Improving Public Debt Management
In the OIC Member Countries
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5 Policy Recommendations
5.1 Measures to Improve Public Debt Management General Recommendations
Most OIC member countries have established legal and organizational debt management
frameworks and created Debt Management Offices (DMOs) or are in the process of doing so.
While these are important measures for successful public debt management, some areas of
improvement concerning public debt management in OIC member countries still remain and
will be indicated below. The policy recommendations given are based on global best practices
and descriptive analyses of public debt management practices in OIC member countries.
In some OIC member countries the delineation of authorities for public debt management is
not clearcut. Public debt management functions are often not fully centralized at the DMO,
with ministerial departments, the central bank and committees pursuing debt management
functions in addition. However, a large number of institutions involved in public debt
management hampers coordination and makes it difficult to evaluate the degree of
accountability of the respective institutions. As long as all relevant debt management
responsibilities are not centralized at a debt management unit, adequate and systematic
communication between the various embedded institutions is recommendable. In general, all
OIC member countries are advised to set up DMOs, if they have not done so already, and to give
them clearly defined, comprehensive operational responsibilities.
All OIC member countries are encouraged to create MediumTerm Debt Management
Strategies (MTDSs) following guidelines from the World Bank and the IMF. A clear
commitment to the public debt management strategy might be helpful in attracting foreign
investors and improving the functioning of domestic debt markets. Countries that have not yet
published their debt management strategies are advised to do so for a facilitated
communication with international investors. Public disclosure of legal and organizational
structures of public debt management, operations as well as general strategies might be
strengthened in OIC member countries. For example, debts of stateowned enterprises (SOEs),
government loans or investment guarantees, and arrears should be included in debt
management reports. Improving public debt disclosure can be supported by setting up
comprehensive debt databases. In some OIC member countries the general level of
transparency on debt management responsibilities and operations could be enhanced.
Delegating public debt management to a clearly specified organizational unit, e.g. the DMO,
creates transparent responsibilities and is conducive to foster accountability in public debt
management.
Central bank independence could be strengthened in some OIC member countries. Whenever
the central bank purchases substantial amounts of sovereign bonds, it potentially poses the
risk that monetary and financial policies are not clearly separated. As a result, the central bank
might not be able to implement an independent monetary policy, as recommended by current
scientific literature (e.g. Crowe and Meade 2008).
Public debt management is recommended to further diversify the investor base, if possible. It
is further advisable to clearly determine and implement a specific country’s optimal balance
between debt denominated in domestic currency and foreign currencies. Foreign currency
denominated debt may be subject to exchange rate risks, but typically comes at lower (real)
interest rates. This balance depends inter alia on the development of the domestic capital