1. Project to prepare a Database on Advanced Fiscal Vulnerability and SustainabilityIndicators Public Debt Committee Meeting Moscow, Russian Federation June 8, 2004 Dr. Jorge Manjarrez-Rivera Superior Audit Institution of Mexico INTOSAI

2. Background “Public Debt Management and Fiscal Vulnerability: Potential Roles for SAIs” (SAI of Canada) –Relevance of the correct management and the development of effective public debt strategies, taking into account: How the capital markets globalization influence the economy. its effects on each country’s financial situation. –Greater relevance for countries with emerging economies. “Performance Audit on Public Debt and its Reference Terms” (SAI of Mexico) –Strategic role of SAIs to estimate fiscal vulnerability and sustainability through an information system that captures and generates accurate and reliable data. Public Debt Training Program (IDI/PDC) 2 INTOSAI

3. Fundaments SAIs may actively participate in the development of solid strategies and transparent practices to manage public debt –Designing a performance assessment system based on debt vulnerability and sustainability indicators. Vulnerability and sustainability indicators –Make possible that public debt managers: Assess the real governmental situation. Assess the economy strength. Assess the involved risk for creditors. Enables to prioritize risk management. –The follow-up of their behavior enables: To identify fundamental economic aspects changes. To prevent setbacks in the short, medium and long run. 3 INTOSAI

4. Fundaments Fiscal Vulnerability and Sustainability Indicators usually used: –Characteristics: Static nature. Limited scope. Restrained to the short run. –Examples: Debt / GDP. Deficit / GDP. –Disadvantages: Ineffective to prevent financial crisis. Unable to identify economic risks in the long run caused by external events. 4 INTOSAI

5. Proposal To compile advanced fiscal vulnerability and sustainability indicators. –Based on the documents prepared by Canada, Mexico, as well as the indicators used in Public Debt training programs. –The indicators are expected to be useful to forecast the impairment of the economic fundamental aspects, and –Capable of identifying potential fiscal vulnerability and sustainability. 5 INTOSAI

6. Objectives To design and integrate a database comprised of quarterly and annual information from year 2000 on –To enable econometric and statistical analysis on fiscal vulnerability and sustainability related to public debt in INTOSAI members. –To be annually updated with quarterly data. To provide information that enables the identification of similar conditions with regard to fiscal vulnerability and sustainability among countries –To encourage the exchanging of information and experiences on public debt. 6 INTOSAI

7. Potential users Researchers interested in undertaking studies and analysis on public debt indicators and the Public Debt Committee with the aim to generate new official documents to be distributed among INTOSAI members on this matter. It could also be used by SAIs as to identify similarities to other countries. The comparison of the data base information may encourage the creation of information channels among countries which are going through the same financial and economic conditions. 7 INTOSAI

8. Process to be followed up June 8, 2004. Presentation on the indicators to be included in the questionnaire, before PDC members. June 22, 2004. Receipt of comments from PDC members. July 7, 2004. Preparation of the questionnaire with the revised indicators. August 2, 2004. Receipt of PDC members comments on the questionnaire. August 15, 2004. Dissemination of the questionnaire among OLACEFS members requesting quarterly information for the 2000-2003 period. October 1, 2004. Receipt of completed questionnaires. 8 INTOSAI

9. Process to be followed up October 1 – November 15, 2004. Review of completed questionnaires. November 15, 2004. Dissemination of preliminary results among OLACEFS members. January 17, 2005. Receipt of comments and clarifications from OLACEFS members. January 17, 2005 – February 15, 2005. Making of the Database. February 15, 2005. Uploading of the database on to the PDC’s webpage. June 1, 2005. Dissemination of the questionnaire to OLACEFS members, requesting quarterly information for year 2004. 9 INTOSAI

10. Advanced Fiscal Vulnerability and Sustainability Indicators Total Public Debt –Total direct public debt* / GDP. –Public Debt Service** / Exports revenues. –Weighted average of term of maturity and duration of the short, medium and long-term public debt. –Increase of direct and indirect public debt*** / Increase of GDP. –Public Debt in foreign currency / Total direct public debt. –Foreign currency denominated Public Debt / Total Public Debt. –Increase of debt service* / Increase of GDP. –Public Debt Financial Cost / Public revenues –Short-term Debt / Total Direct Public Debt */ Direct Public Debt.- Debenture debt plus the one acquired through bank credits. **/ Debt Service includes debt redemption, financial cost, commission and expenses. ***/ Indirect Public Debt.- Contingent Public Debt. 10 INTOSAI

11. Advanced Fiscal Vulnerability and Sustainability Indicators Internal Public Debt –Internal debt service / Ordinary revenues. –Internal debt interest expenses / Net paid expenses. –Internal debt financial cost / Ordinary revenues. 11 INTOSAI

12. Advanced Fiscal Vulnerability and Sustainability Indicators External Public Debt –External Public Debt / GDP. –External Public Debt / Exports revenues. –Short-term External Debt / GDP. –Short-term External Debt / Exports revenues. –Short-term External Debt / International reserves. –External Debt Service / External Debt. –External Debt Service / Exports revenues. –External Debt Service / Imports. –External debt financial cost / GDP. –External debt financial cost / Exports revenues. –Capital Account Balance / Current Account Balance. 12 INTOSAI

13. Advanced Fiscal Vulnerability and Sustainability Indicators Liquidity –International reserves / Amount of the external and internal public debt with maturity within a year. –International reserves / Total short-term external debt. –International reserves / Current account balance. –International reserves / Imports. –International reserves / M2. 13 INTOSAI

14. Further Considerations 14 INTOSAI  If it is decided that the data base be mainly used by the Supreme Audit Institutions then it is necessary to receive feedback from PDC members as to what indicators should be useful to be included.  The Supreme Audit Institution of Mexico will look after the updating as well as the consistency and comparability of information.  The official countries data would be the main source of information. Other official sources such as the World Bank and the International Monetary Fund may be consulted.