STRATEGIES FOR FINANCING DEVELOPMENT The Newsletter of the HIPC CBP and the FPC CBP

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Issue 33, 4th Quarter 2007 HIPC Debt Analysis & Strategy HIPC Ministers on Debt Sustainability, MDG Finance and Capacity Building 2 CEMLA Regional Domestic Debt Strategy Workshop 4 MEFMI Region Experience of the DSF 5 Pôle Dette Workshop Combines CBP and DSF 6 Increasing Aid Effectiveness Through Budget Support 7 HIPC Progress and Debt Sustainability Status 8 HIPC Recent and Forthcoming Activities 10 Technical Questions 16

Foreign Private Capital Flows FPC CBP Activities Update 12 Building an Awareness Strategy 13 Technical Exchanges with the Private Sector 14 Disseminating Results to the Private Sector 15

HIPC MINISTERS ON D MDG FINANCE AND

he 14th meeting of Finance Ministers of Heavily Indebted T Poor Countries (HIPCs) was held in Washington on 19 October 2007. The meeting was co-sponsored by the HIPC Capacity-Building Programme, the Commonwealth Secretariat and the Organisation Internationale de la Francophonie.

The meeting was held under the joint chairmanship of H. E. Ali M. Lamine ZEINE, Minister of Finance and Economy of ; H.E. Kwadwo Press conference with H.E. Kwadwo BAAH WIREDU, Minister of Finance and Economic Planning of BAAH WIREDU, Minister of Finance GHANA, H. E. Ali M. Lamine ZEINE, Minister of Finance and Economy of NIGER and DRI Director and Economic Planning of GHANA; and Matthew MARTIN. H.E. Maria dos Santos TEBUS TORRES, Deputy Prime Minister and HIPC Debt Relief Long-Term Debt Sustainability Minister of Planning and Finance of Ministers indicated once again that stronger SAO TOME AND PRINCIPE. efforts should be made to accelerate progress Ministers reiterated that they are determined to Representatives of 29 HIPCs took part, to decision and completion points for remaining maintain their debt sustainability by maximising and made important recommendations HIPCs. As delays appear to be due to problems the concessionality of their new financing, and to improve debt relief delivery, assure maintaining an IMF track record, they urged the its effectiveness in promoting development. To long-term debt sustainability, finance international community to link HIPC progress this end, they also undertook to implement all the Millennium Development Goals much more closely to PRSPs rather than the legal and institutional reforms necessary, (MDGs), and continue to build their PRGFs. They also urged equitable treatment on and to conduct all the underlying analysis debt management capacity. progress, in particular moving countries rapidly necessary, to ensure the adoption of their own from EPCAs to PRGFs. borrowing ceilings and criteria for judging whether to accept offers of financing, in Improving Debt Relief Mechanisms Ministers also noted that there has been little parliamentary discussions of their budgets. progress on increasing creditor participation in Multilateral Debt Relief Initiative HIPC, and the continuing proliferation of However, they stressed that the attainment of Ministers congratulated the international lawsuits by rogue creditors and third parties. the MDGs while maintaining debt sustainability community on implementing the Multilateral Ministers welcomed once more the legal will depend crucially on a dramatic increase in Debt Relief Initiative (MDRI), and mobilising most technical assistance provided by Advocates for grants and concessional loans during the next of the financing needed for the relief: International Development (A4ID) and the 2-3 years, and their widespread extension to • Emphasised their concern that the funding Commonwealth Secretariat, as well as the financing sectors such as infrastructure which of IADB participation in the Initiative would proposed support by the AfDB, the proposed are essential for growth. This is particularly true considerably reduce concessional funding in publication by the BWIs of “scorecards” of for Latin America. Latin America, and therefore urged donors participation, and the reinforcement of the IDA to begin negotiations immediately on a Commercial Debt Reduction Facility. Ministers noted a rapid increase in offers of substantial replenishment of the FSO, as poor quality less concessional tied export credit well as to provide higher levels of aid for Nevertheless, they urged the international loans by some OECD governments, and urged poverty reduction in Latin America. community to go beyond such assistance by: the international community to reach an early • Indicated that it would be desirable to • Ensuring that the IFIs can provide relief even agreement on “responsible lending” for all low- extend the MDRI to cover the Asian where rogue creditors do not allow income (not just post-HIPC) countries, which Development Bank, Caribbean participation to reach necessary thresholds goes beyond concessionality to take account of Development Bank and other sub-regional • Establishing a small fund to relieve debts effectiveness and value for money in producing institutions. owed between severely indebted and low- development results, to avoid expensive or poor • Reiterated their concern about the use of income countries, which cannot afford to quality lending. performance-based formulas (rather than provide debt relief to one another financing needs for the MDGs) in allocating • Intensifying efforts to convince Iraq, Libya Ministers urged that low-income countries funds to decide how much of the debt relief and new EU members to participate should themselves be given voice to express would be genuinely additional, and urged • Agreeing codes of conduct for creditors not their views on what is the level of debt which is regional development banks to tailor their to sell debts on secondary markets, and for sustainable, by having a major input of views performance formulas more closely to international lawyers not to represent into MDB resource allocation assessments of regional priorities and other donors to litigants in such cases. their policies, and by doing the initial supply funds more on the basis of MDG calculations of debt sustainability for themselves needs and outcomes. rather than leaving them to the BWIs.

2

EBT SUSTAINABILITY, D CAPACITY-BUILDING

Ministers strongly urged that the Bretton Woods Aid Effectiveness However, Ministers expressed strong concerns Institutions should set clearer guidelines for Ministers reiterated their determination to meet about these initiatives, as follows: domestic debt and private sector external debt, all the aid effectiveness targets assigned to • the DSF analysis needs to to avoid these types of debt provoking renewed them under the Paris Declaration, especially - be led by country technical officials, and debt crises. They underlined that they are those relating to managing for results. They approved by their policymakers, rather committed to avoiding excessive domestic urged donors (whether individually or than constructed largely by the BWIs. borrowing which could destabilise domestic collectively) to be more ambitious in the build-up - include much more analysis of financing financial markets, and to assisting the private to the Accra High-Level Forum in 2008, which options including benchmarks for sector to minimise its borrowing costs and risks. will review progress on the Paris Declaration. domestic debt, the impact of improving they have already conducted such analysis and They urged them to adopt effectiveness targets aid effectiveness, private sector debt, would be happy to input strongly into such to untie aid, reduce conditionality, transform contingent liabilities and sub-national discussions. technical assistance into genuine capacity- debt, to make it more useful for HIPC building support, and increase budget support debt management. Ministers urged the IMF to publish transparent and anti-shock financing. - start from a baseline of the genuine level guidelines on how the results of debt of creditor participation in HIPC. sustainability analysis are used to set borrowing While noting that the survey on the Paris • the MTDS support needs to be made fully limits and minimum concessionality levels in IMF Declaration had promoted a much deeper relevant to HIPC needs by: programmes, and to demonstrate more dialogue on aid effectiveness, they regretted - emphasising risks related to debt flexibility in allowing countries to borrow at grant that (as stated by the OECD) the survey had sustainability, aid volatility and poor elements between 35% and 50% if this is considerably overstated progress. They urged effectiveness, and to exogenous shocks, essential to financing the MDGs. the OECD to tighten the definitions for the 2008 rather than to interest and exchange rates survey and ensure more developing country - choosing financing sources and Financing the Millennium leadership of findings. instruments which maximise development Development Goals progress Ministers underlined their determination to - analysing of restructuring existing Aid Quantity design their own aid strategies to encourage domestic debt and of the potential effects Ministers expressed disappointment that the maximum alignment by donors, and to hold of domestic debt policy on financial international community is not delivering on the donors and creditors accountable for markets promises made in 2005 to increase aid flows. compliance with these strategies. They also - identifying pathways for gradually They noted that many countries have seen little emphasised that in order to ensure such mutual returning to non-concessional borrowing or no increase in aid - in particular, this is true accountability they will require extensive building • the DeMPA needs to be considerably for good-performing but 'under-aided' of their analytical and monitoring capacity at the refined, by: countries, and fragile states. They urged all G8 national, regional and international levels. - assessing the quality of debt strategies and EU members to publish 3-year plans which based on debt sustainability, the quality will reach their pledges and reallocate aid to Debt Strategy Capacity-Building and concessionality of new financing, under-aided countries by 2010. domestic debt market development, Ministers stressed that for the past ten years analysis of macro and aid risks Ministers urged the international community to they have been building their capacity to design - testing the tool fully with developing scale up innovative financing mechanisms by and implement debt strategies, with the support country governments to ensure widening the International Financing Facility of the HIPC Debt Strategy and Analysis ownership beyond the IFFI pilot, and increasing the number Capacity-Building Programme, to which they - implementing the tool via country self- of countries utilising an airline ticket tax to fund are also providing large amounts of their own assessments conducted through the development. However, they reiterated the need cofinancing. The programme has resulted in CBP regional partners to ensure that such financing was entirely major improvements in their capacity, expressed additional to normal funds from national through improved legal and institutional Overall, Ministers underlined that capacity- budgets and allow countries to provide more frameworks, as well as successful negotiation of building support should be based on their self- than 0.7% of their GNI in aid. external debt reduction, enhanced domestic assessments of needs, and be executed with debt management and mobilisation of better the CBP implementing partners. They urged the Anti-Shock Financing quality new external financing. BWIs to build on CBP achievements rather than Ministers reiterated that they continue to require duplicating efforts. They also urged caution in large-scale financing against exogenous Ministers welcomed the recent focus by the moving forward with a new partnership for shocks. Accordingly they recommended that Bretton Woods Institutions on debt strategy capacity building on debt management, unless funding for the UN CERF should be dramatically issues through the Low Income Countries Debt the partnership would mobilise large-scale expanded to guarantee a sufficient revolving Sustainability Framework (DSF), the IMF initiative additional funds. Finally, they urged that any fund to combat multiple emergencies. They also to help countries design Medium-Term Debt such initiative should be jointly governed by the urged the international community to provide Strategies, and the 's Debt beneficiary developing countries, donors and more viable solutions to exogenous economic Management Performance Assessment tool capacity-building assistance providers. shocks through a grants-based high-access (DeMPA). and rapidly disbursing anti-shock facility.

