Debt-related vulnerabilities in emerging markets and developing economies (EMDEs) have markedly increased since the COVID-19 pandemic. In EMDEs, the global monetary tightening has led to increasing financing costs and a depreciation of local currencies relative to the US dollar. This situation implies increased debt servicing costs and rollover risks that need to be managed adequately. Sound public debt management is an essential risk mitigant. The GDRM program is SECO's prime tool to support sound debt and risk management reforms in its priority countries.

The overall goal of the GDRM is to help preserve fiscal space for priority and development spending in GDRM countries, while ensuring a sustainable sovereign debt trajectory over time and across possible scenarios.

GDRM III will deliver technical assistance in two main areas: institutional strengthening and technical capacity.

Institutional strengthening through improved (i) governance arrangements to support the fulfillment of the debt management mandate in a sustainable manner, (ii) coordination between debt management, fiscal policy, budget processes, cash management, and monetary policy, and (iii) internal processes, systems, and staff expertise to sustainably manage public debt and related risks.

Technical capacity building through improved: (i) ability to raise the needed financing (including through climate-related instruments) at an acceptable cost and level of risk, (ii), ability to access domestic and international sources of financing and financial derivatives, (iii) ability to support the functioning of the local debt markets (building on the government's borrowing program), (iv) ability to manage contingent liabilities, and (v) ability to manage sovereign assets and liabilities.

Expected results:  

Institutional strengthening:

Enactment and implementation of recommended legal and regulatory revisions

Establishment of coordination mechanisms

Improved reporting on fiscal risks

Technical capacity building:

Production and endorsement of a debt management strategy

Preparation of annual borrowing plans in line with the endorsed debt management strategy and use of derivatives to meet strategic risk benchmarks

Increased issuance volume of and demand for sovereign securities with longer maturities

Formulation and implementation of a strategy to actively manage fiscal risks and contingent liabilities

Reduction of the adverse impact of commodity price movements on the government budget

Results from previous phases:  

Since 2011, the GDRM program has achieved significant outcomes towards the strengthening of debt and risk management practices in the participating countries. GDRM phase II (2017-2024) has contributed most significantly to (i) improving the governance arrangements supporting a sound debt management, (ii) enhancing internal processes, systems, and staff expertise to sustainably manage public debt and related risks, and (iii) developing and implementing the debt management strategy. For instance, debt management officers achieved tangible results such as the submission of the revised debt management legislation to parliament (Colombia), the approval of a medium-term debt management strategy (e.g., Serbia, South Africa, and Indonesia), the improved and more granular disclosure of debt data and information (Colombia), the strengthening of the institutional debt management framework (Serbia), or the development of frameworks for the issuance of green bonds (Egypt and Vietnam).