The DMFAS Programme: An Overview

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1 The DMFAS Programme: An Overview Who we are The DMFAS Programme is a world leading provider of technical cooperation and advisory services in the area of debt management. Integrated as a key activity of the United Nations Conference on Trade and Development (UNCTAD), the Programme has been successful in helping governments improve their capacity to manage debt for over 25 years. It has so far worked directly at the country level with 66 countries (mostly low and lower-middle income) and more than 100 institutions. The problems we address In recent decades, unsustainable debt mostly external has brought country after country into deep economic crisis, with dramatic social consequences for their populations. Unsafe borrowing and high debt servicing has thrown developing countries into a "debt trap", depriving them of the resources needed to secure long-term economic development and build up strong social and physical infrastructures. The Philippine Treasury expresses its unending gratitude and appreciation to UNCTAD for its valuable technical assistance to the Philippines without which our country would not have progressed immensely in the area of debt management. Treasurer of the Philippines The need for good debt management is underlined by growing international recognition of its importance and by global initiatives such as the Monterrey Consensus, the Millennium Declaration and the Millennium Development Goals. These stress the importance of, inter-alia, debt management and debt relief for achieving poverty reduction. In this context, there is increasing recognition that good debt management is an intrinsically important component of Public Financial Management and overall good governance. It is now globally accepted that building national capacity in the area of debt management is essential in order for highly indebted poor countries to reach debt sustainability. Similarly, it is widely recognised that good debt management within an effective macroeconomic framework will improve overall democratic governance and lead to greater economic stability, economic growth and social development. This will increase the resources available to low-income countries for allocation to priority areas such as education and health, thus improving the lives of poor people. In order to attain sustainable debt levels and to use debt instruments as an efficient tool for development, prudent debt management and the availability of reliable and timely debt data are essential. Many governments, however, lack the appropriate human and technical capacity for handling public resources and liabilities more effectively, despite their commitment to development. This is particularly the case for developing countries and where UNCTAD s DMFAS Programme makes a difference.

2 The DMFAS Programme Page 2 of 6 continued from the previous page The installation of DMFAS and training given has helped us to develop a comprehensive database on government debt and upgrade the technical skills of the staff. One major result of this initiative will also be improved transparency, through more timely, comprehensive and accurate reporting of the status of the public debt reduction. Minister of Finance and Economic Development of Ethiopia The DMFAS Programme is a concrete example of how the United Nations builds capacity at the country level, in support of good governance, development and poverty reduction. In partnership with other organisations and the donor community, it provides countries with the means to improve their management of public liabilities, and consequently public resources, through the strengthening of their institutional capacity in this area. What we do The Programme offers countries a set of proven solutions for improving their capacity to handle the day-to-day management of public liabilities and produce reliable debt data for policy-making purposes. This includes its specialized debt management software, DMFAS which greatly facilitates the work of the debt office as well as advisory services and training activities in debt management. By working directly with the countries as well as with international and regional organizations involved in debt, the Programme identifies best practices in debt management and translates them into specialized products and services. These are shared with countries through technical cooperation projects, as well as through international and regional conferences and workshops. The solutions we provide Capacity-building through the debt management and financial analysis software (DMFAS) designed to meet the operational, statistical and analytical needs of debt managers and bodies involved in elaborating public debt strategies, and training in its use; Capacity-building through the Programme's advisory services, including needs assessments and advice on technical, administrative, legal and institutional debt management issues, assistance in software installation and maintenance; Capacity-building in debt management skills and through the Programme's modules in debt data validation, statistics and debt analysis. Through the Programme's assistance, governments are able to produce and publish reliable, comprehensive and timely information on their debt so it is accessible to all at the international, national and local levels. The production of reliable debt information helps countries negotiate better re-payment terms with their creditors, as well as debt relief. Having a debt management software such as the DMFAS, for example, is often a pre-requisite for achieving debt relief.

3 Page 3 of 6 An Overview How we are financed The Programme is largely funded thanks to the generous support of bilateral donors. Currently, these include the Netherlands, Norway and Sweden for the traditional donors as well as new donors like France, Germany and Italy. Support is also provided by beneficiaries through a cost-sharing mechanism, and by UNCTAD s regular budget. The Programme s many advantages 1. Reputation and proven capacity-building. The Programme has a proven track record of strengthening debt management capacity of countries. 56 countries currently rely on DMFAS on a day-to-day basis to manage their debt. 2. Global public good. As part of the United Nations, the Programme s products and services are available to all countries. They are non-exclusive and are considered a global public good. 3. Non-duplication. The products and services provided by the Programme complement and do not duplicate those offered by other international organizations involved in debt management. Thanks to the joint efforts of UNCTAD and of the DMFAS users team in Albania, we have established an accurate information system on external debt. Its advantages are quite evident in the debt management decision-making. Vice-Minister of Finance of the Republic of Albania 4. Insight and experience. The Programme has provided expertise and assistance in debt management since the early eighties and has built a wealth of knowledge and experience in helping developing countries improve the management of their debt. It hires a central team of experts specialized in debt management and uses as its consultants, highly skilled debt officers from the countries themselves. 5. Demand driven. The Programme is demand-driven, meaning that its products and services evolve in line with the requirements of the countries themselves, new trends and best practices. 6. Cost-effectiveness. Through centralised development of its debt management products and services, the Programme provides the benefits of significant economies of scale. 7. Practicability and friendliness. The Programme's products and services are designed as a set of practical solutions that make debt management much easier. This is what good governance should be. That is what the 8. Long-term perspective. The Programme provides continuing support to countries, beyond the completion of country project activities. 9. Established network and partnerships. The Programme s collaboration and partnerships with all of the major actors in debt management (e.g. IMF, World Bank, IDB) place it at the centre of discussions and initiatives on how to improve debt management, benefits which are shared with developing countries. 10. Policy of transparency and accountability. The Programme provides regular progress and management reports to donors.