3 REGIONAL DOMESTIC DEBT STRATEGY WORKSHOP

EMLA jointly with DRI macroeconomic prospects. The second cooperation programme with CEMLA to organised a second was the construction of 20-year sectoral fulfil its needs for capacity-building in debt C Regional Workshop on projections by sectoral working groups. management and analysis. Domestic Debt Strategy and The third was working in national teams to Sustainability Analysis, in Mexico analyse domestic and total debt CHALLENGES FOR MAINTAINING City from 1 to 11 October, attended sustainability and write a report. SUSTAINABILITY by three HIPCs (Bolivia, Honduras The challenges for maintaining domestic and ) and Paraguay WORKSHOP RESULTS debt sustainability include: (middle-income country which The main results of the workshop were • the limited expected access of Latin financed its participation in the national domestic debt strategy reports, American HIPCs to concessional event). analysis of long-term fiscal, monetary and external funding over the medium term financial sector development prospects, (increasing the need for domestic recommendations for improvement in financing); The workshop responded to regional HIPC institutional coordination to manage • public investment financing policies and countries' demand, because although domestic debt, and - in Paraguay's case - their effects on the wider economy external public debt has become much a domestic debt database in Debt Pro© (especially liquidity and monetary more sustainable due to cancellations format. policy); under HIPC and MDRI, several countries • the speed of future financial sector have seen sustained increases in domestic The Domestic Debt Template proved to be development and capacity to absorb public debt, which can be a major risk in a very useful tool. During the workshop, it government debt; future, necessitating detailed analysis of its was easily adapted further to the • the extension of maturities to avoid origin and behaviour. characteristics of the participating bunching of maturities (based on countries' economies, and the adaptations economic stability and confidence in The aim of the workshop was to reinforce will be fed back into further improvements public sector management; and the capacity of government officials from in overall CBP methodology. • generating higher levels of budget Latin American HIPCs (and Paraguay) in revenue to increase debt servicing analysing domestic and total debt Though the analysis of domestic and total capacity and avoid undermining fiscal strategies and establishing permanent debt sustainability took account of the stability. teams capable of regularly updating such indicators defined by DRI (23% debt analysis, with minimal external assistance. service/budget revenue and 88% CAPACITY-BUILDING NEEDS Such strategies will help governments PV/budget revenue),1 countries indicated The participants underlined the following design and implement policies for the need to update the DRI analysis in additional capacity-building needs: restructuring existing debt and issuing new order to define even clearer debt • Improving their ability to conduct overall debt, to ensure long-term sustainability. sustainability thresholds for domestic and domestic debt analysis, especially total debt. Each national team analysed relating to monetary and financial NEW METHODOLOGY recent developments in fiscal, monetary sector policy. The workshop used the HIPC CBP's and financial sector development, and • Construction of domestic debt updated Domestic Debt Strategy Analysis domestic debt issuance, for their country, databases and design of debt issuance methodology, including a comprehensive as well as three scenarios (baseline, strategies. Domestic Debt Analysis Template, which optimistic and pessimistic) for future • Training new personnel in debt allows consolidated analysis of short- and developments. management and analysis. long-term debt issuance needs (or • The use of models and templates for “supply”) for budget financing and Apart from Nicaragua, all countries' ratios long-term macroeconomic and debt monetary policy implementation, and were below the reference levels suggested forecasts. financial and private sector “demand” for by DRI. Nevertheless, several countries • Integration of the methodology with the government paper, using 20-year scenarios showed long-term increasing trends in Bretton Woods Institutions' DSF for fiscal, monetary and financial sector some indicators which provide early framework. development policy. After undertaking such warning signs, and had unsustainable debt • Inclusion of analysis of the relative risk sectoral analysis, users of the template can levels in their pessimistic scenarios. of domestic and external debt. assess whether demand will exceed supply Nicaragua's Compensation Payment or vice versa, and the impact of this Bonds (Bonos de Pago por Indemnización balance on prospects for domestic debt - BPI) issued to compensate past interest rates and maturities. expropriations, which represent a large part of its domestic debt, produced growing The methodology was applied in three and unsustainable debt in all scenarios. stages, based on using the Domestic Debt Template and the Debt Pro© software. The The Paraguay team particularly valued the 1 For more details of these thresholds and how they are calculated, see HIPC CBP publication first stage was country presentations on workshop, leading its Finance Ministry to 5, Key Issues for Analysing Domestic Debt their domestic debt situation and explore the possibility of establishing a Sustainability.

4 MEFMI REGION EXPERIENCE OF THE DSF

data on debt, new borrowing and economic DSF methodology with the HIPC-CBP variables, the design of new financing and methodology. The HIPC-CBP methodology macroeconomic scenarios, and the usefulness would be used in order to prepare much more of the DSF as one input into national debt detailed forecasts of alternative external and strategies. It targeted middle-to-senior level domestic borrowing options, and officials from Ministries of Finance and Central comprehensive alternative macroeconomic Banks responsible for middle office (analysis) scenarios, which would make countries feel aving benefited from HIPC and functions, from ten MEFMI member countries much more confident of the reliability of results MDRI debt relief, MEFMI (Kenya, Lesotho, Malawi, Mozambique, and recommendations than the generalised H member states still face the Rwanda, Uganda, Swaziland, Tanzania, Zambia overall assumptions about financing and the challenge to constantly monitor their and Zimbabwe). stress tests undertaken in the DSF template. public indebtedness and make the However, they were confident that they could correct decisions regarding new As such, it provided several important initial easily use the DSF methodology during national borrowings. The IMF/World Bank Debt lessons: workshops, and to conduct tripartite DSF Sustainability Framework for Low • Participants need a full training guide exercises with BWI missions. Income Countries (DSF-LIC) explaining the data necessary for inputting methodology and related templates are into the framework, and the dissemination 2. Zambia National Workshop Lessons designed to help officials to analyse the of detailed data prerequisites, so that they This was the first occasion on which the DSF public debt situation objectively, and can arrive at workshops with the correct had been used in a MEFMI national workshop, assist officials in preparing appropriate data. and the experience reinforced the lessons of the policy advice for any new financing • This is especially true of debt data, where regional workshop. In particular, it found that at requirements. there is no problem with availability of a country level considerable preparatory work relevant data, but automatic reports could will be needed in making sure the debt be created from CS-DRMS and DMFAS to database is up to date and validated, and that MEFMI has been working on introducing the download data for the DSF, and domestic PV projections are done using the correct DSF to its low-income members intensively debt data to be prepared in advance could exchange and discount rates before the during 2007: be specified more carefully, including for baseline debt data is downloaded into the DSF. • In January, two MEFMI staff and two trainee example requirements on contingent Thereafter successful use of the DSF will require fellows participated in the LIC-DSF regional liabilities. a country team comprising three groups workshop organised by WAIFEM, to • Data on private sector debt could be more namely: macro specialists who would meet prior familiarise them with the DSF methodology problematic, though some countries could to the DSF exercise to carry out necessary in readiness for a MEFMI regional draw for example on FPC CBP programme projections using existing models; new financing workshop. survey results and other national data. specialists who will go through the process of • MEFMI held the regional workshop during 2 • Efficient use of the framework templates analyzing various new borrowing options to 10 July in Namibia in collaboration with requires detailed prior work on the validation available to the country (probably subdivided the World Bank, IMF and DRI. of debt data, and the design of detailed into external and domestic specialists if both • MEFMI also conducted the Zambia DSA new external and domestic financing, and types of financing are significant for the country); update workshop in July, during which the macroeconomic projections, all of which is and debt data specialists who will validate not country debt strategy team used the DSF normally done in the context of national only the external debt data but also domestic template to conduct some simulations. The debt strategy workshops under the HIPC and private sector debt data. DSF results were compared with those CBP, but was not done in the workshop. obtained using the HIPC CBP methodology. • Only some parts of the fiscal sustainability 3. Future Plans • MEFMI and its member states played template were explained: as a result, As a result of all these experiences, MEFMI leading roles in discussions with the BWIs countries were unable to analyse fiscal intends to proceed rapidly, in cooperation with on HIPCs' experiences of the DSF at the sustainability satisfactorily. Future training its HIPC CBP partners, with the improvement CBP inter-regional workshop in London on should emphasise and spend more time on and adaptation of the DSF to meet its member September 4 (see article in Newsletter 32) this as the primary template of interest to states' needs and with training measures to and at the Ministerial Meeting in Washington MEFMI member countries. ensure its full utilisation in its member states. on October 19 (see article on page 2). • Much more time should be spent The steps to achieve this in 2008, funded by interpreting and understanding country- the HIPC CBP, will include attachments of This article aims to summarise these specific results of the DSF, rather than pre- MEFMI region experts to the Bretton Woods experiences and suggest possible next steps in prepared case studies, so that they can Institutions to develop training materials and improving the DSF for the benefit of MEFMI produce policy recommendations and use adapt the tool to member state needs, a member states. the results for their own national debt regional Training for Trainers workshop on strategies. analysing Long-Term Debt Sustainability using 1. MEFMI Regional Workshop Lessons combined HIPC CBP and DSF methodology, This workshop was designed as an introduction At the end of the workshop, participants and national workshops for Angola, Malawi, to the DSF methodology, providing training on indicated that in order to have comprehensive Mozambique, Rwanda, Tanzania and Uganda. the templates, the preparation of DSF input debt strategies they would need to combine the

