(AS PRESENTED ) TABLE OF CONTENTS List of Tables……….. ................................................................................................................... iii List of Figures……… .................................................................................................................... iii LIST OF ABBREVIATIONS ......................................................................................................... v FOREWORD………… ................................................................................................................ vii ACKNOWLEDGEMENT ............................................................................................................. ix EXECUTIVE SUMMARY............................................................................................................. 1 SECTION I: INTRODUCTION ................................................................................................ 3 SECTION II: PROFILE OF PUBLIC DEBT STOCK ................................................................ 5 2.1 Central Government Debt ................................................................................................ 6 2.2 Public Bodies Debt ........................................................................................................... 6 2.3 Public Debt Trajectory and Net Financing Flows ............................................................ 6 SECTION III: COST AND RISK ANALYSIS ............................................................................ 9 3.1 Interest Cost .................................................................................................................... 11 3.2 Interest Rate Risk ........................................................................................................... 11 3.3 Foreign Currency Risk ................................................................................................... 12 3.4 Inflation Risk .................................................................................................................. 14 3.5 Refinancing Risk ............................................................................................................ 16 3.6 Contingent Liability – Government Guaranteed Loans ................................................. 17 3.7 Cost and Risk Indicators for the GGL Portfolio ............................................................. 18 SECTION IV: RISK FACTORS AFFECTING THE DEBT PORTFOLIO ............................... 21 4.1 Comparative Static Simulations of Changes in Key Macroeconomic and Market Variables on the Debt Portfolio ...................................................................................... 23 4.2 Dynamic Simulations of Changes in Key Macroeconomic Variables ........................... 25 4.3 Natural Disaster Shock Simulation ................................................................................ 27 4.4 Value at Risk (VaR), Cost at Risk (CaR) and Conditional VaR (CVaR) ...................... 32 4.5 Cash Flow at Risk (CFaR) Estimates for FY 2021/22 ................................................... 33 SECTION V: MACROECONOMIC OVERVIEW ................................................................... 34 Medium-Term Debt Management Strategy FY2021/22-FY2024/25 i | P a g e SECTION VI: MODELLING OF THE MEDIUM-TERM DEBT MANANGEMENT STRATEGY ................................................................................................ 37 6.1 Baseline Assumptions and Exogenous Shock Scenarios ............................................... 37 6.2 Medium-Term Targets ................................................................................................... 37 6.3 Financing Strategies ....................................................................................................... 38 6.4 Toolkit Output – Results for Alternative Financing Strategies ...................................... 40 6.4.1 Risk to Baseline Projections for the Respective Strategies under Stress Scenarios ................................................................................................................. 42 6.4.2 Dynamic Effects of Shocks to Baseline Macroeconomic Variables ....................... 44 SECTION VII: ANNUAL BORROWING PLAN ....................................................................... 46 7.1 Issuance Strategy for FY2021/22 ................................................................................... 47 7.2 Challenges to the Issuance Strategy ............................................................................... 48 7.3 Active Liability Management Operation ........................................................................ 49 SECTION VIII: DEVELOPMENT OF THE DOMESTIC MARKET ......................................... 52 8.1 Government Domestic Debt Market .............................................................................. 52 8.2 Financial Market Development ...................................................................................... 52 8.3 Investor Relations ........................................................................................................... 55 SECTION IX: CONCLUSION ................................................................................................... 57 GLOSSARY……. ........................................................................................................................ 58 Medium-Term Debt Management Strategy FY2021/22-FY2024/25 ii | P a g e List of Tables Table 1: Public Debt Profile ......................................................................................................................... 5 Table 2: Public Debt Cost and Risk Indicators ........................................................................................... 10 Table 3: Stock of Government Guaranteed Loans...................................................................................... 17 Table 4: Government Guaranteed Loans Cost and Risk Indicators............................................................ 18 Table 5: Estimated Portfolio Effects of Changes on key Market Variables ............................................... 23 Table 6: Medium-Term Macroeconomic Framework ................................................................................ 36 Table 7: Key Portfolio Targets for FY2021/22 and the Medium-Term ..................................................... 38 Table 8: Cost and Risk Indicators for Alternative Financing Strategies .................................................... 42 Table 9: GOJ's Annual Borrowing Plan for FY2021/22 ............................................................................ 47 Table 10: Proposed GOJ Issuance Calendar for BINS for FY2021/22 ...................................................... 50 Table 11: Proposed Schedule for Treasury Bills ........................................................................................ 51 List of Figures Figure 1: Trajectory of the Public Debt Stock .............................................................................................. 7 Figure 2: Debt-to-GDP Trajectory ................................................................................................................ 8 Figure 3: Weighted Average Annual Interest Cost by Instrument ............................................................. 11 Figure 4: Reference and Benchmark Interest Rates for the Debt Portfolio ................................................ 12 Figure 5: Foreign Currency Composition of the CG Debt Portfolio, end-December 2020 ........................ 13 Figure 6: Rate of Depreciation of the JMD Relative to Foreign Currencies, end-March to end-December 2020 ............................................................................................................................................ 13 Figure 7: Daily JMD/USD Exchange Rate ................................................................................................. 14 Figure 8: Monthly Depreciation Rate and Associated Valuation Effects .................................................. 14 Figure 9: Share of CPI-Linked Debt in Total CG Debt .............................................................................. 15 Figure 10: Adjusted Cost of CPI-Linked Debt ........................................................................................... 15 Figure 11: Redemption Profile for Central Government Debt at end0December 2020 ............................. 16 Figure 12: Government Guaranteed Loans as a Share of GDP .................................................................. 17 Figure 13: Redemption Profile of GGLs at end-December 2020 ............................................................... 19 Figure 14: Quarterly Valuation Effects from Exchange Rate Changes ...................................................... 20 Figure 15: Nominal Value of Inflation-Linked GGLs ................................................................................ 20 Figure 16: Selected Risk and Implications for the Debt Portfolio .............................................................. 22 Figure 17: Effects on Adjusted Costs from Changes in Macroeconomic and Market Variables, April to December 2020 .......................................................................................................................... 24 Figure 18: Relative Sensitivity to Changes in Macroeconomic and Market Variables, April to December 2020 ..........................................................................................................................................