1. The Government successfully borrows in the domestic market: how to optimize this process and to reduce Debt Management Costs
Erika Latyšovič, Principal Auditor
National Audit Office of Lithuania
INTOSAI PDWG Meeting

2. Structure of the debt on behalf of the State by measures of borrowing, in per cent

3. Audit Objectives and Assessment Criteria
Audit objective – to assess the efficiency of the management of GS issued in domestic market
Assessment criteria:
Compliance with legislation regulating the issuance of GS in domestic market
Comparison of the management measures for GS issued in domestic market applied in Lithuania with provisions of PDM guidelines defined by IMF, the WB, INTOSAI PDWG and the best foreign practice

4. Audit Scope and Methodology
Audited period: ; in some cases data of 2010 was used for comparison
Audit methods:
Analysis of content and application, and data analysis
Meetings, interviews, surveys – MoF, Stock Exchange, Central and Commercial banks
Data verification, checking, reviewing, comparison

5. Public Debt Management Strategy
does not stipulate what share will be borrowed in the domestic market
does not provide for an aim to develop and maintain the efficient and liquid domestic market
Recommendation for the Government:
Strategy should foresee the following as one of its main objectives: to develop and maintain the efficient and liquid GS domestic market, as well as to set detailed measures for implementation of this objective

6. Planning of borrowing in the domestic market
MoF announces insufficient information about the planned borrowing in the domestic market. Planning process of the borrowing is to be improved
Preliminary annual calendars for issuing of GS in the domestic market are not approved and not made publicly available
MoF didn’t often follow the self-established borrowing programmes and calendars

7. Issuance of GS in the domestic market
Debt management operations in the domestic market are not sufficiently transparent, regular and predictable
The MoF systematically cancelled previously announced auctions in 3rd-4th quarter of
The issuance of GS and terms to maturity were not always closely connected to the need for money on respective days
The MoF does not analyze / use auction evaluation indicators, which show the interest of investors in securities with various maturities

8. Recommendations for Ministry of Finance
To establish preliminary annual predictable and regular calendars for issuance of TB and bonds, and make them publicly available
To take into consideration the dynamics of fluctuation of the State Budget revenue and expenditure when planning the annual borrowing
To analyze / use auction evaluation indicators when making decisions on maturity of GS

9. Information about the Issuance of GS through Auctions
Insufficient information is announced in quarterly auction calendars
The MoF does not announce the amount of the GS issue
The MoF follows the best practice and reopens issues to ensure the liquidity of GS, however it does not disclose data about it

10. Recommendations for Ministry of Finance
To announce more detail information in quarterly calendars for issuance of GS
To indicate the amount of GS issue in the announcement to issue GS
To make publicly available auction evaluation indicators and their analysis
To announce data on the reopened issues during the year

11. Auction Participants Lack of regulation about non-competitive bids
No minimum / maximum amount is set for one auction participant / investor to purchase during one auction
Lack of understandable information to potential investors
The MoF does not own information, nor does it communicate with final investors

12. Recommendations for Ministry of Finance
To set in requirements and limitations for auction participants on non-competitive bids as well as minimum and maximum limit per one auction participant
To make publicly available understandable information about the organization of auctions
To organize regular meetings with auction participants, as well as potential and existing investors

13. Thank you for attention