Debt management based on the analysis of risks in domestic and external debt and testing for Turkey (1980 onwards)

One of the most important financial methods of government financing ispublic borrowing. Unlike the other methods of government financing, publicborrowing creates liabilities that need repayments. Furthermore these liabilitiesnot just contain that repayments but also bring out an effect which spread out towhole economy.Because of these sepecial features of public borrowing it needs effectivemanagement in order to prevent its negative effects and to take advantages ofthat kind of financing. Basically in that management there are two dimensions.One is minimization of borrowing costs and the other is risk analysis. Althoughthere is a trade-off between these two dimensions, the importance and volumeof public debt in developing countries especially forces policy makers to takeinto account both cost minimization and risk analysis approaches in debtmanagement.Risk analysis in debt management is based on analysing risks that affectborrowing process, developing strategies according to findings of this analysisand to make necesarry political propositions. However, in order to make thisanalysis effectively, it should be given priority to two other things. One is toobserve developments in macroeconomic structure of the country which adoptrisk analysis method in debt management. Moreover, at any borrowingsperformed public authorities must take into account macroeconomic priorities. Incountries without sound macroeconomical objectives risk analysis in debtmanagement would be nothing more than a technical methods.The other priority in risk analysis that should be taken into account is thescope of debt liabilities. In order to optain the effectiveness and correctivenessof the risk analysis, besides traditional borrowings contingent liabilities must alsobe taken into account. Whole of the governmental debt liabilities are called fiscalrisks in risk analysis in debt management. Fiscal risks approach is so importantbecause it affects whole efforts at developing strategies and determining politicalpropositions. As fiscal risk management contains contingent liabilities, correctand effective documantations, accounting and budgeting are necessitates.The subject of this thesis is to identify risk analysis in debt managementtheoritically and to investigate effects and outcomes of such an analysis. Alsorelating to Turkey it is aimed to make a comparison between the terms in whichrisk analysis method is used in debt management and not. It is tought that usingrisk analysis method in debt management would minimize harmful and costlyeffects of borrowing and serve usefully to growth and development efforts of adeveloping country like Turkey.