Improving Public Debt Management
In the OIC Member Countries
3
Results from the CESifo World Economic Survey (WES) suggest that the efficiency of public
debt management is highest in highincome countries and lowest in lowincome countries.
While foreign currency risk is least important in highincome countries, it is the most
important risk category for public debt management in the other income groups and in the OIC
countries.
Public debt markets in highincome countries received the best assessment from WES experts,
in lowincome countries the worst. Public debt markets in the group of OIC countries perform
on average relatively unsatisfactory in international comparison. According to the experts, the
most important problems faced by domestic public debt markets in OIC countries are a p or
market infrastructure, the limited size of the economies and a missing investor base.
Global best practice in OECD countries reveals four important issues for the success of public
debt management. First, public debt management needs to be based on a sound longterm
strategy. Second, it is important that this strategy is implemented by an institution capable to
deal with public portfolio management. Third, modern instruments and techniques have to be
used in public debt management. Finally, suitable mechanisms to ensure accountability and
successful delegation have to be designed. Applied to emerging and developing countries, their
characteristics (e.g. limited access to financial resources, less developed institutions, larger
vulnerability) have to be taken into account.
3 Public Debt Management Practices in the OIC Member Countries
Average public debt relative to GDP in the OIC member countries has increased from 36.7%
in 2012 to 46.1% in 2015 and is expected to rise to 51.1% in 2017. The amount of outstanding
gross public debt relative to GDP is, however, very heterogeneous among OIC member
countries, ranging between 3% and 139%.
The highest average debttoGDP ratios are expected in lowincome OIC countries in the next
years. Highincome OIC countries are expected to experience the largest increases in the
average debttoGDP ratios. Different debt dynamics also arise among regional groups. Several
African countries have been granted debt relief or restructuring in the last decade.
Consequently, debt ratios have substantially decreased between 2006 and 2009 in the African
group but have slightly risen afterwards. The average debttoGDP ratio in the Asian group has
been on a relative stable path. The average debttoGDP ratio in the Arab group has increased
since 2014 as the decline in oil prices had negative effects on the economies of oilproducing
countries. While the fiscal buffers of some OIC member countries are expected to be capable of
absorbing the predicted budget deficits following lower oil revenues for some years, other OIC
member countries have to issue substantial amounts of debt.
The average grant element in OIC countries has been about 50% since 2006, similar to the
worldwide average. Grants are primarily extended by official creditors, i.e. international
organizations and governments, while private credit contracts rarely have a grant element.
Grants to low income countries are more generous than to middleincome countries. The grant
element is particularly high in the African group.
The share of short-term debt in total public debt in the OIC member countries has decreased
from 68.1% in 2006 to 54.5% in 2015 (slightly above the worldwide average of 52%). Official
creditors sign contracts with maturities similar to the worldwide average at around 21 years
on average. Private creditors extend their credit for an average period of approximately 4
years (below the worldwide average of 5 years). The maturity of new debt contracts is
significantly larger in lowincome countries than in middleincome countries, which might be