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Debt Recording and Monitoring

EDMU, DEA
Ministry of Finance
November 4, 2009
Outline
•Overview of CS-DRMS
•Use of CS-DRMS In India
•Recording of External Assistance/External
Commercial Borrowings/Sub-National Debt
•External Debt Data Dissemination
•MIS Applications-Debt Analysis
•Use of Debt Management Tools
•External Debt Management Strategy
Need for Debt Recording System
• CS-DRMS introduced in 1985 to help compile
debt data in a computerised environment
against the backdrop of debt crisis of 1982.
• The objective was to facilitate monitoring,
retrieval and management of external debt.
Overview of CS-DRMS
• CS-DRMS is debt data recording and reporting system used
by around 60 countries for monitoring and management of
debt.
• CS-DRMS developed by the Economic & Legal Advisory
Services, Commonwealth Secretariat, London and launched
in 1985 has been an integral part of its technical assistance
and capacity building programme in debt management. The
software has been provided free to Commonwealth and also
to non-Commonwealth countries.
• Development of CS-DRMS has been a continuous process,
aimed at enhancing its functional, architectural and usability
aspects. Latest version of the software i.e., CS-DRMS 2000
plus is windows based.
Overview of CS-DRMS
• Maintains individual loan-wise records, covering basic loan
features, financial terms, disbursement and repayment
details, exchange and interest rates, etc.
• Data retrieval possible based on various indicators e.g.,
borrower, creditor, currency, maturity, guarantee status,
DOD, CUB, debt service projections including principal
and interest payments.
• Standard reports available.
• Management Tools facility available for scenario building
exercises including the impact of new borrowings, exchange
and interest rate sensitivity, change in macroeconomic
variables.
• Provides for customised (User-interface) data reports.
Use of CS-DRMS in India
• CS-DRMS has been operational in India since 1987. India was among
the first few countries to start using CS-DRMS for debt recording and
monitoring.
• Being used for recording of data on Multilateral/Bilateral debt, which is
the basis for compilation of Sovereign external debt. Database is
maintained in the Office of Controller of Aid Accounts & Audit,
Ministry of Finance.
• Also being used for debt recording/monitoring in respect of external
commercial borrowings (ECBs) by the non-Government sector. ECB
database is maintained by the Department of Statistics & Information
Management, RBI.
• In the recent past, sub-national authorities have also started using
domestic debt module in CS-DRMS for recording of debt transactions.
In May 2007, COMSEC organised an Inter-state workshop for 4 states
in India on the use and functionality of CS-DRMS for recording and
managing debt liabilities. o record and manage state debt. The pilot
project has since been extended to six more states.
CS-DRMS and India’s External Debt
CS-DRMS in India-External Assistance from
Multilateral and Bilateral Creditors
• Maintaining an inventory of all external debt instruments including basic
details and terms of loans/instruments; Database under external assistance
available for 2,138 loans/grants beginning the American Wheat Loan
taken in 1951.
• Loans under external assistance are basically project loans.
• Recording of actual transactions of loans, disbursements and debt service
on a transaction-by-transaction basis;
• Monitoring of loan and grant utilisation and government lending
including on-lending:
• Forecasting debt service payments, with and without future
disbursements.
• Sovereign external debt data generated through the CS-DRMS, except
defence debt (other than Rupee debt) and liabilities of the Central
Government arising on account of investment by FIIs in Treasury bills
and dated securities and investments of foreign central banks and
international institutions in such instruments. These components account
for around 5 per cent of total sovereign debt.
Recording of External Assistance from
Multilateral and Bilateral Creditors
Sovereign External Debt
End-March Total external Sovereign Share of SED Ratio of
debt external debt in total SED to
(US $ (US$ million) external debt GDP (%)
million) (%)
2001 101,326 43,956 43.4 9.7
2005 132,973 46,668 35.1 6.5