5 PÔLE-DETTE WORKSHOP COMBINES CBP AND DSF

ôle-Dette and DRI's regional Each of the presentations included extensive discussion • Link together electronically the various templates workshop to train members of of national experiences, and was followed by practical used by the HIPC CBP and the DSF, especially P National Public Debt Committees work for each country team to apply lessons to their those used for macroeconomic forecasting, and (CNDPs), in Yaoundé, from 1 to 12 October, own country. By the end of the first week, countries encourage the BWIs to share all of the was the first to combine the HIPC CBP had designed detailed alternative macroeconomic macroeconomic modelling spreadsheets used for methodology with that of the DSF, in order to forecasts and projected external and domestic their DSF analyses design national debt strategies. financing strategies, using the HIPC CBP methodology. • Ensure that debt database (CS-DRMS and During the second week participants used the DSF DMFAS) and restructuring simulation systems The workshop aimed to reinforce the capacity of the templates and other tools supplied by Pôle-Dette and (Debt Pro©) can produce DSF inputs automatically. technical units which are members of the CNDPs DRI to design a draft document containing a public • Ensure the presence of more (and fully-trained) (responsible for public debt management and debt policy. trainers in this new methodology. macroeconomic forecasting) to apply international best practices in debt management, especially closer The workshop produced very interesting findings for the Participants also agreed that there was a strong need coordination between debt and macroeconomic strategies of each country, as well as general lessons for follow-up in country, including: management to design public debt strategies. The on the need for the Franc zone to benefit from higher • Training a wider group of experts in each country concrete output was intended to be a national levels of grants if it is to finance the MDGs without through on-job training missions document containing guidelines and ceilings for public compromising debt sustainability ; to place more stress • Ensuring that the work of debt policy formulation is debt policy, to annex to future Budget Laws, in on the regional convergence criteria on total debt (70% timetabled into the process of budget preparation conformity with article 4 of the regional framework law debt/GDP and 15% debt service/budget revenue) in in each country, so that macroeconomic forecasts on public debt policy and management for the 14 assessing sustainability ; and to begin thinking about a and policy recommendations come from the macro member states of CEMAC and UEMOA. long-term pathway away from aid dependence and framework already prepared for the budget ; back to market-based financing. • More training and information on how to design The five countries in the CFA Zone which have already scenarios for mobilising external financing (quantity established debt committees (, , The participants' evaluation of the workshop revealed and quality), and the prospects for issuing bonds , Niger, and Chad) took part, with 36 officials that its aims had been clear and were attained, and that on regional markets, as well as how to simulate attending. The training included presentations on: the workshop was extremely useful for their jobs. their impact on future debt service. • International best practices in debt management; However, plenary sessions were found to be very • Full agreement on division of labour among • The main steps in designing a public debt interesting but too short, and the technical work for different units for the policy document. management strategy; country teams was very difficult. As a result, future • Agreement by government on the process for • Designing macroeconomic forecasts and regional (and national) workshops should: approval and implementation (including the role of projections; • update and validate debt data well before the parliament). • Defining long-term financing needs to reach the workshop (while none of the countries had MDGs; problems providing public debt data, they needed Finally, there would be a need for follow-up at the • Designing external financing and aid mobilisation more information on the format in which to prepare regional and international level: strategies ; it for the DSF template); • Ministers and Secretary-Generals might need • Designing domestic financing and market • ensure the participation of all key members of the further sensitisation on why such documents are development strategies national debt committees at sufficiently senior essential and what they will imply for organisation • Assessing external debt sustainability and levels by avoiding clashes with periods of budget of staff workloads. dynamics using DSF and UEMOA criteria preparation • Parliaments will need full training on the expected • Assessing public debt sustainability and dynamics • (for regional workshops) countries should arrive content of such documents and their expected role using DSF and UEMOA/CBP criteria with macroeconomic forecasts, financing strategies in approving/debating them, and scrutinising policy • Defining national borrowing ceilings for external, and databases prepared in national workshops execution (Pôle-Dette is scheduling a regional domestic and total debt • prepare a much more comprehensive training workshop for parliamentarians early in 2008). • Drafting and presenting public debt policy manual, especially on aspects relating to the DSF, • HIPC CBP implementing agencies should liaise documents to annex to the Budget. debt ceilings and debt policy documents with the BWIs to improve training documentation and electronic links among spreadsheets, organise their translation into French, Portuguese and Spanish, and especially include regional convergence criteria such as nominal total public debt stock/GDP. • They should also liaise with the Commonwealth Secretariat, IDM and UNCTAD on automatic data production. • Most importantly, countries should continue to exchange at regional and international level on their experiences with the DSF - and especially its implications for policy and conditionality, as well as the design of national debt strategies (see also the comments on the DSF emerging from the inter- regional workshop of debt managers in issue 32 ; Working group with participants from Mali. and from HIPC Finance Ministers on page 2 of this issue).

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THROUGH BUDGET SUPPORT C

he new aid architecture evolving partner government's central exchequer to performance is strong; since the late 1990s is intended spend using its own financial management, • addressing cross-cutting government-wide T to promote development and procurement, and accountability systems; policy, expenditure, and institutional priorities poverty reduction in low income that cannot be tackled by stand-alone and countries. It entails country-owned CIDA defines budget support as aid that is sector projects; and priorities expressed through national provided direct to host-country institutions to be • promoting government accountability, both development strategies developed spent as part of their budgets using their own internal (to parliament and taxpayers) and jointly by the government, the people financial management systems. external (to donors). and civil society organisations, with The commonality in these definitions is the donors playing a more equal role notion of direct financial support to a country's Challenges and Risks through a partnership-based approach budget, which provides flexible funding for While the development community has broadly to aid in which each side is mutually country-led poverty reduction efforts, using its embraced budget support as a promising accountable to the other. The own financial management procedures. Some for delivering effective aid, this form of Monterrey Consensus of 2002 agreed key characteristics of budget support may be aid poses many challenges, including: on broad principles for making aid summarised as follows. • increasing pressure on developing countries more effective for development, and • using a partner country's own allocation, to implement multiple macro conditionalities the Paris Declaration has now defined procurement, and accounting systems; • increasing fiduciary risk in countries with more precise indicators, including one • supporting its own development programs, weak financial management systems; which refers specifically to the typically focusing on growth, poverty • increasing the volatility of aid flows in cases percentage of aid provided as reduction, fiscal adjustment, and the where country performance is poor; “programme-based approaches” such strengthening of institutions, particularly the • higher transaction costs in the short term, as budget support. budgetary processes; for donor and partner governments; • providing funds at regular intervals, in line • limited scope for hands-on sector dialogue with the country's annual budget cycle; and and capacity building in sectoral agencies; Budget support has become an increasingly • agreeing on general budget priorities and and important mode of development assistance. expenditures, so that in principle there is no • strained capacity of the ministry of finance This article reviews the concept of budget need to earmark funds for specific projects. as the main interlocutor with donors. support, and its potential advantages and risks, However, some donors provide budget support especially for post-conflict countries in the which is “earmarked” to only a part of the Conclusion WAIFEM region (Liberia and Sierra Leone). planned budget spending (such as for example The choice of appropriate aid modalities education or health). This is more correctly depends on the country characteristics and What Is Budget Support? Concepts and known as sector budget support and is not as development objective, including the extent of Definitions flexible as “general” or un-earmarked budget agreement with donors on policy and budget Donors use a range of definitions for budget support. priorities, and the institutional capacity of the support. Some define budget support very recipient country to implement the conditions vaguely, as any predictable aid flows that are Advantages of Budget Support required by donors. HIPC decision-makers need disbursed through a developing country's The following advantages are associated with to carefully assess fiscal adjustments which budget processes. Others define it more Budget Support: would be needed if budget support was precisely as financial assistance that is provided • increasing aid flows, thereby facilitating suddenly reduced due to inadequate directly to support a recipient country's overall scaling up of aid to reach the MDGs more performance, and build into budget support budget, using its own financial management rapidly; agreements obligations for donors to disburse a systems and budget procedures. More • improving the efficiency and transparency of considerable proportion of budget support as precisely: budget spending, while reducing fixed predictable tranches (Ghana has reached • the OECD defines budget support “as a fragmentation of public expenditure a level of 50%) which are supplied regardless of method of financing a partner country's management; performance. The experiences of other HIPCs budget through a transfer of resources from • honing recipient countries' skills in budget such as Ghana, Ethiopia, Tanzania and Uganda an external financing agency to the partner processes and public financial indicate that channelling aid through budget government's national treasury. The funds management; support benefits both recipients and donors, thus transferred are managed in • encouraging greater orientation of partners providing aid which is much more effective than accordance with the recipient's budgetary towards medium-term results by focusing traditional project-based modes of aid delivery. procedures”; on national development objectives rather As a result, budget support is a highly desirable • UK Department for International than on donor-driven priorities; form of aid for WAIFEM's post-conflict member Development (DFID) refers to poverty • strengthening country ownership of countries to increase, moving in the direction of reduction budget support (PRBS) as aid programmes and prospects of sustainability multi-donor budget support arrangements such provided (1) in support of a government of reforms; as those in place in Ghana, in which donors are program typically focusing on growth, • reducing transaction costs for government held accountable for the predictability of their poverty reduction, fiscal adjustment, and by avoiding parallel project and reporting financing, as well as recipients for their budget strengthening institutions, especially arrangements; spending allocations and effectiveness of the budgetary processes; and (2) direct to a • increasing predictability of funding if country use of funds in achieving MDG results.

