Parliamentary Control over Sovereign Borrowing and Debt Management

Sovereign borrowing power is regulated in constitutions and in most countries it is delegated to the ministry of finance. While in former times this delegation was unproblematic, securitization of central government borrowing and soaring sovereign debt rates raise new questions and may make parliamentary borrowing control to an intractable problem. This paper addresses the question whether recent reforms in sovereign debt management (SDM) undermine democratic mechanisms in the governance of public finance. It suggests a novel concept to measure parliamentary control over SDM and illustrates this concept by data on 18 OECD countries. The deregulation of financial markets has lifted capital controls for the private sector and also for government borrowing. Consequently, the sovereign debt market has fundamentally changed. Nowadays, debt and borrowing power is delegated to professional debt management offices (DMOs), which are authorized by legislation or a by ministerial decree to manage governments’ borrowing requirements and their financial risks. The puzzle this paper deals with is in how far the financialization of SDM has altered parliamentary capacities and abilities to control public debt policy. It addresses the following questions: How can parliamentary borrowing control be measured in times of professional DMOs adopting complex financial market techniques? Which kind of indicators are useful for the measurement of parliaments’ control over public borrowing? Is there cross-national variance in parliamentary borrowing power? The paper measures parliamentary control over SDM by a set of indicators which operationalize the degree of transparency and accountability of DMOs and their activities vis-à-vis the parliament.