2006 138,133 45,278 32.8 5.6

2007 171,331 48,331 28.2 5.1

2008 223,312 56,947 25.5 4.8

2009 223,953 54,856 24.5 5.3


End-June 227,688 57,446 25.2 ….
2009
Creditor Composition of Sovereign External Debt
(US$ million)
2001 2005 2007 2008 2009 End-
June
2009
Sovereign external debt 43,956 46,668 48,331 56,947 54,856 57,446
Of which:
Multilateral creditors 27,417 29,204 32,515 36,170 35,724 37,062
IDA 18,811 23,693 24,548 26,497 24,758 25,570
IBRD 5,657 3,771 5,015 5,660 5,878 6,120
ADB 2,680 1,410 2,623 3,652 4,766 5,034
Bilateral creditors 13,310 14,482 13,640 16,368 16,092 16,655
Japan 7,513 9,662 8,720 10,806 11,110 11,560
Germany 2,113 2,564 2,445 2,848 2,451 2,562
United States 1,298 790 589 513 435 433
Russian Federation 407 817 1,321 1,584 1,619 1,621
Currency Composition of Sovereign and
Total External Debt (per cent)
Currency Sovereign External Debt Total External Debt

End- End- End- End- End- End-


March March March March March March
2007 2008 2009 2007 2008 2009
US dollar 28.6 27.2 30.1 51.4 54.4 56.5
SDR 42.1 39.6 38.4 11.9 10.1 9.2
Indian 5.0 8.1 5.8 18.6 17.5 15.1
Rupees
Japanese 18.0 19.0 20.3 11.5 12.0 13.5
yen
Euro 6.2 6.0 5.3 3.9 3.5 3.6
Pound 0.1 0.1 0.1 2.4 2.2 1.9
Sterling
Non‐Government External Debt 
Recording in India
CS-DRMS and ECB Recording in India
• Data recording and reporting of ECBs is a mirror reflection of policy
guidelines.
• The overall ECB limit is decided by the Government of India in consultation
with the Reserve Bank of India .
• In terms of extant ECB policy, ECBs are being permitted as an additional
source of finance to augment the resources available domestically to Indian
corporates for financing of import of capital goods, new projects,
modernization/expansion of existing production units in real sector-industrial
sector including small and medium enterprises and infrastructure sector- and in
the services sector viz., hotels, hospitals and software companies for import of
capital goods, for foreign currency and/or rupee capital expenditure.
• A prospective borrower can access ECB under two routes viz., the automatic
route and the approval route. A corporate, other than a financial intermediary,
can access ECB under the automatic route up to US$ 500 million in a financial
year.
• Under the approval route, ECB proposals are cleared on a case-by-case basis
by Foreign Exchange Department of the Reserve Bank of India.
• The policy guidelines cover end-use stipulations, term/maturity restrictions
and all-in-cost ceilings, etc. Information which flows in through the prescribed
monthly return i.e., ECB-2 is captured through the CS-DRMS package.
CS-DRMS and ECB Recording in India
• Data recorded by borrower category viz., banks, non-bank
financial sector, non-financial corporations and households and
non-profit institutions serving households. Borrower-wise
classification also generates breakdown by public corporations
and private sector separately.
• Creditor-category details include borrowing from multilateral and
bilateral agencies, export credit and commercial sources.
Borrowing from multilateral and bilateral creditors reported under
ECB represents non-guaranteed portion of non-Government
borrowing from these sources.
• Instrument-wise details relate to Bonds and Notes, Loans and
Trade Credit.
• ECBs raised through securitised instruments and Foreign
Currency Convertible Bonds(FCCBs) recorded separately.
• Details of ECBs/FCCBs being converted into equity also
available from the recorded data.
CS-DRMS and ECB Recording in India

