WAIFEM Calls For Improved Debt Management

In recent times, the West African sub-region has been struggling with significant economic and financial challenges, including high fiscal deficits, rising public debt levels, low growth rates, persistent external Imbalances and weak domestic resource mobilisation capacity.

Against this Backdrop, the Director General, West African Institute for Financial and Economic Management, WAIFEM, Dr Baba Musa said improving debt management strategies and practices to ensure Debt sustainability and long-term economic growth has become even more urgent.

Dr. Musa who stated this during the Joint Regional Training on Medium Term Debt Management Strategy put together by WAIFEM, the International Monetary Fund and the World Bank explained that effective debt management strategies ensures that a country’s borrowing is sustainable and supports its development objectives.

He stressed that the plan must balance the need for financing against the costs and risks associated with borrowing options, including the risk of default and the potential for debt distress.

The WAIFEM Director General said It also provides a roadmap for formulating the Annual Borrowing Plan, ABP, which enables governments to schedule their borrowing in a given fiscal year.

In an address, the Governor, Central Bank of Nigeria, Mr. Olayemi Cardoso said across the globe, rising public debt levels have emerged as a significant point of concern, especially acute in developing nations, where higher debt levels are coupled with greatly restricted fiscal space and limited opportunities for concessional finance.

Mr Cardoso who was represented by the Director, Monetary Policy Department, Dr Mohammed Tumala noted that such circumstances hinder government and private sector efforts to tackle economic down turns or fund initiatives that stimulate growth, which are essential for debt-to-GDP ratio and achieving long-term debt sustainability.

Dr. Tumala said the Medium Term Debt Strategy, MTDS framework and Analytical Tool, AT, developed jointly by the World Bank and the IMF, are grounded in best practices for managing public debt.

He stated that the core aim of the MTDS was to assist countries in finding a balance between the costs and risks of borrowing, focusing on maintaining debt sustainability and minimising debt servicing expenses over a medium-term horizon of 3-5 years.

The Analytical tool specifically enables debt managers to examine various risks in their current and projected debt portfolios like currency, interest rate and refinancing risks, thereby aiding in making informed choices to address potential vulnerabilities.

Dr Tumala explained that this tool ensures that debt management strategies are aligned with broader economic policies, including fiscal and monetary policies and promoting a holistic approach to economic management.

He added that the MTDS and the AT ensure that debt management strategies aligned with broader economic policies, including fiscal and monetary policies, promoting a holistic approach to economic management.

In 2009, the World Bank and IMF developed a framework that helps countries produce a debt management strategy, DMS, and an implementation and communication plan to engender stakeholder collaboration and debt transparency.

Umbwanko Baba, Edited By Grace Namiji