REQUEST FOR EXPRESSIONS OF INTEREST

AFRICAN DEVELOPMENT BANK

Immeuble CCIA, Avenue Jean-Paul II

01 B.P. 1387, Abidjan, Côte d’Ivoire

Web Site : www.afdb.org

GOVERNANCE AND PUBLIC FINANCIAL MANAGEMENT COORDINATION OFFICE (ECGF)

RECRUITMENT OF AN INDIVIDUAL CONSULTANT TO CARRY OUT A DEBT MANAGEMENT SUSTAINABILITY ASSESSMENT STUDY COVERING FOUR COUNTRIES IN THE SOUTHERN AFRICA REGION – ANGOLA, MOZAMBIQUE, SAO TOME & PRINCIPE AND ZAMBIA

Expressions of interest are being requested for an individual consultant to carry out a Debt Management Sustainability Assessment Study covering four countries in the Southern Africa Region – Angola, Mozambique, Sao Tome & Principe, and Zambia.

Brief description of the assignment : The consultant will be required to carry out a study to assess the debt strategy, policy and management frameworks of the four concerned countries with the aim of gaining an in-depth understanding of the drivers of unsustainable debt dynamics in order to propose and inform policy responses to strengthen debt management capacity of regional member countries.

Department issuing the request : Governance and Public Financial Management Coordination Office (ECGF).

Place of assignment : The consultant will work remotely

Duration of the assignment : 6 months

Tentative Date of commencement : October 2021

Detailed Terms of reference for the assignment : (see below)

Deadline for applications : 2 October 2021

Applications to be submitted to : k.gebre-selassie@afdb.org  copied to c.ahouansou@afdb.org.

Interested Consultants must register on the AfDB E-Consultant site at https://econsultant.afdb.org/sap/bc/webdynpro/sap/zdac_wd_login_page/# and advise c.ahouansou@afdb.org on the webcode that will be issued, or share their DACON number if they are already registered. Please use Internet Explorer to access the E-Consultant application.

Any questions and requests for clarifications may be sent to k.gebre-selassie@afdb.org copied to c.ahouansou@afdb.org.

TERMS OF REFERENCE

INDIVIDUAL CONSULTANT – DEBT MANAGEMENT SUSTAINABILITY ASSESSMENT IN

ANGOLA, MOZAMBIQUE, SAO TOME & PRINCIPE AND ZAMBIA

1. INTRODUCTION :

The Governance and Public Financial Management Coordination Unit (ECGF), as part of the Economic Governance and Knowledge Management Complex (ECVP), is responsible for coordination of operationalization of the Bank’s governance policy, strategy and programmes, including lending and non-lending work. ECGF works in collaboration with key Departments within the Bank, regional and international organizations in providing technical leadership and coordination for Bank’s substantive engagement with key policy and strategy processes in economic and financial governance matters. It is also responsible for generation of analytical works to inform the design of governance and public financial management operations, policy dialogue, and institutional capacity building and technical assistance to regional member countries. It coordinates the design and delivery of Bank’s governance interventions in Regional Member Countries, through program based operations/budget support and institutional strengthening projects, with the aim to promote effective and accountable governance and public financial management systems.

The Coordination Unit is the technical unit of the Bank with lead responsibility for the coordination and operational implementation of the Bank’s Strategy for Economic Governance in Africa (SEGA) 2021-2025 which is the framework for the Bank’s support to its Regional Member Countries (RMCs) to improve their economic governance, including through boosting public financial management (PFM), promoting transparency and accountability in public service delivery, stimulating government effectiveness, building business enabling environments, fighting corruption, and enhancing the institutional frameworks required to efficiently manage the economy at the national and sub-national levels.

Key among SEGA priorities is supporting economic recovery and resilience building in the aftermath of the COVID-19 pandemic, including by addressing the rising public debt burden of many RMCs. Indeed, one of the sub-pillars of the strategy is aimed at improving debt transparency and enhancing the capacity of RMCs to sustainably manage their debt. To achieve this the strategy emphasizes the need to carry out knowledge generation work – including debt vulnerability assessments and debt sustainability analyses – as the basis not only for the Bank’s operations but also to underpin its role as a trusted advisor for RMCs.

