Bhathiya Barukanda
Summary
The Sri Lankan authorities have embarked on an ambitious reform of its public debt management functions. There is consensus that the fragmented public debt management (PDM) legal framework and PDM functions across departments within the MoF and the CBSL have contributed to the lack of coherent management of the public debt in Sri Lanka.
It has also contributed to a lack of comprehensive public debt reporting and management of public guarantees, reducing debt transparency. A joint IMF-World Bank Technical Assistance mission—which visited Colombo on February 20 – March 3, 2023 to assist the Ministry of Finance, Economic Stabilization, and National Policies (MoF) in developing a public debt management reform plan—made the following assessments and recommendations:
• A new legal framework for public debt management should be introduced. The law would consolidate the existing laws, establish a new public debt management office, and define the governance and accountability framework for public debt management. The need for transparency would also be embedded in the PDM law, including annual reporting to Parliament on the progress in implementing the medium-term debt management strategy.
• The new public debt management office should be established inside the MoF, with the appointment of a Director General overseeing the office comprising of front-, middle-, and back-offices in line with international best practices. Developing a medium-term debt management strategy approved by the Cabinet of Ministers will be critical to strengthen the operational independence of the public debt management office.
• The new public debt management office should rationalize and strengthen the debt database management by unifying the functions and creating a streamlined system of debt recording, monitoring, and reporting to enhance debt transparency.
A policy framework and control system for the issuance and management of guarantees and on-lending should be established, consistent with the government’s overall risk management framework. Following the recommendations of the technical assistance mission, the authorities have since drafted and submitted a new Public Debt Management Act to Parliament, which was enacted on June 18, 2024.
The authorities are also in advanced stages of finalizing the Public Debt Management Regulations, which will be submitted to Parliament. The drafting of the Public Debt Management Guidelines, which defines the roles and responsibilities of the new Public Debt Management Office, is also in train. A new Director General has been appointed to head the Public Debt Management Office. With these actions, the stage is set for the establishment and operationalization of the Public Debt Management Office at the Ministry of Finance in Sri Lanka.
source: https://www.imf.org
