Suchergebnisse

Central to making good decisions about debt guarantees is assessing their expected and possible fiscal cost, a task that many governments still struggle with. This paper therefore describes a relatively simple scenario analysis method for estimating potential payments from the government when a beneficiary faces difficulty with debt payments. The basic version of the approach estimates the payments in a given scenario to inform risk management decisions. The paper then extends the method for situations where more rigor is required or where the economic guarantee fee is to be estimated. The final part of the paper extends the method to assess the combined loss of multiple guarantees when simultaneously subjected to negative economic conditions.

Managing government debt guarantees is difficult because the potential costs of guarantees are hard to estimate and typically do not show up in the reported budget deficit. A good framework for managing guarantees can, however, help governments overcome the difficulty and enhance the transparency of guarantees. This paper sets out a checklist of issues for a government to consider when designing or revisiting its framework for managing guarantees. The checklist comprises: (1) steps to establish macroeconomic control over guarantees by setting limits on their use and restricting the authorization to grant them; (2) steps to improve decisions to grant individual guarantees by means of guidelines, restrictions, conditions, cost estimation, guarantees fees, and a structured process for making the decisions; and (3) steps to ensure careful management after the granting of guarantees, including the recording and reporting of guarantees, arrangements to pay when necessary, and learning from past experience.

Drawing on the results of recent state-level debt management performance assessments (SN DeMPAs) in seven Nigerian states and the Federal Capital Territory, the paper highlights key institutional and capacity challenges in state debt management in the context of the Nigerian fiscal federalism system. It also provides a comparison of subnational debt management practices of selected Nigerian and Indian states. The analysis highlights the important role of the central government in the successful implementation of subnational debt management functions within fiscally decentralized system, in particular by: (i) establishing a sound legal framework for subnational borrowing and defining key parameters for state indebtedness; (ii) establishing, standardizing, and monitoring state-level debt-management procedures, systems, and institutions; and (iii) building the capacity of subnational authorities along the entire cycle of debt management, including for debt management strategy formulation, borrowing plans, debt contracting, recording and reporting. While this paper focuses on state-level debt management in Nigeria, it is designed to contribute to the ongoing dialogue on international sound practices for subnational debt management and implementation of fiscal decentralization in developing countries.