7 8 IMF &World Bank HIPC Governments, Sources: HIPC PROGRESS AND DEBT SUSTAINABILITY STATUS NOVEMBER 2007 ak edn;Agninlwut MDRI pending; banks Argentian lawsuit. ooed20 09N W NA NA NA 8/02 90% 6/02 2009 2/01 12/00 4/01 … … 3/00 6/00 … nolongereligible 11/01 end-2008 4/00 Yemen Vietnam Togo Tanzania rte ocrettmtbe60 .N W NA NA 97% W 11/03 NA W 96% W …. 5/02 W 02/03 5/00 NA 6/03 7/00 W 87% 81% … nocurrenttimetable NA W NA 95% 4/05 86% ….. nocurrenttimetable 85% 12/02 7/05 W 87% forHIPC Decidednottoapply 5/00 12/00 88% 8/02 2007 process PRSP no 90% 85% W 2/02 6/00 8/05 9/01 NA 2/00 9/01 97% 12/00 W 12/00 nocurrenttimetable 9/01 1/01 Nepal 3/03 4/04 91% 12/06 4/00 NA Republic Kyrgyz nocurrenttimetable 12/00 W W Eritrea NA 8/02 4/05 process PRSP no NA 4/04 4/00 3/02 6/00 9/00 W NA 3/07 Zambia mid-2008 11/03 1/04 W 12/00 12/00 96% 81% 12/00 2/04 Uganda 9/01 12/00 12/04 3/03 1/07 6/02 12/00 90% 12/00 nocurrenttimetable 81% W W W 85% 09/06 end-2007 Sudan W 9/02 4/00 92% 8/00 9/00 81% 4/01 Somalia 2/00 10/04 … Sierra Leone W 4/03 12/00 93% 11/06 NA 11/06 Senegal 93% 4Q074 W São Tomé 11/00 & Príncipe 12/00 4Q2007 Rwanda 9/02 7/02 nolongereligible nocurrenttimetable 60% 93% Niger Q42008 8/00 NA 12/00 12/00 10/01 Nicaragua 93% 2008 10/01 12/03 Myanmar 98% 3/01 12/00 10/06 Mozambique 84% 2Q2007 end2008 2010 7/04 Mauritania 7/03 76% 7/00 11/00 2007 68% 99% 7/00 Mali 3/02 7/06 end-2007 Malawi 4/04 12/00 12/04 12/00 7/03 Madagascar 2/02 9/06 7/00 Liberia 4/05 05/06 12/00 4/05 7/00 end-2007 … Laos PDR 6/02 3/03 11/01 end-2009 Kenya 10/00 mid-2008 Honduras 7/00 1/04 mid-2008 Honduras 7/00 … 1/01 1sthalf2008 5/00 03/06 Haiti 7/00 95% Guyana 5/01 05/06 7/03 2ndhalf2008 early2008 Guinea-Bissau end-2008 Guinea 4/02 3/03 Ghana 10/00 8/05 09/07 Gambia 6/01 Ethiopia 7/00 Côte d’Ivoire 7/00 of Rep. Congo, of Rep. Dem. 2/00 Congo, Comoros Chad Rep. Central African 6/01 Cameroon Burundi Burkina Faso Bolivia 2/00 Benin Potential HIPCs 4 3 2 1 noan ogreiil 05…N W W NA 87% … mid-2008 2005 1/06 mid-2009 nolongereligible 7/07 Angola Afghanistan Countries New PRSPrequired countries arenoteligibleforIDAgrants. Blend andgap DSF-based DSFforBolivia(July2006)andHonduras(December 2006). Latest of debtdistressandRed= high riskofdebtdistress. Yellow risk =moderate riskofdebtdistress, Green=low DSF-basedDSAsandusedasbasisforIDAtraffic lightclassification: forFY07incorporating This isthedebtdistressrating performance (Strong whichisusedtoassesscountries' institutionalstrengthandpolicy Policy formerlyCountry andInstitutional Assessment (CPIA), World BankIDAResource Index(IRAI) 2006, Allocation ≥ .5 eim32-.5 weak medium3.25-3.75, 3.75, ≤ 3.25). eiinCmlto nei ia CreditorParticipation Final Interim Completion Decision ICI ae PRSPDates HIPC IIDates HIPC Initiative This table has been revised to include HIPCs' rankings according to the BWI's IRAI (formerly CPIA) indicator of policy performance and institutional strength and debt distress, incorporating the new DSF-based DSAs and used as the basis for countries' IDA allocation of loans and grants.

IRAI ranking of Debt distress ranking IDA-14 grant policies and institutions1 for IDA-14 FY082 allocation for FY08 Key Debt Relief and New Financing Issues

Weak High 100% Cologne agreement yet to be negotiated, Rusia is major Paris Club creditor Weak na 3 na 3 Reclassified as a 'gap' country, no longer eligible for IDA grants Medium Moderate 50% Most creditors provide relief. MDRI Medium na 3 na 3 New borrowing ceilings. Debt unsustainable compared to Treasury revenues. MDRI Strong Moderate 50% Algeria, Libya, Saudi, Taiwan refuse relief. MDRI. New borrowing ceilings Weak High 100% IDA, ADB , Paris Club creditors providing interim relief and promise of relief from EU Medium Low 0% Facing increasing lawsuits. MDRI Weak High 100% No IMF interim relief. Arrears to IFAD and OPEC to be dealt with as part of HIPC Weak High 100% Slippages in PRGF performance delays CP Weak High 100% PRGF request on hold following deterioration of political situatiom Weak High 100% USA only PC creditor yet to finalise relief. Agreements with 13 commercial creditors signed. Weak High 100% No IMF interim relief. Pending negotiations with London Club. Lawsuits continue Weak High 100% DP delayed because of civil conflict. Potentially qualify with PV/revenue=361% Medium Moderate 50% Still to conclude with some non-Paris Club creditors. Lawsuit threatened. MDRI Weak High 100% IDA and AfDF interim relief limit reached. All but one CP trigger met. Strong Low 0% All HIPC agreements signed. MDRI. US$750m 10-year bond at 8.5% issued on international markets Weak High 100% IMF, AfDB, PC interim relief suspended. Egypt, Kuwait, Saudi willing to provide relief Weak High 100% Only IDA and AfDB providing interim relief. Lobbying donor community to advance Completion Point. Medium Moderate 50% Lawsuit relating to government bonds resolved. MDRI Weak High 100% Possible HIPC relief of US$ 139m in PV terms.