It is in this context, that the Governance and Public Financial Management Coordination Office is looking to hire a consultant to carry out a Debt Management Sustainability Assessment study covering four countries in the Southern Africa region – Angola, Mozambique, Sao Tome & Principe and Zambia – which have seen increased debt vulnerabilities in recent years.

2. BACKGROUND AND CONTEXT :

Sovereign debt is vital to finance critical investments needed to achieve inclusive and sustainable development goals (including the SDGs). However, the potentially high costs and risks of excessive debt burdens, which include loss of access to credit markets, depressed private sector activity, damaged reputation and withdrawal of foreign direct investments, highlight the importance of paying close attention to debt management and sustainability.

Prior to the COVID-19 pandemic, debt levels in many African countries were already rising above the debt sustainability thresholds. The situation was exacerbated by the unprecedented easing of fiscal and monetary policy adopted by countries to cushion the socio-economic impacts of the pandemic amid tight fiscal space, already rising interest expense, increasing security expenditures, large public infrastructure investment programs, and widening fiscal deficits. As a result, it is projected that debt-to-GDP ratios would increase by up to 10 to 15 percentage points above the pre-COVID trajectory in 2020/21. Indeed, while public debt in African countries averaged 60% of gross domestic product in 2019, it is projected to increase to over 70% of GDP by the end of 2021.

As at December 2020, 14 out of the 38 African countries for which debt sustainability analyses are available, were rated to be at high risk of debt distress and another 6 were already in debt distress. If these rising debt vulnerabilities are not quickly and properly addressed, it could degenerate into a widespread and far-reaching sovereign debt crisis for the continent.

While threats to debt sustainability include external factors such as deteriorating terms of trade, natural disasters, adverse trends and volatility on international financial markets, internal factors related to economic governance are at the root of debt sustainability issues. One-time interventions to restore debt sustainability through debt restructuring or relief without addressing the structural root causes of unsustainable debt accumulation have proven to be ineffective in addressing long-term debt sustainability and on their own are unlikely to avoid future cycles of debt accumulation followed by seemingly inevitable debt crises. Indeed, while many African countries benefited from the Highly Indebted Poor Countries Initiative (HIPC) and the Multilateral Debt Relief Initiative which saw debt levels decline significantly, debt levels have risen steadily since and are once again a risk to macroeconomic stability and the hard-earned economic and development gains made by African countries in recent years.

To get to the root of the debt sustainability problem in Africa, bold evidence-based governance reforms to strengthen countries’ capacity to manage their public finances and debt productively and transparently need to be vigorously and systematically pursued. This requires an in-depth understanding of the root causes of unsustainable debt accumulation to serve as a basis for designing targeted reform programs to address these key drivers including analysis on whether debt sustainability is correlated with inefficiencies in public investment management.

Angola, Mozambique, Sao Tome & Principe and Zambia are four countries in the Southern Africa region that have seen their public debt levels increase rapidly in recent years creating significant debt vulnerabilities. Understanding the drivers behind their debt dynamics, particularly in terms of debt management capacity, is key to informing the necessary policy responses to put in place debt management frameworks for long-term debt sustainability.

Box 1: Country context

Angola: The public debt stock in Angola has increased rapidly as a proportion of GDP in recent years, from about 60% in 2015 at the time of the first oil price shock, to 90% of GDP to in 2018 and finally to over 130% in 2020. This growth has been driven to a great extent by macro-economic shocks, including the sustained contraction of GDP since 2015 and the more recent sharp exchange rate depreciation which has increased the local currency value of foreign-currency denominated debt. However, a weak debt management framework, lack of transparency and overall weak public financial management practices have also played a significant part. In this context, the Government of Angola is undertaking significant fiscal consolidation and debt reprofiling efforts which have stabilized the debt stock, which according to the IMF’s latest debt sustainability analysis is now expected to peak at 134% of GDP and remains sustainable in the medium and long-term albeit with significant risks. Mitigating these risks and putting the country’s debt situation on a sustainable footing in the long-term will require significant reforms to the country’s debt management framework, which are based both on evidence and international best-practice. Thus, an in depth understanding of the drivers of recent debt dynamics in the country, Mozambique: Public debt has risen dramatically in Mozambique in recent years, from an estimated 64.3% of GDP in 2014 to a peak of 126.9% of GDP in 2016 and it is currently estimated to stand at around 110% of GDP. Mozambique is in debt distress according to the latest IMF debt sustainability analysis from April 2020, with estimated arrears on external debt amounting to 9.3% of GDP. While external shocks, including cyclones Idai and Kenneth and more recently the COVID-19 pandemic, have hit growth, worsened the country’s fiscal position and contributed to driving public debt upwards in recent years, it is weak debt management and oversight capacity and lack of transparency of public debt, which are at the core of Mozambique’s debt sustainability problems. While the GoM has implemented a number of key reforms to strengthen debt management, further efforts to strengthen institutional capacity and the legal framework are required.

