sostenibilidad de deuda en guatemala
TRANSCRIPT
Institutional and management fundamentals of the debt sustainability in Guatemala, a
micro approach
Fredy Gómez, MGPP, ME*, MFPublic Credit Directorate
Ministry of Finance
Outline
• Sustainability literature• Public debt situation, aspects to manage• Sustainability management under institutional
and management fundamentals• Perspectives
Sustainability and Risk literature
Area Approach Authors Outstanding management aspectsMacroeconomic The IMF Standardized
ApproachIMF summarized by UN 2009.
“….standardized DSA to meet ArticleIV ….”
The Debt Stabilizing Primary Balance
Blanchard (1990). Burnside 2003 y 2005.
The objective can be to stabilize the debt either at its current level or at any other level deemed more desirable.
Micro Value at risk stress tests Garcia and Rigobon(2005) and Celasunatal, 2005)
For financial firms, the objective is the avoidance of insolvency. It can create Reaction Functions
The Parameters of Debt Policy
UN 2009 (Pg 83) Sustainability implies, among other things, liquidity dimensions, vulnerability, not only solvency. Indicators of Debt Vulnerability: Debt Service, Interest Payments, Implicit maturity.
Using retrospective analysis, sustainability can be improved if the service flow, for which certain cost and risk objectives become relevant (vulnerability, liquidity, etc.) is managed. In Guatemala there are explicit management measures at macroeconomic level (designed to reduce costs, manage risks and ensure payment, which contribute to sustainability).
Guidelines for Public Debt Management. IMF 2001. “... governments should seek to ensure that both the level and rate of growth in their public debt is fundamentally sustainable and can be serviced under a wide range of circumstances while meeting cost and risk Objectives”
Statistics
2006 2007 2008 2009 2010 2011 2012 2013 (Preliminar)
30.0%
50.0%
70.0%
90.0%
110.0%
130.0%
150.0%
170.0%
49.3% 45.6% 42.7%51.5% 50.1%
42.8% 49.2% 53.3%
150.0%
Deuda/Export Techo
125.0%
145.0%
165.0%
185.0%
205.0%
225.0%
245.0%
265.0%
169.5% 166.1% 167.3%
207.7% 214.5%203.4%
194.8%
213.5%
250.0%
Deuda/Ingresos Techo
2006 2007 2008 2009 2010 2011 2012 2013 (Preliminar)15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
21.8% 21.6%20.0%
23.0%24.6% 24.1% 24.6% 24.7%
40.0%
Deuda/PIB TechoDebt/ Exports
Deuda / PIB
Debt / Total revenues
Debtd
Qualities associated with debt sustainability in Guatemala…Portfolio approach and assets
20142016
20182020
20222024
20262028
20302032
20342036
20382040
20422044
20462048
20502052
0.00
2,000,000,000.00
4,000,000,000.00
6,000,000,000.00
8,000,000,000.00
10,000,000,000.00
12,000,000,000.00
14,000,000,000.00
16,000,000,000.00
Projection of public debt payment in QuetzalesC+I
Deuda Externa Deuda Interna
Qualities associated to debt sustainability in Guatemala… Portfolio approach and assets
Risk Ratings ScaleDescription S&P Moody's Fitch
Highest credit quality
Investment grade
AAA Aaa AAA
High credit qualityAA+ Aa1 AA+AA Aa2 AAAA- Aa3 AA-
Strong payment abilityA+ A1 A+A A2 AA- A3 A-
Adequate payment abilityBBB+ Baa BBB+BBB Baa2 BBBBBB- Baa3 BBB-
Likely to comply with their liabilities, with some uncertainity
Speculative
grade
BB+ Ba1 BB+BB Ba2 BBBB- Ba3 BB-
High credit riskB+ B1 B+B B2 BB- B3 B-
Very high credit riskCCC+ Caa1 CCCCCC Caa2 CCCCC- Caa3 C
Near breach, with recovery possibilitiesCC Ca CC
C
BreachSD C DDDD DD D
Institutional and management fundamentals of debt management
• Funding has continued a deficit path, following the logic of the spending highly bound by constitutional rules
2005 2006 2007 2008 2009 2010 2011 2012 2013-3.5
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
-1.7-1.9
-1.4-1.6
-3.1 -3.3
-2.8
-2.4-2.2
Note: figures of approved budget
Institutional and management fundamentals of debt management
• Rules of operation approval – Loans must be approved one by one by the
Congress, even bond financing– Prior to being sent to this instance, they must
count with the approval of investment directors and the Central Bank.
Management fundamentals, risks
• Which risks faces the service payment, present and future? • Tax resources or debt for debt payment?• Timely payment?• What coverage do we have for risks?
– Price risk (i, E)– Credit and liquidity risk
• Liability and risk management…Focusing on instruments– Who? Reform of the debt office– What do they do? Strategic approach– How? Focusing on management instruments, case of rate. – Results
• Payment reduction for service in time (Eurobond)… exposure increases
• Reduction of concentration risk … Domestic Bond Series…cost, cost increases due to long term
• Exposure reduction.. Domestic placement• Cost reduction
Who?
Proposed organizational structure
Public Credit Directorate
Subdirectorate of Operations
Legal Technical Assistance Unit
Subdirectorate of Management of Public Credit Politics
Department of Treasury Bond Trading and Placement
Department of Negotiation of International Cooperation
Department of Support for the Execution of Foreign Loans
Department of Public Debt Servicing
Department of Registration of Public Debt
Subdirectorate of Operation Negotiation
Department of Liabilities and Risk Management
Department of Research and Innovation
Department of Politics Management
Back Office: Focusing on operations
Middle Office: Focusing on politics
Front Office: Focusing on negotiation
• Better linkage to functions of a modern debt office.• New departments
How? With instruments
* First amount: Q. 400.0 million
* 4 new series, to 7, 10, 12 and 15 years
* Coupon lowerings
Approach for placement1. An amount is “auctioned” , this is a new rule2. Coupons are lowered to reflect the strategy
of cost reduction.
Some results• Results
– Payment reduction for service in time (Eurobond).. Exposure increases
– Reduction of concentration risk … Domestic bond series… cost, cost increases due to long term
– Exposure reduction... Domestic placement
– Cost reduction
Management perspectives
• Relevant interest rate at the market• Prospective studies on service• Contingent liabilities inventories• Rules for the use of provisioning funds• Financial instruments: variable to fixed rate. • Development of the domestic market for low
cost. Standardization.