# **I. Introduction**

A Debt Management System (DMS) is the backbone of any sovereign Debt Management Office (DMO). A robust, well-functioning and user-friendly system allows governments to strengthen their debt management operations.

Most DMS can support core functions and business processes of a DMO. They should, at a minimum, handle the business flow between the resource mobilization and repayment teams. As a debt portfolio becomes more diverse and the range of responsibilities of a DMO evolves, the requirements for its Information Technology (IT) infrastructure will also change.

This evolution is presently taking place. An increasing number of countries have less access to sources of concessional and semi-concessional financing. In response, emerging and developing countries’ DMOs are shifting their debt management strategies, issuing market-based bills and bonds in domestic and international capital markets and using less conventional instruments such as Islamic, green, and catastrophe infrastructure bonds. Accessing more diverse sources of financing means DMOs must manage more challenging cost and risk trade-offs. For example, governments focused on developing domestic government securities markets or introducing changes in cash management policies must set up repo/reverse repo or securities lending facilities and conduct liability management and derivatives operations. As debt portfolios become more diverse and transactions more complex, teams responsible for public financial management expect to have in place a connection between the DMS and the external systems, such as the Financial Management Information System (FMIS) or treasury system.<sup>4</sup> With the need to adapt systems to the changing nature of government financing, DMOs must decide whether to upgrade their existing DMS or switch to other solutions that can be off-the-shelf or built specifically for them. The off-the-shelf systems currently available consist of public solutions directly targeting sovereigns and sub-sovereigns or commercial solutions that can be implemented for governments.

This study aims to contribute to the literature on (i) the essential requirements of a DMS, (ii) how to select software that fits the system modernization and integration needs of a DMO, and (iii) how the solutions currently being used by governments meet those requirements. The target audience is emerging and developing countries exploring ways of improving their IT platform.

The first section of this study describes the characteristics of a DMS and articulates the benefits of a well-functioning system. The second section touches upon the coverage and functions expected from a DMS, including its integration with external systems. The third section discusses the pros and cons of selecting and implementing an off-the-shelf versus an in-house developed system. The fourth section presents the findings of a survey covering 31 countries with the objective of collecting information on the DMS currently used by DMOs and the respondent countries’ aspirations, while the closing section draws some general conclusions.

> 4 This study focuses on systems related to the key responsibilities of a DMO that oversees the financing of the public investment of the government and the budget deficit through borrowing and guarantee operations. A related, and sometimes interconnected, system, but used for a different purpose is the treasury system that is responsible for treasury and cash management functions. Although section two will touch upon the relationship between the two functions, the treasury systems are not the primary focus of this study.

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