19 Jan2015

Debt Management Office

The Debt Management Office (DMO) is mainly responsible for:

  • Advising on a debt and borrowing strategy.
  • Implementing the debt and borrowing strategy.
  • Recording debt information and preparing reports.

Settling debt transactions and making related payments DMO will be organised with clear Front Office, Middle Office and Back Office functions.The DMO must follow sound business practices to ensure efficiency. Internal controls, including approval procedures, well-articulated responsibilities for staff, business recovery procedures and audit compliance, must be implemented to protect against operational risk.

PORTFOLIO MANAGEMENT – FRONT OFFICE

The Front Office is normally responsible for resource mobilisation, which includes all the activities related to securing funds on behalf of the government. This includes:

  • Implementing the government’s borrowing plan based on an approved strategy
  • Developing a funding strategy to mobilise resources from foreign governments, international financial institutions, capital markets and financial institutions and retail investors
  • Preparing loan proposals and prospectuses
  • Negotiating loans, guarantee arrangements and on-lending agreements
  • Issuing securities
  • Hedging and undertaking derivative transactions
  • Managing relationships with creditors and investors
  • Ensuring compliance with all conditions required for the drawdown of a loan

The Front Office seeks to secure funds in a manner consistent with the government’s debt management cost and risk objectives.

RISK MANAGEMENT- (MIDDLE OFFICE)

The Middle Office is responsible for debt and risk analysis and for providing advice on the debt management strategy. It performs the analytical functions for debt management. The main activities of the Middle Office are:

  • Developing a medium and long-term borrowing policy and strategy aimed at minimising cost or risk
  • Undertaking portfolio and debt sustainability analysis
  • Undertaking risk analysis and managing risk in coordination with the Front Office
  • Monitoring the performance of DMO the funding managers against strategic benchmarks
  • Formulating guarantee and on-lending policies
  • Producing analytical and annual debt reports

The Middle Office - Risk Management team because of their portfolio and risk management activities.

ACCOUNTING & SETTLEMENT- (BACK OFFICE)

Back Office is responsible for debt settlement and the management information system. It performs the accounting and recording function. Its main activities include:

  • Settling debt service payments
  • Forecasting debt service payments and cash requirements
  • Registering and recording all debt transactions
  • Generating debt reports required for the DMO, the government and lenders and the preparation of Annual Reports on debt
  • Maintaining a comprehensive, accurate and up-to-date debt database
  • Maintaining a debt management website.

Vanuatu Debt strategy Plan 2015 -2017