StrongStrong Moderate na na 33 Guatamala, Guatamala, Mexico Mexico andand TaiwanTaiwan refuserefuse toto provideprovide relief;relief; agreementsagreements withwith CostaCosta Rica,Rica, Venezuela, Venezuela, Kuwait and commercial Kuwait and commercial

Medium Low 0% DSA shows ratios under HIPC thresholds. PC Houston terms relief Weak High 100% Despite eligibility, government does not wish to participate in HIPC Weak High 100% Debt stock estimated $3.7 bn (3000% of exports), nearly all in arrears. Arrears to multilaterals being cleared Medium Low 0% Cancellation of Abu Dhabi and PRC debt to be finalised . MDRI Medium Moderate 50% Kuwait and Taiwan relief to be negotiated. MDRI Medium Low 0% Difficulties with non-PC creditors. MDRI Weak Moderate 50% Unsustainable due to lack of relief from Arab creditors. MDRI Medium Low 0% Agreements with , Kuwait and . MDRI Weak High 100% No WB lending since 1987. Probably unsustainable Strong Moderate 50% Strong debt strategy and borrowing ceiling. New non-PC relief but lawsuits continuing. MDRI Medium High 100% No agreement with non-Paris Club creditors. Taiwan won lawsuit. MDRI Medium High 100% Ceilings on new borrowings. MDRI Weak High 100% Achieved Completion Point. MDRI Medium Low 0% Benefited from non-PC creditors relief. MDRI Weak Moderate 50% Lawsuits for US$35m. MDRI Weak High 100% Accumulating large arrears to creditors. No IMF arrangements since 1987. Weak High 100% IMF urged to minimise non-concessional borrowings. Need to clear arrears. Strong Low 0% Relief from Algeria, Angola, Iran and Zambia to be negotiated. MDRI Weak High 100% Potentially qualify with PV/revenue of 394% Strong Low 0% Ceiling on new borrowings, seeking more grants as debt is unsustainable. MDRI Strong Low 0% Debt ceiling for public debt/GDP of 50% by 2010 Medium Moderate 0% Ratios under HIPC thresholds so Paris Club Naples stock treatment Medium Low 0% Donegal lawsuit has resulted in payment to be made. MDRI

Weak Low 100% Potentially qualify with PV/exports of 362% Medium Low 100% Debt ratios at end-2006 are below HIPC thresholds. Medium Low 100% Potentially qualify with PV/exports of 201%. Authorities undecided about HIPC participation.

Dates for HIPC decision and completion points and PRSPs are those of final BWI Boards' approval. Most governments have published PRSPs several months before BWI approval. 9 HIPC CBP RECENT AND

Inter-Regional Meetings presentations on Rwanda's Aid Policy, and on needed to produce an Annual Report on HIPC Finance Ministers' Meeting the prospects for diversifying Rwanda's sources Guyana's Aid and Debt Management, including (see page 2) of financing, in the short-term to additional aid a portfolio review and debt sustainability HIPC CBP Steering Committee Meeting donors, and in the medium-term to other less analysis. As well as being introduced to the The 19th SC meeting took place in Accra from concessional financing sources. Participants necessary technical skills, the 20 participants, 29th October to 1st November and will be were then trained in basic concepts common to from the Debt Management Division and other reported on in the next newsletter. all types of financing (such as calculating grant departments involved in debt and aid elements and identifying quality issues such as management, produced a draft Annual Report Regional Workshops/Seminars tying or conditions precedent), and a checklist on Guyana's Aid and Debt Management. On CEMLA Domestic Debt Regional Workshop of issues to cover in each negotiation. They the final day of the workshop, the participants (see page 4) were then split into negotiating teams, each of presented the key results of the portfolio review MEFMI DSF Regional Workshop which prepared and simulated negotiations of: and debt sustainability analysis to senior (see page 5) multilateral and bilateral aid from OECD and Government officials and the report is now Pôle Dette Francophone Training for non-OECD donors; OECD and non-OECD being finalised. National Debt Committees (see page 6) export credit; and commercial finance. CAR, Congo, Guinea-Bissau and Togo National workshops The workshop enhanced participants' skills, Institutional Missions (17-21 September Bolivia - Subnational Workshop (Santa with 86% indicating their skills had been and 22-26 October) Cruz, 20 to 27 August) improved and 71% that they would be able to In line with the CBP workplan and phase 4 The workshop for the municipality of Warnes use them immediately to improve policy goals, the missions had the following aims: (preceded by a preparatory mission) took place implementation. It also produced several • present to the authorities the draft regional in Santa Cruz. It involved only 11 officials, important recommendations for the ongoing generic law prepared by Pôle-Dette for because a small municipality like Warnes could implementation of Rwanda's Aid Policy, Central and West African countries, and not spare more staff without affecting its normal including diversifying sources and improving the sensitise them on the need for early administrative work. The workshop aimed to quality of financing, tracking and analysing NGO adoption of the document as well as of build the capacity of Warnes officials to analyse flows, improving institutional organisation for aid complementary texts for effective debt the sustainability of public finances (fiscal and debt management, and a series of management in the country and for the balance and financing), especially emphasising capacity-building and training needs, the preservation of long term debt sustainability, debt sustainability. They undertook a series of formation of a permanent negotiating team and • assess the implementation of the reforms events in line with the methodology of the the construction of a negotiating checklist and recommended during the previous IMM, subnational governments' CBP, beginning by guide. • agree with the authorities on the next steps compiling comprehensive fiscal and debt in reinforcing the legal and institutional information, and ending with the building of Institutional/Follow-up Missions framework for effective public debt scenarios and forecasts, production of results Guyana: Procedures Manual Missions (6-17 management. and analysis of sustainability. August and 26 Sept - 5 Oct). Each mission lasted 5 working days and was Recent capacity building events, funded by the conducted by two regional consultants. After a The workshop produced an analytical report, a EU, have included institutional review missions plenary session in which the generic law was comprehensive debt database, the building of a (18-29 June and 27-31 August), procedures explained, bilateral meetings were organised to financial flows matrix for public finance analysis, manual missions (6-17 August and 26 get each unit's more detailed views on the legal a micro-economic and sustainability analysis of September-5 October) and a national workshop and institutional framework. All four countries the debt, and improvements in institutional (5-12 November). agreed to urgent timetables for improving laws coordination. In addition, participants evaluated and institutions. Warnes' capacity for fiscal and debt The institutional review missions reviewed and management using the methodology designed synthesised all the recommendations made in Institutional Mission to the Gambia by CEMLA. All participants assessed that the recent years for strengthening the institutional (22-28 October) workshop had been long enough and well arrangements to align them with international The final mission under the DFID funded organised technically and administratively, and best practices and make them relevant to the capacity building project had as its main focus 80% assessed that the knowledge acquired current focus of debt and aid management in to review the progress made in strengthening during the workshop World be extremely useful Guyana. The mission consultants worked with aid and external and domestic debt for their future daily work. Government officials to finalise the most management in The Gambia under this two- appropriate institutional framework, which is year project, and to work with Government Rwanda - Negotiating New Financing due to be implemented shortly. There have also officials to identify continuing capacity building Workshop (Kigali, 1 to 5 October) been two missions to work with national officials needs in the area of debt and aid management. In order to help implement its Aid Policy, the to prepare a procedures manual setting out the The outstanding needs identified include: Government of Rwanda asked DRI and MEFMI work functions of the departments involved in all • updating the Loans Act in line with current to train its aid management staff in how to aspects of debt and aid management. best practices in aid and debt negotiate financing for the national Economic management, Development and Poverty Reduction Strategy. In November, a 2-week workshop provided • preparing a procedures manual detailing the The workshop began with introductory training on the technical and analytical expertise procedures of how aid and debt

10 FORTHCOMING ACTIVITIES

management are conducted; and The first Spanish DLP residential school is MEFMI member countries, and helping MEFMI • training of new staff (once recruited) in debt scheduled to take place in January 2008, with to facilitate project planning for specific and aid strategy analysis. the French and Portuguese residential schools countries to address specific needs that would to follow. Students who have not been able to interest donors at bilateral level hence increasing Distance Learning and Attachments complete their study modules in time for the first the number of donors to co-finance debt Distance Learning Programme Anglophone series of residential schools will be able to management capacity building activities. Residential School (Accra, 12-23 participate in the second series of residential November) schools in 2009. Future Activities The first of a series of DLP residential During the next six months, the HIPC CBP will workshops was held for 14 participants from MEFMI Staff Attachment. As part of the implement the following activities: the four English speaking HIPCs participating in reinforcement of CBP partners' programme 1. Regional Workshops: three CBP Distance the first Phase 4 intake (Ethiopia, Malawi, Sierra planning, management and delivery skills, a Learning Residential Schools; Pôle Dette's Leone and Tanzania), as well as one MEFMI MEFMI Programme Officer attended a Parliamentarians Regional Workshop, Global Fellow and one WAIFEM staff member. The Development Planning and Management Debt Strategies Regional Workshop and overall quality of students' work at the Workshop in Bangkok from 5 to 16 November, New DSA Frameworks Regional Workshop; residential school was very good and it is very organised by IMA International. The two-week CEMLA's Training for Trainers and encouraging to note that three students, Mercy workshop drew participants from Asia, Europe, Caribbean Long Term Debt Sustainability Kumbatira, (Malawi), Abebe Lewegineh and the US, half from the public sector and half Sub-Regional Workshop; (Ethiopia) and Lekinyi Mollel (Tanzania) achieved from NGOs. 2. National Workshops: Burundi, Guinea, distinction, having submitted excellent work for Honduras, Malawi, Nicaragua, Sierra Leone, their domestic debt strategy studies. The workshop covered the following key topics: Sudan, Uganda; Development Planning; Stakeholder Analysis; 3. Sensitisation Seminars: Guinea, The idea underlying the residential workshop is Participatory Techniques and Facilitation Skills; Mauritania, Mozambique, Kenya, Uganda, to bring together all the work done in the study Problem Identification and Intervention; Zambia; modules to simulate scenario projections using Managing Conflict; Project Design; 4. Institutional/Follow-up Missions: Debt-Pro©, and analyse scenario results as the Implementation Planning; Budgeting and Burundi; Ghana; Guinea, Mozambique, Sao basis for writing a debt strategy report. To do Financial Management; Managing Personal Tomé and around 5 to Pôle Dette member this students work through a specially designed Change; Managing Organisational Change; states; Module 9 (for external debt and new financing Leading and Motivating; Presentation Skills; and 5. Distance Learning: preparation of the strategy) or Module 14 (for domestic debt Team Building. second intake of students, which will involve strategy) individually. These have been written the best candidates from 16 countries; as distance learning texts, so the resource The workshop allowed the Programme Officer 6. Attachments: Pôle Dette candidates to people act as their mentors for these Modules. to identify key project areas which can be DRI and the IMF; WAIFEM to DRI; and The students work on their own computer, and developed in the near future for consideration CEMLA candidates to the BWIs and other submit their completed tasks to the resource by MEFMI stakeholders. As such it s expected regional neighbours; people for comments and feedback. In addition, to contribute to management and delivery of 7. Information products: produce the resource people conduct brief introductory high quality debt strategy capacity building newsletters 34 and 35, disseminate 4 sessions to explain the day's tasks, when programs (especially in identifying areas of listserves on latest debt management appropriate, and clarification sessions, if they intervention that can impact on the sustainability developments, and expanding the website note common difficulties or errors. On the final of debt management, possibly replicating some with new sections. day of the workshop, the students present their benefits from the post HIPCs countries in all the strategy results at a plenary session.

