A Medium-Term Debt Management Strategy (MTDS) is a rolling three-to-five-year framework designed to guide a government’s borrowing decisions. The MTDS ensures that the government’s financing needs are met at the lowest possible cost over the medium to long term, while keeping financial risks within prudent boundaries. It prevents short-sighted borrowing decisions that can lead to debt distress.

The MTDS continuously evaluates the structure of the national debt portfolio against key financial risk indicators:

[ Market Risk ] ------> Exposure to interest rate changes (Fixed vs. Floating rates)
[ Currency Risk ] ----> Fluctuations in exchange rates impacting foreign currency debt
[ Refinancing Risk ] --> The danger that maturing debt must be replaced at higher interest rates

Developing an MTDS requires analyzing the trade-offs between borrowing costs and portfolio risks. For example, while short-term domestic Treasury Bills carry lower interest rates than long-term bonds, they must be rolled over frequently, which increases refinancing risk. Conversely, international Eurobonds provide access to large volumes of foreign currency but expose the state to exchange rate volatility. The final MTDS establishes specific targets for the debt portfolio, such as the maximum share of foreign currency debt or the minimum average time to maturity.