Debt Strategy Analysis
Debt strategy analysis enables governments (or individual government agencies) to:
- Plan and negotiate the best available new borrowing and financing options to fund economic development, growth and poverty reduction.
- Keep debt costs and risks as low and sustainable as possible in the short and long-term
- Negotiate maximum debt relief from creditors where this is needed.
- Assess potential risks arising from private sector debt and contingent liabilities.
The main inputs needed to conduct debt strategy analysis are:
- a comprehensive debt database, including projected stock and service payments for external and domestic debt and contingent liabilities of central government and other government agencies, as well as private sector debt.
- analysis of the risks and costs of debt, including its interest rates and other fees, its maturity, and its composition by currency and by interest rate type
- analysis of the options for mobilizing new external and domestic finance
- analysis of the options for restructuring existing external debt
- comprehensive macroeconomic projections, including a baseline scenario and optimistic or pessimistic scenarios for GDP, balance of payments and budget.
- forecasts of the unmet financing needs for national development and poverty reduction strategies.
These inputs are then combined and analysed using a variety of computerized tools to assess debt sustainability, risks and costs, resulting in recommendations for the design and implementation of a national debt strategy. Given that government priorities and international circumstances change frequently, strategies are best updated annually, preferably annexed to the budget to provoke transparent parliamentary discussion, and widely disseminated to inform potential development funders and civil society.
