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Asset-Liability Management (ALM)

Joint management of assets and liabilities, or ALM consists in matching the financial features of assets and liabilities to reduce net risks characteristics and the effects of financial or market changes to the budget.

Most countries however have until now emphasized the liability side of the balance sheet. This choice emanates from the importance given by countries to steady debt servicing flows, as appropriate management of liabilities is most important for minimizing unexpected increases in these flows.

In fact ALM can be difficult to apply in practice due to an underdeveloped government securities market, weak domestic investor base, lack of detailed data and the coordination needs required by ALM.

Notwithstanding countries recognize ALM as a strategic choice in the management of public debt and are making steps towards its adoption. In order to facilitate the transition to ALM, it is necessary to understand the needs of countries to consistently implement ALM.

LAC Debt Group conducts research, training and facilitates discussions among regional debt offices about their accomplishments, challenges and experiences in implementation of ALM.

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