• The recorded data covers ECB disbursements,


principal repayments, interest payments and other
payments.
• ECB debt service projections also available from the
system. Used for compilation of debt liabilities on a
residual maturity basis.
• Currency composition of ECBs and utilisation
pattern namely acquisition of goods, import of
capital goods, remittances to India, pre-payment of
old loans, amount held abroad in FC account,
interest payments, investment abroad, etc. are some
of the useful system generated inputs, which help
monitor ECBs in the context of policy guidelines.
External Commercial Borrowings Outstanding at end-
June 2009
(US$ million)
Borrower Sector Sector Bonds and Loans Trade Grand total
Notes Credit
Banks Public 548.2 1,747.5 0 2,295.7
Private 41.4 133.3 0 174.7
Total 589.7 1,880.8 0 2,470.4
Non-bank Financial Public 738.9 1,442.2 0 2,181.1
sector Private 109.2 862.3 0 971.6
Total 848.1 2,304.6 0 3,152.7
Non-financial Public 520.0 7,820.0 1.6 8,341.6
corporations Private 13,539.3 50,663.8 708.8 64,911.9
Total 14,059.3 58,483.8 710.4 73,253.5
Total Public 1,807.1 11,009.7 1.6 12,818.4
Private 13,689.9 51,669.5 708.8 66,068.2
Total 15,497.0 62,679.1 710.4 78,886.6
External Commercial Borrowings
(US$ million)
Quarter/Financial ECB ECB ECB
year approvals* Disbursements outstanding

2007-08 28899.6 29,000.2 71,068.9


April-June 8,348.8 8,044.0 54,831.5
July-September 7,030.9 5,966.9 59,663.0
October-December 7,498.2 8,134.3 65,033.9
January-March 6,021.7 6,854.9 71,068.9
2008-09 17,199.9 14,003.0 78,081.8
April-June 3,760.5 2,526.5 71,632.5
July-September 6,474.8 3,068.2 72,479.3
October-December 4,099.5 5,290.9 78,909.4
January-March 2,865.1 3,117.4 78,081.8
2009-10
April-June 2,684.9 2,238.7 78,886.6
* Approvals under Automatic and FED approval Route.
Utilisation of ECB disbursements
(Per cent of total disbursements)

Utilisation April- July- October- January- April-


June September December March 2009 June 2009
2008 2008 2008
Import of 15.8 43.4 62.5 41.1 27.9
capital goods
Remittances to 50.9 37.2 30.3 38.0 67.4
India
Amount held 18.6 - - - -
abroad in FC
Buy-back of - - - 4.5 0.7
FCCB
Investment 11.8 6.6 3.8 9.9 0.3
abroad
Others 2.9 12.8 7.2 6.5 3.7
External Debt Data Dissemination
• Debt data updated regularly and disseminated on a quarterly basis with a lag
of one quarter. Data for quarters ending September and December
disseminated by Ministry of Finance and for the remaining two quarters by
the Reserve Bank.
• Data disseminated in the form of a press release and sent to IMF under
SDDS and to World Bank under ‘QEDS’ reporting.
• Status Report on India’s external debt, an annual publication, provides a
detailed review of debt data and debt-related policy issues, with a particular
focus on Sovereign external debt. CS-DRMS generated database underlines
the basis for this analysis.
• Data also published in Economic Survey, Mid-Year Review of Indian
economy and Annual report of the Reserve Bank.
• Loan ledger in respect of loans from multilateral and bilateral agencies
maintained and updated on a real time basis by Controller of Aid Accounts
and Audit Division. Latest available database disseminated by them provides
information relating to 1,010 loans including the breakdown by major
multilateral and bilateral creditors.
• Data export facilities viz., ‘World Bank Bridging System’ available in CS-
DRMS utilised for data reporting to the World Bank. Database also used for
carrying out exercises under Debt Sustainability Model.
MIS applications- Debt Analysis
• The updated database maintained in CS-DRMS along with available
tools provides useful inputs for policy purposes including negotiation of
loans with creditors, evaluation of different loan offers, monitoring of
debt service payments and assessment of portfolio risk on a regular
basis.