The full list of those who participated Ethiopia Dereje Girma External debt strategy successfully at the November residential Yohannes Hailu Tesfa External debt strategy workshop and are to be congratulated on Aynalem Mamo Abebe New financing strategy completing their DLP studies are listed in the Getu Getuhun Domestic debt strategy table. Abebe Lewegineh* Domestic debt strategy Malawi Nations Msowaya New financing strategy The students who have been awarded a Margaret Kaphinde Domestic debt strategy distinction have demonstrated that they have Sierra Leone Samuel Maju Lahai Debt data and portfolio review the knowledge and skills to be potential Jibao Flee Domestic debt strategy resource people and mentors for the next Joseph Alimany Thullah Domestic debt strategy student intake, as well as trainers in regional Tanzania Lekinyi Mollel* Domestic debt strategy and national workshop events. The students Charles Yamo Domestic debt strategy who achieved a pass are to be encouraged to MEFMI Fellow Mercy Kumbatira* Domestic debt strategy take an active role in the national team doing WAIFEM Staff Mod Ceesay New financing strategy regular debt and new financing strategy *with distinction analysis.

11 FPC CBP ACTIVITIES UPDATE

METHODOLOGY In line with its development plan agreed with the together with representatives from Cameroon, Steering Committee, the CBP developed Ghana, Nicaragua, and Tanzania who greatly methodology in the following areas: enriched the discussions with their experiences. • Non-survey reporting mechanisms (see The meetings were very positive, and covered Newsletter 32) progress and next steps as follows: • Building partnership with the private sector • Country progress: the CBP is already halfway ver the last quarter, the FPC (see Newsletter 32) to achieving its logframe targets but, in order CBP confirmed the launch of • Building an awareness strategy (see this to ensure that this occurs, partners requested O the Franc Zone programme for Newsletter on page 13) unanimously to extend Phase 3 to March BCEAO and BEAC member states and 2009. resumption of Zambia's participation, SOFTWARE • Staff turnover, data timeliness, and moving to progressed with country projects, • Version 1.80 of the CBP software includes an sample surveys were identified as major software, methodology design and important patch in the Input and Output challenges and measures recommended to information products, deepened Modules, to ensure filtered reports generate overcome them. coordination with the IMF GDDS, and consistent data once the "missing attributes" • Methodology and information products have held its 8th Steering Committee. function has been used. The designer advises been developed on schedule, but further users to download and install immediately efforts are needed to define what will happen (visit www.evinsol.co.uk/software/dfi - to interregional information sharing after COUNTRY PROGRESS username and password required) phase 3. Countries have progressed as follows: • The Technical Manual for Designers is being • Software: transfer of the generic CBP system • BCEAO/BEAC: following successful pilots in finalised is almost complete, but some countries Burkina Faso and Cameroon, Ministers in the • MEFMI has announced its timeframe for require enhanced programming capacity to Franc Zone approved the participation of all developing its regional software, which is benefit fully, and there is need for greater 14 member states in a regional programme, expected to be ready in November 2008 information-sharing among regions on efforts which will start with an awareness creation (contact MEFMI for information). to develop decentralised softwares. and training for trainers event in January 2008 • Liaison and dissemination: all partners (and • Bolivia requested 2 missions in 2008 to INFORMATION PRODUCTS Seco) need to make more effort to assist in implementing its ROSC • Briefings #16 and #17 were disseminated, disseminate to international and regional recommendations and are available online (visit www.fpc-cbp.org organisations and other donors the • Botswana: discussions are underway with and link to “FPC CBP Briefing”). They describe successes of the CBP, especially at regional the Commonwealth Secretariat for support to latest developments in the CBP, as well as key and national levels. begin in Q1 2008 related international, regional and national • Finance: countries and regional organisations • The Gambia (Cycle 2) hosted its 3rd follow- initiatives, research, and codes and standards. need to submit full reports on their financial up mission, implemented jointly with the IMF For subscription enquiries, contact contributions to avoid underestimation. GDDS 2 project, and thereafter finalised its [email protected] database. • The website continues to be updated every 6 • Ghana is preparing to launch with a demand weeks for latest developments in the CBP and FORTHCOMING WORK PROGRAMME assessment mission in Q1 2008 related initiatives. Burkina Faso and In the next quarter the FPC CBP will address the • Honduras requested a demand assessment Cameroon's analytical reports from the pilot following: mission and awareness and training workshop surveys are now available online (visit • Finalise arrangements to launch programmes to launch its survey during 2008 www.fpc-cbp.org and link to “Country in Ghana, Kenya and Honduras, and to • Kenya plans to launch its surveys in Q1 2008. reports”). relaunch in Zambia, and liaise with many other • Malawi (Cycle 3) is to close Cycle 3 and countries seeking entry to the CBP; launch Cycle 4 in Q1 2008 GOVERNANCE AND LIAISON • Country projects: missions to Bolivia, Gambia, • Nicaragua (Cycle 1) will disseminate results • WAIFEM hosted the 8th Steering Committee Honduras, Malawi, Nicaragua, Tanzania, and launch Cycle 2 in Q1 2008 on 2nd November 2007 in Accra. Main points Uganda, Zambia, and 14 Franc Zone • Tanzania (Cycle 4) disseminated the are presented in the box below countries, as well as providing ongoing long- Zanzibar report and is finalising the Mainland • IMF GDDS2: in addition to jointly distance support report for Cycle 3. It has also launched Cycle implementing the 3rd follow up mission to The • Methodology: continue to implement the 4 with a sample survey and achieved a Gambia, discussions are underway about development plan, focussing especially on response rate of over 70% cooperation in Ghana, Kenya and . sustainability analysis. • Uganda (Cycle 6) has obtained over 70% • Information products: continue to produce to response rate on its sample survey. schedule • Zambia (Cycle 3) rejoined the CBP, and Key Points from the 8th Steering Committee • Software: disseminate the Technical Manual, discussions are underway on the modalities of WAIFEM hosted the event in Accra, Ghana, on and further address user needs and support. It plans to launch in Q4. 2nd November 2007. Seco and BEAC chaired the coordination of developments across regions sessions. All implementing partners attended, • Liaison: enhance liaison at international, regional and national levels.