Sao Tome and Principe: Sao Tome and Principe’s total public debt stock as a proportion of GDP has increased sharply in recent years, from 81% of GDP in 2016 to 98% in 2019, and further to a projected 102% of GDP in 2021. These large increases have been driven to a great extent by internal arrears and accumulated losses of State Owned Enterprises (SOEs), most notably of the electricity and water utility (EMAE). The latest IMF debt sustainability analysis from December 2020, classifies the country as being in debt distress due to post-HIPC arrears to Angola (US$4.8 million), Brazil (US$4.3 million), and Equatorial Guinea (US$1.7 million). These arrears are the result of weak debt management and the government is actively seeking debt rescheduling agreements with these bilateral creditors. Despite this, the DSA suggests that both external and total public debts are sustainable in the medium-to-long-run, but subject to large risks. Indeed, debt sustainability is contingent on implementing a prudent debt strategy and expediting reforms to tighten debt management, including the accumulation of losses and arrears by SOEs.

Zambia: After benefitting from HIPC in 2005, which saw debt levels decrease substantially on the back of debt relief, Zambia started borrowing significantly again in 2012, with debt climbing to 65.5% of GDP by 2017, when the IMF’s DSA classified the country as being in high risk of debt distress. Debt levels continued to climb rapidly to 78.1% of GDP in 2018 and an estimated 94.5% by 2019, as GDP growth remained subdued and the fiscal deficit remained persistently high. The economic slowdown due to the COVID-19 pandemic further widened the fiscal deficit in 2020 to an estimated 12% of GDP, with the debt stock estimated to have reached 114% of GDP at end-2020. Weak debt management capacity and lack of transparency have been identified as key drivers of the country’s debt crisis and the government has pledged to implement a number of reforms to address these issues, including improving monthly cash flow forecasts, strengthening oversight of SOEs and closer monitoring of portfolio risks.

3. OBJECTIVE OF THE ASSIGNMENT :

The objective of the assignment is carry out a study to assess the debt strategy, policy and management frameworks of the four concerned countries with the aim of gaining an in-depth understanding of the drivers of unsustainable debt dynamics in order to propose and inform policy responses to strengthen debt management capacity of regional member countries. It will complement Bank’s initiatives and program on public debt management including the Debt Management Action Plan, and Debt Management Forum for Africa.

4. SCOPE OF WORK :

As part of the assignment, the consultant will be responsible for the delivery of the following outputs :

A – The main study report :

• Review of the fiscal policy and public debt management situation in the four concerned countries including: (i) Recent debt dynamics and trends and composition of debt stock; (ii) Public debt projections and sustainability; (iii) Key drivers of debt dynamics (i.e. public investment programs, external shocks, debt management capacity, and transparency in debt reporting and monitoring); and debt’s contribution to capital formation (i.e. public investment) and economic growth. The review will build on the analysis done by others such as DSA by IMF/World Bank ;

• Review of the concerned countries’ debt management frameworks, including the following areas: (i) Governance and institutional framework: legal framework, organizational structure and decision making process, HR capacity, IT systems; (ii) Strategic framework and coordination with fiscal and monetary policies; (iii) Capacity of public debt management offices to conduct debt sustainability analysis and design medium term debt management strategies; (iv) Policy and institutional framework for development of domestic capital market; and (v) Transparency and controls. The review exercise will build on the information generated by DeMPA if the report is available in any of the selected countries ;

• Analysis of drivers of debt dynamics in the debt management frameworks and practices of the concerned countries, including from a comparative perspective. The analysis should also look at the broader PFM issues including inefficiencies in other areas of PFM that prevent the productive use of debt ;

• Review of past and current debt management reform efforts in the covered countries to assess both their alignment with international best practices and their actual and/or expected impact in resolving the identified key weaknesses ;

• Review of the role of development partners in supporting debt management reforms in the concerned countries ;

• Outline key findings and lessons from the study and present policy recommendations to put in place debt management frameworks for long-term debt sustainability.

