(April 11 – 16:00 ET) – The recent turnaround in Canada’s finances presents a new set of challenges for government debt managers, says Auditor General, Denis Desautels in his report tabled in the House of Commons today.
Desautels says that the debt management program is a well-run operation overall. But he recommends strengthened strategic planning and reporting practices to ensure that the program adapts effectively to the new borrowing environment.
His report says when the government was running deficits, new debt instruments were developed and issued, since debt managers sought to broaden the appeal of government debt to a wide range of investors.
In the present era of budget surpluses, says Desautels, a central concern of debt operations is how to retire maturing debt with minimum disruption to financial markets.
“Managing debt operations successfully in a post-deficit environment may require more active intervention in markets in order to promote more efficient capital markets and lower borrowing costs,” says Desautels. “Strengthening the government’s debt management framework takes on added importance in this context.”
In his report he calls for:
-establishing a range of performance indicators to guide debt management operations;
-increasing transparency to ensure public accounting of the benefits as well as the costs of debt management options taken;
-clarifying the role of retail debt (such as Canada Savings Bonds) in the context of the government’s overall objectives for management of the public debt; and
-increasing the use of independent advice on strategic issues of debt management.
Despite the recent turnaround in Canada’s finances, says Desautels, the stock of government debt is still very large and interest payments remain the largest item in federal government spending. At roughly $42 billion a year, debt service costs absorb about one-quarter of every dollar of government revenues. “Clearly the way the government manages its public debt has a strong bearing on the government’s overall fiscal condition and the well-being of Canadians.”
-IE Staff