12

BUILDING AN AWARENESS STRATEGY

his article develops the Therefore, to show their leadership and policymaker presence guarantees better discussion in Newsletter 32 on attract high level business representatives, coverage, and participation by private T the importance of partnership senior policymakers (Ministers, Governors, sector associations provides reassurance to building, and the prerequisite need etc) should host the event. the private sector. to understand how the private sector is organised. It outlines Up to 100 business people usually High-quality (rather than quantity) of media strategies for awareness creation, participate, although more invitations are coverage is essential. The NTF has a key and coordination on a technical sent to maximise attendance. The NTF role to play in targeting journalists with level. In the next issue, a concluding follows up intensively before the event to appropriate technical knowledge, training article will address dissemination of confirm participation of senior staff. them in key concepts (Malawi, Uganda, and data and analysis (consistent with on a regional level, WAIFEM), and offering international codes), and the In many countries, most business head exclusives to a few key journalists, each implementation of policy offices are located around the capital city, with a different angle on a story. The time of recommendations. making it easier to coordinate awareness a broadcast, the selection of a journal, the events; but in others, the business language(s) used, and the popularity of a community is located in multiple centres or particular show have a significant impact in Outlining an awareness strategy outside the capital (Bolivia, Cameroon, optimising access to the target audience. Partnership building requires an extensive Malawi, Kenya, Tanzania, Uganda). Some Messages are also reinforced by linking the awareness campaign implemented countries therefore hold smaller “satellite” exercise to other current stories on foreign throughout each “project cycle” (i.e. launch events to achieve a higher turnout in other investment or development policies. Debate of surveys, data collection and finalisation, cities. Even then, some major (eg mining) has worked on television shows (Ghana), or dissemination, and policy design). A companies may be located in relatively in press letters columns (Tanzania). successful strategy needs to be streamlined remote parts of the country, and have to be and cost-effective, making maximum use of sensitised by company visits. Other forums awareness seminars organised by the Most countries need to pay more attention National Task Force, other existing forums, The optimal format for awareness seminars to other forums, identifying those most and the media. varies by country. Some favour short closely related to the exercise, and “breakfast meetings” (Bolivia, Nicaragua, coordinating with them. Many LICs for Defining messages Trinidad and Tobago), others a more example currently have vibrant debates on The main messages in an awareness structured series of presentations, private sector development in a rapidly campaign include: discussions and working groups (Burkina growing number of structures. Some • Presenting the aims, objectives and Faso, Cameroon, Gambia, Tanzania, prominent examples include Presidential or anticipated results of the exercise Uganda). Brevity usually guarantees fuller special initiatives on investment (Ghana, • Underlining benefits to the private sector participation, but a slightly longer meeting Guyana, and Tanzania), central bank-hosted of their cooperation (see Newsletter 32) can provide more assurance of cooperation meetings for financial institutions, • Describing implementing partners and and understanding. investment promotion agency meetings with coordination to minimise “survey investors, meetings of private sector fatigue” International organisations and donors can association members, and donor meetings • Reassuring the private sector about also intervene to put the exercise into its with investors from their country. confidentiality wider context, linking it to other • Presenting key dates in an international and national goals such as the This widens scope for liaising with the implementation plan: launch, fieldwork MDGs. And invitees from other countries private sector, with minimal cost, and the and dissemination can contribute their experiences to reinforce additional advantage of promoting • Consulting on methodology to get the main messages, providing valuable harmonisation with related initiatives private sector advice on user- practical lessons on how to resolve various (sometimes linking the exercise into the friendliness challenges. activities of a wider initiative rather than • Indicating communication channels for creating new structures may be desirable). any assistance or concerns. Media campaigns But to avoid NTF fatigue given limited Given the limited numbers who can attend, resources, interventions need to be NTF awareness seminars NTF awareness events need to be prioritised to target outcomes at critical The success of these seminars depends on complemented by a media campaign, to points in the project cycle. the participation of strategic private sector reach a much wider audience. This includes associations and investors, representing key press conferences (notably at the Successful awareness strategies have regions, sectors and source countries, and awareness seminars), policymakers dramatically increased the percentage and preferably accounting for the bulk of the contributing articles to the press, appearing quality of responses, and reduced the need stocks and transactions. Businesses should on radio/television news and discussion for time spent in the field visiting be represented at CEO level, so as to programmes, press releases at the time of enterprises. Their importance for successful reflect the views of the enterprise, raise launch or to encourage response, and using monitoring and analysis of FPC cannot be concerns, and commit their support. NTF members' bulletins/websites. Senior overemphasised.

13

TECHNICAL EXCHANGES WITH THE PRIVATE SECTOR

wareness campaigns are survey execution aids effective, well-timed Finally, many countries administer not enough to ensure liaison with enterprises. This should “feedback questionnaires”, at the closing A successful data-gathering include the list of enterprises for each event or when distributing copies of the and partnership with the private enumerator, with their primary and final report to investors, on methodology sector. After convincing investors secondary contact points, and an and implementation. Regular feedback is that the exercise will be beneficial itemised record of interactions and necessary to maintain private sector for them, it is essential to promote agreements including questions asked, cooperation, given staff turnover within exchanges on a technical level to and deadlines for response or collection. enterprises, new enterprises, and ensure the highest-quality data. changes to methodology. The complexity of survey forms, Telephone helplines have proved an and their substantial differences extremely useful support to fieldwork by While the integration of private sector from company accounting allowing enterprises to put questions associations into NTF arrangements, and formats, mean that respondents about form content, delivery, or collection. effective awareness creation, are often require intensive technical Indeed, as relations between NTF and important steps to promote response to support. private sector develop over time, they surveys, data quality will only improve if may increasingly conduct dialogue via there is intensive liaison with investors on email or telephone. Some countries are the challenging technical aspects of In meetings already planning to move to electronic response. Awareness seminars or focus meetings surveys (distributing forms via e-mail or with selected enterprises hosted by the encouraging companies to complete continued from page 16... National Taskforce provide the ideal forum them on a secure website), although not to present and test new methodology, all enterprises have good enough access NEW WEBSITE PAGES ON especially if the country has insufficient to technology, or trust the NTF sufficiently http://www.hipc-cbp.org budget or time for a full pilot survey to to provide information in this way. New pages on legal and institutional test methodology. If the NTF intends to best practices have been added to achieve this at the event, it is best to In some smaller countries, major investors the Members' Only section of the extend it to at least a half day, invite have their headquarters and financial HIPC CBP website. These pages finance managers as well as CEOs and records in neighbouring larger countries. set out the key issues relating to ask them to bring financial statements or They therefore struggle to get response international best practices and other data on assets and liabilities. Many from subsidiaries, constantly being provide examples from HIPCs. The enterprises have been found to be referred to head office, and found it examples include best practices in reluctant to provide statements at such necessary to visit the headquarters. This public debt laws, procedures an early stage of the exercise. initially increases cost and time burdens manuals for debt management, Nevertheless, the NTF can use the event for the NTF, but has been shown to bear terms of reference for co-ordination to present survey forms to them, and fruit in that, after initial contacts, structures for debt and aid organise working groups to test their enterprises respond more rapidly via management, and national capacity understanding of technical concepts and subsidiaries. building plans. obtain their views on methodology including timing of surveys, or using At the end of a survey In early 2008, the CBP will be language which relates more closely to Results dissemination events (discussed adding new webpages on the financial statements. in the next article) give a further following: opportunity for investors and NTF to • debt sustainability analysis, which During fieldwork address technical-level challenges to will highlight the complementarity Face-to-face technical support during improve the next exercise. As at the of the CBP's DSA and BWI's surveys is even more essential. Training opening awareness event, it may be DSF methodologies and provide enumerators to provide support and help desirable to organise a more detailed links to the relevant enterprises to complete forms is a key technical feedback session, with documentation. first step. Enumerators also need to build enterprise financial managers. Investors • on CBP self-assessments of good relations with the financial staff of may comment on the user friendliness of country capacity for debt enterprises. To achieve this, NTFs have the questionnaire, or the quality of strategy - providing a time series allocated the same enumerator to an support received from the NTF in the field showing country progress in debt enterprise in successive surveys, to or by telephone. Conversely, NTF may strategy capacity promote trust, high-quality response, and report on how it perceived data quality, • HIPC country profiles - showing a better understanding of each and problems in obtaining information, the progress each country has respondent's challenges. However, staff whether technical or due to confidentiality made under the CBP in turnover in NTF and enterprises concerns, and suggest how these might developing its debt strategy undermines this unless accompanied by be overcome in future. capacity, as well as the concrete very good handover of information. achievements of the programme. A comprehensive database tracking