B – Policy Note :

• Drafting of a high-level policy note that summarizes the study findings and presents the main policy recommendations for all stakeholders (i.e. the concerned countries, development partners, creditors).

C – High-level Webinar : 

• Assist in the planning, and delivery of a high-level webinar to present the findings and policy recommendations for debt management managers, policy practitioners and decision makers, including organizing a high-level policy dialogue in collaboration with RDVP and key Departments within ECVP.

5. DELIVERABLES AND TIMELINE :

6. CONSULTANT QUALIFICATIONS AND PROFILE :

• An advanced degree in economics, public finance or related. A PhD would be a significant added advantage.
• A minimum of ten (10) years of relevant professional experience in public financial management. A strong background working in the areas of debt management, cash management and government securities is a must.
• Demonstrated ability to methodically conduct independent research and strong drafting skills as evidenced by the publication of relevant reports and/or articles.
• Demonstrable experience providing high-level policy advice to governments and international organizations.
• Experience communicating at the highest levels of government and the private sector, including presenting research findings and facilitating discussions with high-level audiences.
• Excellent interpersonal skills and ability to maintain effective and cooperative relations with national authorities and development partners.
• Good knowledge of the role and instruments of multilateral and bilateral development partners in supporting governance and public financial management reforms as evidenced by relevant professional work experience.
• Good knowledge of relevant public financial management tools and methodologies, including PEFA, DeMPA and IMF/WB Debt Sustainability Analysis.
• Ability to apply innovative approaches, work independently and apply new methods to solve problems, while remaining efficient in a fast-paced, changing, and challenging institutional environment.
• Strong communication skills in English, both verbally and in writing.

7. ASSIGNMENT DURATION AND LOCATION :

The period of the contract will be six (6) months. The service of the Consultant shall start in October 2021. The consultant will work remotely.

ANNEX 1: ANNOTATED OUTLINE OF THE DEBT MANAGEMENT SUSTAINABILITY ASSESSMENT REPORT

1. Executive Summary :

This section shall provide an overview of the findings of the study and the key policy recommendations.

2. Introduction :

This section shall introduce the objectives and scope of the study, as well as the topic in question.

3. Recent debt trends :

This section shall review the debt situation and recent trends in the countries covered by the study. Issues to be covered include: (i) Recent debt dynamics and trends and composition of debt stock; (ii) Public debt projections and sustainability; and (iii) Key drivers of debt dynamics (i.e. external shocks, debt management issues, transparency in debt reporting and monitoring).

4. Debt management framework review :

This section shall provide a review of the concerned countries’ debt management frameworks, including the following areas: (i) Governance and institutional framework: legal framework, organizational structure and decision making process, HR capacity, IT systems; (ii) Strategic framework and coordination with fiscal and monetary policies; (iii) Capacity of public debt management offices to conduct debt sustainability analysis and design medium term debt management strategies; (iv) Policy and institutional framework for development of domestic capital market; and (v) Transparency and controls. This section shall provide an analysis – including from a comparative perspective – of the key areas of weakness (or strength) of the covered countries’ debt management frameworks that contributed to drive debt dynamics.

5. Review of debt management reforms :

This section shall provide a review of past and current debt management reform efforts in the covered countries and assess both their alignment with international best practices and their actual and/or expected impact in resolving the identified key weaknesses. This section shall also examine the role of development partners in supporting debt management reforms.

6. Policy recommendations :

This section shall outline the key findings and lessons from the study and present policy recommendations to put in place debt management frameworks for long-term debt sustainability. These recommendations should cover not only the concerned countries but other key stakeholders in supporting strengthened debt management frameworks including development partners.

7. Conclusion :

This section shall present concluding remarks, including a summary of recommendations on the way forward.