• Auto generation of data and standard reports available in CS-DRMS


facilitate analytical work. More frequently used built-in Reports include:
• Report No. 163:Grant element and Effective Rate of Interest
• Report No. 200:Projected Debt Service Payments
• Report No. 350:Public/Publicly Guaranteed Long-Term debt
• Report No. 651: Debt outstanding by Borrower and Creditor Category
• Report No. 652 : Debt Outstanding by Original Maturity
• Report No. 656: Overall Aid Pipeline
• Report No. 670: Currency Composition of Debt
• Report No. 671: Composition of Debt by economic Sector
• Report No. 721: Debt Outstanding/Debt Service Payments by Borrower
Category
MIS applications- Debt Analysis
• Creditor and sector-wise details of assistance in pipeline generated from
the CS-DRMS database. Assistance in pipeline for infrastructure sector
often used as an important policy parameter. For example, total assistance
in pipeline on Government account stood at US$ 20.7 billion at end-
March 2009 and of this, 71.1 per cent related to infrastructure sector.
• Creditor-wise DOD figures analysed in relation to country limits.
• The database being used to derive creditor-wise projections of external
debt service payments under Government account and currency
composition of Sovereign external debt.
• Historical and future debt service projections data by borrower category
viz., government, public with/without Government guarantee and private
with Government guarantee also available for analysis, scenario building
and as MIS inputs.
• Complete record of public and publicly guaranteed debt available in CS-
DRMS.
• Explicit contingent liabilities of Central Government monitored regularly
in pursuance of prescribed rules under the Fiscal Responsibility and
Budget Management Act.
MIS applications-Debt Analysis
• At end-March 2009, Government guaranteed external debt stood at US$
6.8 billion, accounting for only 3.9 per cent of total non-Government
debt. Total of Government and government guaranteed non-Government
debt aggregated US$ 61.7 billion, i.e., 26.8 per cent of total external debt.
• External loans to sub-national Governments routed through the Central
Government. Details of such loans extended to non-special category
states (under back to back arrangement) also generated through the CS-
DRMS package.
• Database used for evaluation of exposure to exchange and interest rate
risk; For instance, available database indicates that currency composition
of SED differs significantly from that of total external debt of the
country. Share of US-dollar denominated debt in total SED at end-March
2009 was 30.1 per cent as against 56.5 per cent in total external debt.
• Loan ranking facility used to identify expensive loans in the external
assistance portfolio for the purpose of pre-payment of these loans.
During 2002-03 to 2006-07, multilateral and bilateral loans amounting to
US$ 5.9 billion and US$ 1.8 billion, respectively were pre-paid.
Management Tools for Debt Analysis
and Management
• Facilitates basic loan administration
• Analytical Functions
‰Monitor level of Indebtedness
‰Review portfolio
‰Evaluate new borrowing based on calculation of
Present value and Grant element.
‰Provide early warning signals based on sensitivity
analysis
‰Develop debt strategies i.e., loan terms,
prepayment/refinancing/restructuring of loans
Use of Management Tools for Debt
Analysis and Management in India
Contd ….
Snapshot of External Assistance Data in
CS-DRMS at end-March 2009
Sovereign External Debt Strategy
• Borrowing restricted to multilateral and bilateral sources.
• Government does not borrow from commercial sources.
• No explicit or publicly announced external debt strategy.
However, cost and risk minimisation objectives determine
selection of creditors and even while deciding among
different options being offered by a given creditor.
• Restrictive policy regarding explicit contingent liabilities.
• Debt service payment projections help undertake pro-
active policy measures to minimise roll-over and
refinancing risks.
• Middle Office has already been set up in Ministry of
Finance, which in due course will merge with the proposed
Debt Management Office. It would help to frame overall
policies pertaining to debt management and facilitate an
integrated approach to debt management.
External Debt Management Policy

• Regular monitoring of long and short-term


debt
• Emphasis on concessional borrowings
with lower interest and longer maturities
• Rationalising external commercial
borrowing guidelines and regulating their
end-use.
Key Indicators of India’s External
Debt
2006- 2007-08 2008-09 End-June
07 2009
External Debt 171.3 223.3 224.0 227.7
(US$ billion)
Ratios (%)
Debt related Indicators
External debt to GDP 18.1 18.9 21.4 …
Debt service ratio 4.7 4.8 4.6 5.5
Concessional debt to total debt 23.1 19.8 18.7 19.0
Foreign currency debt to total debt 81.4 82.5 86.4 85.7
Liquidity Indicators
Short-term debt to foreign 14.1 14.8 17.3 15.3
exchange reserves
Short-term debt to total debt 16.4 20.5 19.5 17.8
Reserve Adequacy Indicator
Foreign Exchange reserves to 116.2 138.7 112.5 116.5
total debt