4 The DMFAS Programme Page 4 of 6 The DMFAS software At the Programme s core is the Debt Management and Financial Analysis System (DMFAS) a software that can be used for the purposes of recording, monitoring and analysis. Usually installed in the Ministry of Finance and/or Central Bank, it supports both external and domestic public debt (loans and securities), whether this be short-, medium- or long-term. It also provides coverage for private debt, grants and on-lent loans. The DMFAS enables the debt office to develop a debt database containing detailed and aggregated data on loan contracts, bonds and grants, real operations (disbursements and debt service) as well as future operations (disbursements and debt service). As the system can process large quantities of debt data, more time and energy can be deployed on analytical and management tasks. Its design allows for easy customisation and adaptation in accordance with the needs and preferences of each client institution. It can also be integrated with other financial systems if the institution so wishes. Life of those responsible for debt management has changed since the adoption of DMFAS. Without DMFAS we would not have been able to reach the level of accuracy in which the debt unit is now. DMFAS contains a number of pre-defined reports and also offers the user the possibility to design his own reports. The flexibility of the reporting module facilitates the production of debt statistics using codes that follow international standards. The number of possible user-defined reports is nearly unlimited and they can be easily exported to other applications. Example of the benefits we provide In 2006, Nicaragua one of the world's poorest and most indebted nations obtained relief from its foreign financial obligations worth US$ 3.8 billion, or roughly 60% of all debt owed. The agreement was reached after years of negotiations with creditors, and freed up highly needed resources that could be used for poverty reduction. DMFAS played a vital role by helping the country produce up-to-date and accurate debt information essential for the negotiation process. Egyptian DMFAS user DMFAS advisory services At the invitation of a government institution, UNCTAD will conduct a needs assessment of that institution s capacity to manage its country s debt. UNCTAD and the government will then work together on defining those areas of debt management that would be improved with the support of the DMFAS Programme. All defined activities will be outlined in a technical cooperation project document and submitted to potential funding agencies. Project implementation will start on approval of the document by all parties. Through such a project, the Programme gives advice, for example, on the installation and use of the DMFAS system, on its integration with other financial management systems, on database building, on debt strategies, on communication and information flows, financing techniques, credit analysis and debt renegotiation, among other areas. This advice will also continue after the completion of each project, through such services as its HelpDesk support.

5 Page 5 of 6 An Overview DMFAS capacity-building services The Programme offers a full range of capacity-building services including training modules in debt data validation, debt statistics and debt portfolio analysis based on a bottom-up approach. This starts with assistance in the creation of a debt database (installation of the DMFAS software, registration of debt information, validation of debt data), followed by training in the generation and production of reliable debt statistics (including debt statistics bulletins), and followed by assistance in performing debt portfolio analysis (appropriateness of the debt portfolio composition) and in understanding the concepts of debt sustainability analysis (interaction of debt with macroeconomics and balance of payments). Training is delivered nationally and regionally. DMFAS helps countries compile timely and accurate debt information. It also helps promote transparency and encourages the application of the latest international financial reporting standards. In the case of Indonesia, for example, in 2005, US$ 2.7 billion was restructured to help the nation cope with the widely publicized tsunami disaster. With DMFAS assistance, Indonesia's Government now also produces a quarterly statistical bulletin on its government debt. Debt Management Conference Every other year, the Programme also organizes an international conference on debt management. The Conference serves as a discussion forum for developing countries on some of the most pertinent issues in debt management and public finance today, with its ultimate objective being to help developing countries manage their debt more effectively. This meeting also provides an opportunity for debt managers and policy makers around the world to interact and share experiences. DMFAS helped us manage our public debt in a more efficient and transparent manner, and proved itself to be an indispensable tool in helping us during the last phases of the HIPC Initiative in the conciliation of our public debt data with our creditors. Director of Public Credit, Ministry of Finance of Honduras The conference brings together representatives from Governments, mostly from country capitals, international organizations, the private financial and legal sector, academia and civil society..

6 Beneficiaries of the Programme All UNCTAD Member countries are potential beneficiaries of the services provided by the Programme. However, its cooperation at the country level is particularly targeted at low and lower-middle income countries. Current users of the DMFAS software Africa Algeria, Angola, Burkina Faso, Burundi, Chad, Côte d Ivoire, Democratic Republic of Congo, Djibouti, Egypt, Ethiopia, Gabon, Madagascar, Mauritania, Republic of Congo, Rwanda, Sudan, Togo, Uganda, Zambia, Zimbabwe Asia & East Bangladesh, Cambodia, Indonesia, Iran (Islamic Rep. of), Iraq, Jordan, Lebanon, Mongolia, Pakistan, Palestinian Authority, Philippines, Syrian Arab Republic, Viet Nam, Yemen Latin America & the Caribbean Argentina, Bolivia, Chile, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Nicaragua, Panama, Paraguay, Trinidad and Tobago, Venezuela (Bolivarian Rep. of) East Europe and the CIS Albania, Belarus, Georgia, Lithuania, Republic of Moldova, Romania, Turkmenistan FOR MORE INFORMATION, PLEASE CONTACT: DMFAS Programme UNCTAD Villa Bocage 1211 Geneva 10, Switzerland Tel.: (41) 22/ Fax: (41) 22/ The DMFAS Programme Overview is not an official document. Opinions expressed in this document are those of the authors and do not necessarily reflect those of UNCTAD or of the United Nations Scretariat.