14 DISSEMINATING RESULTS TO THE PRIVATE SECTOR

eedback of high quality results at sharpen. The CBP provides template tables and website; publishing summaries in newsletters and the end of a survey is essential to charts and encourages exchanges of best other information products of participating or F fulfil the commitment of the practices among countries, to facilitate analysis. supportive public, private or donor agencies; National Taskforce to report back to encouraging additional research by academic stakeholders, and sustain dialogue with Nevertheless, annual in-depth analysis is vital to bodies, and press releases. the private sector. This is the clearest maintain analytical skills within the NTF, and to way to show investors that their data is maximise the utility of the data collected for 3) Target audience transformed into information useful for policymakers and investors to factor into decisions Recipients need to include all national, regional their decision-making, while protecting and policy action plans. Countries that compile and international stakeholders. On a national level, their confidentiality. The resulting higher data with higher frequency also tend to produce these include all investors (respondents to the percentage and quality of response to shorter, interim reports presenting full data with survey with covering letters of thanks; non- future surveys makes future fieldwork briefer analysis. respondents with covering letters highlighting the quicker and cheaper. The results also benefits of the exercise, confidentiality, and the feed into wider investment promotion Given these possible delays, it is highly desirable value of their cooperation in future surveys; new and facilitation efforts, economic to release summary BOP and IIP data immediately investors who may be brought into the sample in management strategies, corporate they are collected and verified, often well ahead of future; and private sector associations who may social responsibility and anti-poverty the analytical report, so as to meet the timeliness liaise with their members on the findings). Other actions, and enhance private sector standards of GDDS and SDDS, and ensure users stakeholders include other ministries and sub- participation in policy action plans. This derive maximum value from the data. If necessary, national governments who may use the analysis to article outlines best dissemination revised data (with accompanying explanations) work with the private sector to implement the practices. can be released in the analytical report. recommendations, and local offices of international organisations and donors, as well as the media. Modes of dissemination Data presentation, analysis and publication 1) Seminars Regional and international recipients to target Results should be published in as much detail as The participation, organisation, and timetable of include: possible. To avoid compromising confidentiality, dissemination events match those of awareness • potential investors targeted during investment publications should present data only in aggregate seminars to launch surveys (see page 13). It is promotion missions or attracted via IPA form. The minimum necessary is standard BOP best to invite the same participants, targeting websites, to provide them with better and IIP tables, but these say little to investors, so especially any high profile non-respondents, so as information and “local success stories”. maximum disaggregation by sector, source to address their concerns. At these events, NTF • international organisations (eg IMF Statistics, country, region and financing instrument is also policymakers can emphasise actions government regional, International Capital Markets and desirable. Investors find most useful any data on has taken or intends to take to respond to investor Policy Development and Review departments; comparative investment returns, financing costs policy concerns. Investors, donors and World Bank regional and private sector vice and instruments for investors in similar sectors. international institutions can intervene to underline presidencies, IFC and FIAS; the BIS, the benefits of results and policy actions for the Commonwealth Secretariat, OECD Statistics Countries typically produce analytical reports of private sector. Statisticians can report back on Directorate, and UNCTAD Transnational 70-100 pages. This means that a report must methodological lessons and improvements for Corporations unit. have a short executive summary to highlight key future exercises. • regional institutions interested in analysis and findings and recommendations for policymakers, methodology aspects (African and Inter- enterprise CEOs and the media. Countries may also combine the dissemination American Development Banks, East African with the launch of a further exercise, allowing Community, Caribbean Community, West In writing reports, division of labour benefits from results from the previous survey to provide media African Monetary Institute, CEMAC and comparative advantages within the NTF. For headlines. This approach is cost effective, and UEMOA Secretariats). example the central bank leads on enhances predictability by providing a fixed date • data compilers in the main investment source macroeconomic policy issues and FPC analysis, for feedback. However, it works only once countries identified, so as to share aggregate the agency implementing the survey (eg national countries have well-functioning methodology and data for broad crosschecking purposes and bureau of statistics) on methodology, and the institutional arrangements, so that any delays to policy discussion in future. investment promotion agency and/or private dissemination and re-launch can be avoided. sector associations on investor perceptions and Conclusion policy concerns. All agencies end to combine on NTFs may also use additional existing forums (see Many countries expend tremendous effort in high agreeing policy recommendations and page 14) to disseminate results, depending on quality data compilation and analysis, but struggle conclusions. their timing, target audience, and topicality. to get these achievements and their policy messages across due to weak dissemination Producing reports has been found to be 2) Other methods practices. They therefore need to invest more time sometimes very time consuming, with delays Other potential for dissemination include in identifying target audiences and selecting because too many institutions are involved, writing uploading information on to the websites of all effective channels of dissemination. A final article is left until all data are collected, or policymakers NTF agencies; inserting links on websites of other in Newsletter 34 will look how dissemination helps delay approving the data or analysis. Report agencies consulted; sending out email circulars to meet international standards for timeliness, writing accelerates over time as analytical skills attaching the report or linking to the report on a quality, integrity, and public access.

15 DEBT RELIEF TECHNICAL QUESTIONS

WHAT ARE THE RECENT DEVELOPMENTS IN DEBT RELIEF FROM NON-PARIS CLUB BILATERAL CREDITORS?

s delivery of HIPC debt relief • Angola, Cape Verde, Colombia, Costa understood by creditors, nor are they from non-Paris Club bilateral Rica, Cote d'Ivoire, Democratic Republic familiar with how to calculate relief. A creditors remains low and of Congo, Ecuador, Egypt, Honduras, • Sales of HIPC claims. Some creditors there is legal basis requiring Iran, Iraq, Niger, Nigeria, Oman, Pakistan, may consider selling their claims to creditors to participate, the IMF and Peru, Taiwan, Uruguay, Zambia and private investors, which may litigate. World Bank are proposing to raise Zimbabwe (accounting for 40% of International pressures resulted in one the profile of this issue by setting up planned relief) have not provided any non-Paris Club creditor deciding not so a 'scorecard' system identifying HIPC relief to date. Iraq and Taiwan have do so in 2007. creditor progress, to be published on the largest number of post-completion • Domestic legal constraints. In a few the BWI websites. In addition, the point debtors (9 and 7) and should cases, particularly where debts are owed BWI have indicated they will continue provide US$111 million and US$304 to the central bank and/or public to use moral suasion to foster million of relief. enterprises, these may be constraining increased delivery of debt relief. • 17 creditors are providing partial relief as the provision of relief. indicated in the table below. • Financial restrictions. Some creditors As part of this process, the BWIs have have indicated they are unable to provide compiled an update on non-Paris Club The factors contributing to the slow progress relief because of the costs involved. This bilateral creditor relief in a new paper by non-Paris Club bilateral creditors include: is particularly true for HIPCs which are (http://www.imf.org/external/np/pp/2007/eng • Political factors. Libya which initially had creditors of other HIPCs. /091007.pdf) as follows: agreed to participate in HIPC • No billing by creditors. Some creditors, • Jamaica, Korea, Morocco, Rwanda, subsequently announced its Parliament such as Algeria, Libya and China, are not South Africa and Trinidad and Tobago had overturned this decision and relief will billing HIPCs and this is perceived as a (accounting for only 8% of planned non- be provided under its own initiative. In waiver of the obligation to pay. In other Paris Club bilateral relief) have delivered Algeria, the provision of HIPC relief awaits instances countries, such as China and full HIPC relief. Burundi and Tanzania a high level political decision. India, have made general have each signed an agreement with their • Insufficient understanding of the initiative. pronouncements about providing relief one HIPC debtor but it is not clear if full The principles of burden-sharing and and so debtors are waiting for creditors HIPC relief has been provided. comparability of treatment are not well to propose an agreement.

Status of Non-Paris Club Bilateral Debt Relief, September 2006

Creditor Agreements signed Algeria Signed agreement with 1 of its 11 post-CP debtors. Delivery of full relief awaiting high level approval. Signed agreement with 1 of its 2 debtors, providing 60% of relief Bulgaria Provided relief to 3 of 6 debtors, providing more than 75% of relief China Signed agreements with 17 of its 20 post-CP debtors, providing about 34% of relief due. Benin, Cameroon, Ethiopia, Guyana, Mozambique and Niger have received beyond HIPC relief and four HIPCs receiving between 22%-64% of PV relief due. Relief to Mauritania and Tanzania considered by debtor to be full HIPC relief. No negotiations with Burkina Faso, Nicaragua or STP as has no diplomatic relations. Relief provided through cancellation of government loans and it is assumed that debts not cancelled are serviced in full. But China not pressing for payments, so most HIPcs are not paying, thus receiving more relief. Cuba Signed agreement with Guyana, but not yet Mozambique Former Czechoslovakia Signed agreements with 3 of 5 debtors, providing 80% of relief. Former Serbia & Monetnegro Signed agreement with 1 of 6 debtors. Guatemala Signed agreement with Nicaragua, swapping claims with which providing relief . No agreement signed with Honduras. Signed agreements with 3 of 4 post-CP debtors, providing 73% of relief. Negotiations with Mozambique are on-going. India Signed agreements with 5 of 7 debtors. In 2003, India announced its intention to write-off all non-export credit debt of HIPCs, but not all agreements signed. Not yet agreed to provide full relief on export credits. Kuwait Kuwait Fund of Arab Economic Development (KFAED) has signed with 16 of 18 post-CP debtors, delivering 75% of relief due. Kuwait Investment Fund (KIA) and Central Bank of Kuwait have not signed any agreements. KIA has indicated it cannot participate in HIPC. Mexico Signed agreement with 1 of 2 debtors, providing 81% of relief. Libya Signed agreements with 3 of 13 post-CPs debtors, with full delivery to one HIPC, and 10%-17% of relief to others. Libya initially agreed to participate but Parliament subsequently overturned the decision and so Libya to provide relief under its own initiative. Korea (PDR) Signed agreement with 1 of 7 debtors. Signed agreements with 2 of 4 debtors, providing 66% of relief. Romania Signed agreements with 1 of 3 debtors, providing 88% of relief. Signed agreement with 12 of 13 debtors, providing full HIPC relief to 5 HIPCs, partial relief to 5 HIPCs , 1 HIPC claims loans are fully repaid and 1 promised relief at alater date. United Arab Emirates Signed agreement with 1 of 9 debtors. Venezuela Signed agreement with Nicaragua, one of its 4 debtors.

Source: IMF and World Bank

Debt Relief International / Development Finance International 16 4th Floor Lector Court, 151-153 Farringdon Road, London EC1R 3AF, United Kingdom t: +44 (0)20 – 7278 0022 f: +44 (0)20 – 7278 8622 e: [email protected] http://www.hipc-cbp.org http://www.fpc-cbp.org