Improving Public Debt Management
In the OIC Member Countries
43
Figure 2-19: Problems Faced by the Domestic Public Debt Market
Source: Ifo World Economic Survey (WES) IV/2016.In sum, the survey results provide new insights with respect to the question where experts see
public debt management policies and domestic debt market development in OIC countries
compared to the rest of the world. They offer indicators for governments and DMOs
concerning which aspects of their public debt management might be reconsidered or
improved. First, experts see room for improvement in the efficiency of public debt
management. Second, while a majority considers domestic public debt markets to function
satisfactorily, public policies are well advised to provide the necessary regulatory framework
to further improve their functioning. Besides a small investor base, poor market infrastructure
is found to be the most important impediment for properly functioning domestic public debt
markets in OIC countries. Better functioning public debt markets would also help to retain
more savings in the domestic economy, which would alleviate the problem of a small investor
base.
Experts consider foreign currency risk and interest rate risk to be quite important in OIC
public debt markets. OIC member countries might therefore focus on strategies to reduce
vulnerabilities to those risk categories. They might target to issue a higher share of public debt
in domestic currency. Moreover, a further lengthening of the maturity of newly issued debt
instruments might help to reduce interest rate risk.
These survey results provide important information about priorities for a reform of public
debt management in OIC countries. These findings complement the conclusions from the
global best practices and the country case studies. In the following sections recommendations
are based on a comparison between public debt management in the respective country and
global best practice. In contrast to that approach, this section presented the evaluation of
country experts. Their opinion is especially important because the experts might be potential
investors, i.e. those working at financial institutions and firms, or they may influence the public
view of the functioning of public debt markets, i.e. those working at think tanks, research
institutes and universities. If governments succeed in improving experts’ assessment of public
debt markets, they may also be able to expand the investor base and issue debt at a lower cost.