Public Debt Markets in Central America, Panama, and the Dominican Republic

This paper-consisting of a regional study and seven country studies-reviews the state of domestic public debt markets in Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and Panama as at end-2005. Although they account for the lion''s share of capital markets, regional public debt markets remain underdeveloped for a variety of reasons. The problems of small scale, dollarization, and weak public finances in many countries are compounded by poor structure and composition of debt (with sizeable nonstandard and non-tradable components), fragmentation of public debt between central banks and the sovereigns and across instruments, poor debt management practices, weaknesses in securities market, and small investor bases all of which result in high transaction costs and a lack of liquid benchmarks. The paper also briefly discusses efforts towards and impediments to regional integration of public debt markets. The authorities recognize these problems and the paper takes note of the regional efforts to harmonize debt standards and improve issuance practices. It offers several recommendations to improve strategic debt management, issuance mechanics, and secondary trading.Sovereign debt;public debt, debt, central bank, debt management, external debt, interest, debt issuance, domestic debt, government debt, debt securities, institutional investors, domestic public debt, treasury bills, debt market, yield curve, government securities, creditors, central banks, payments, public debt management, loans, noncompetitive bids, private credit, deficits, private debt, treasury notes, private banks, debt instruments, debt relief, external public debt, secondary markets, debt sustainability, private creditors, liabilities, liquidity management, debt restructuring, deficit financing, creditor, restructuring, obligations, debt exchange, bank loans, debt service, domestic investors, short-term debt, debt management strategy, strategic debt management, external borrowing, long-term debt, local debt, debt burden, domestic debt issuance, debt managers, debt management units, official creditors, bond issuance, multilateral debt, market liquidity, debt outstanding, corporate bonds, debt reduction, currency risk, budget law, external finance, domestic debt market, repayment, debt management practices, current account, nontradable debt, domestic currency, debt obligations, credit risk, currency debt, debt problems, debt structure, debt maturity, foreign debt, debt service payments, debt stock, deep discount bonds, cooperatives, public external debt, domestic creditors, debt servicing, debt exchanges, bond markets, debts, liability management, discount bonds, domestic financing, external funding, national debt, risk premium, outstanding debt, solvency, taxes, sovereign bond, primary dealers, debt maturity profile, debt contracts, refinance, primary dealer, public finances, actual debt, prime rate, credit rating, fiscal policy, corporate debt, debt maturities, debt management unit, fiscal deficits, syndicated loans, debt management operations, tax incentives, treasury bonds, interest rate expectations, concessional debt, balance of payments, debt stocks, repayments, private financial institutions, long-term government debt, debt portfolio, debt finance, current account deficit, debt management office, yield curves, debt holders, bilateral agreements, foreign currency debt, debt statistics, regional debt management, debt relief initiative, debt management policies, debt profile, long-term public debt, debt policy, domestic debt markets, debt financing, indebted countries, expenditures, defaults, debt situation, private bank, tax avoidance, debt level, debt management department, sovereign credit ratings, commercial bank debt, public sector borrowers, currency mismatches, bailouts, commercial paper, domestic financial market, promissory notes, debt management function, sovereign bonds, debt equity, principal repayment, multilateral debt relief, current account deficits, debt relief initiatives, external debt financing, tax revenues, debt burdens, bond market, underwriting, stock of debt, external payment, internal debt, debt management capacity, total external debt, currency mismatch, external debt obligations, auction failure, short-term debts, reserve holdings, overall debt management, currency risks, domestic investor, liquidity injection, improvements in debt management, public sector borrower