January 2, 2002
Developing countries have been urged to set up autonomous or semi-autonomous debt management offices with the responsibility for handling debt crisis.
This call comes from the UN agency responsible for trade and development (UNTAD), and comes in the wake of President Benjamin Mkapa's directive that only the Ministry of Finance is entitled to negotiate and sign foreign loans.
UNCTAD early last month organized a meeting for debt managers in Geneva which included in its agenda the changing role of national debt offices, and the impact of risk management systems. Members focused on recent developments of interest to professional debt managers, particularly in view of the changing role of national debt offices.
However, one such trend was for developing countries to set up autonomous agreements. He also directed the Ministry of Finance to scrutinize all ministries to see whether they were still receiving loans contrary to his latest directive.
The Presidential directive comes in the wake of pilling up of debts, despite debt relief. The country seems to be experiencing a debt crisis despite having qualified for debt relief program under the IMF and World Bank-supported plans, known as the Heavily Indebted Poor Countries (HIPCs) initiative.
Also on the agenda of the recent UNCTAD's meeting on debt management issues was the growing trend for investment decisions to be taken by sub-national entities, as part of the overall trend of government decentralization. "While domestic and foreign borrowing undertaken by local governments is in principle not considered a liability for central governments, default by a major municipality could have serious consequences for the national economy," the meeting papers say.
It said that an increasing number of institutions were being set up to monitor this type of indebtedness and assess its risks. This topic was to be discussed on 4 December by finance officials from Colombia, Russia, Brazil, India, Argentina and Mexico.
During the conference, representatives from the World Bank, the IMF, the US General Accounting Office and other national financial and accounting entities examined private sector debt, auditing and general guide-lines for debt management. They had looked closely at how auditing requirements for debt data can complicate the use of computerized tools in debt management. They had a related symposium that focused on the technical requirements for operating a modern debt office in a computerized environment.
Internet-enabled debt management systems, fraud prevention, data security and the standardization of interfaces were to be discussed before the end of the week long meeting that was closed on 7 December with the General Assembly of the WADMO, which was created in 1997 as an international forum for the discussion of debt management issues.
UNCTAD has contributed to the field of debt management for over 17 years through its Debt Management and Financial and Analysis System (DMFAS), a computerized system designed to provide accurate and timely debt information to debt offices in managing their debt.
The major feature of the program is a debt management software package that handles the operational, statistical and analytical needs of debt managers in finance ministries and central banks. Since 1995, DMFAS has more than doubled its client base to 60. As part of a joint World Bank/UNCTAD partnership to distribute and provide training on the Bank's Debt Sustainability Model (DSM+) software, the UNCTAD program also offers training activities that are also being implemented at the country level.
As the focal point within the United Nations system on debt issues, the UNCTAD secretariat prepares the Secretary-General's annual report to the General Assembly on the external debt situation of developing countries.
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