Public debt transparency depends on (1) effective recording; (2) an extensive reporting function; and, (3) a willingness to share debt-related information (UNCTAD, 2018). Anomalous cases, such as Mozambique, where “off-book” loans were contracted to purchase fishing vessels and military equipment, and neighbouring Zambia, which is suspected of hiding substantial external debt, have contributed to a general perception that African countries are unwilling to share their debt data and do not meet the third condition of debt transparency.
CABRI, through collecting data for the Africa Debt Monitor (ADM), a platform for peer-exchange on African central government debt, has learnt that this general perception is false. More than 50% of countries approached to participate in the ADM, voluntarily completed an extensive three-part survey covering domestic- and foreign-currency debt, risk benchmarks and contingent liabilities, and cash- and debt-management institutional arrangements, policies and practices.
What seems to matter for governments are that they have a say in how their data is collected and used, and that data collection exercises result in insights and tools they find relevant and useful. The ADM was developed by CABRI in consultation with African DMOs and provides the type of debt-related information that officials have said is a prerequisite for making informed decisions and promoting debt sustainability. It features multiple tools which facilitate peer-learning and exchange on debt management, including (i) individual country debt profiles; (ii) cross-country comparison of debt management practices and procedures; (iii) individual country data tables; and (iv) the Debt data explorer.
The ADM also serves as a repository of information for CABRI to better understand what works, when and how in debt management and to share this insight through our ADM Analysis series. The first reports in the ADM Analysis series provide empirical evidence that optimal debt portfolio composition is not the product of compliance with international best practice or the existence of formal mandates or regulation. What appears more important is understanding local context and prioritising practices, such as effective coordination, consistency and clarity of roles, that result in improved functionality.
For example, in many areas of public administration, it is assumed that fragmentated structures lead to inefficiencies. However, the ADM Analysis reports show that this is not necessarily true. There will be cases where local context implies that fragmented responsibility is necessary or, indeed, superior to unified responsibility. The ADM results show that countries with fragmented foreign- and domestic-debt operations actually have more domestic-currency debt than countries with completely unified operations.
It is also interesting to note that the ADM results suggest that the clarity and consistency of debt responsibilities are more important than whether these responsibilities are codified in law. The ADM shows that countries which have their DMO’s mandate formalised in law do not appear to obtain benefits in debt composition. Indeed, DMOs without formally codified mandates have more domestic debt and more marketable debt. CABRI has previously argued for the importance of local-market development to provide stable long-term financing, reduce external vulnerability and provide private issuers with benchmark bonds. A greater share of marketable debt, in turn, reflects the presence of instruments with which a secondary market can emerge or deepen.
While the benefits of comprehensive public debt information are well-known, the ADM Analysis provides another reason why DMOs should emphasise information-sharing and reporting: the number of reports a debt-management office produces is positively correlated with marketable debt and more of that marketable debt is long term (countries reporting in most of the ways tracked by the ADM have, on average, nearly 50% of their debt in marketable instruments).
The ADM Analysis results further show that primary-dealer systems (PDS) are associated with significantly deeper primary domestic-currency debt markets. Specifically, countries with a PDS have half of their debt in domestic currency, while countries without a PDS have less than one-third of their debt in domestic currency. We have also shown that countries that issue at least monthly also have 33% more marketable debt than countries where auction schedules are irregular.
As we include additional countries and years, the ADM platform will become even more useful for debt managers seeking to learn how their peers manage their debt portfolios. These additional data points will also provide us with greater evidence of what does and does not contribute to effective debt management and sustainable debt portfolios.