuring the accuracy and completeness of public debt records and comprehensive and timely reporting.
Many countries using DMFAS have already fully or partially closed their debt management offices. In some countries, remote access to the DMFAS database (web-based software) has been implemented with the support of the Programme.
Technical advice and support is also provided for debt restructuring and debt relief, including on the preparation of information needed for decision-making and for applying the results of the process to the database. The software is adapted to accommodate innovative financing mechanisms for leveraging public and private finance, and countries receive support and capacity-development in using the new functionality. The objective is to assist countries to ensure the accuracy and completeness of their public debt records and the information transparency required. The Programme also offers countries online learning material and tutorials.
For further information on DMFAS support during the COVID-19 crisis available here.