The Fiscal Costs Of Contingent Liabilities
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The Fiscal Costs Of Contingent Liabilities
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Author : Ms.Elva Bova
language : en
Publisher: International Monetary Fund
Release Date : 2016-02-08
The Fiscal Costs Of Contingent Liabilities written by Ms.Elva Bova and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-02-08 with Business & Economics categories.
We construct the first comprehensive dataset of contingent liability realizations in advanced and emerging markets for the period 1990–2014. We find that contingent liability realizations are a major source of fiscal distress. The average fiscal cost of a contingent liability realization is 6 percent of GDP but costs can be as high as 40 percent for major financial sector bailouts. Contingent liability realizations are correlated among each other and tend to occur during periods of growth reversals and crises, accentuating pressure on the budget during already difficult times. Countries with stronger institutions are able to better control and address the underlying risks so that they are less exposed to contingent liability realizations.
The Fiscal Costs Of Contingent Liabilities
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language : en
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Government At Risk
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Author : Hana Polackova Brixi
language : en
Publisher: World Bank Publications
Release Date : 2002
Government At Risk written by Hana Polackova Brixi and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002 with Business & Economics categories.
Many governments have faced serious instability as a result of their contingent liabilities. But conventional public finance analysis and institutions fail to address such fiscal risks. This book aims to provide motivation and practical guidance to governments seeking to improve theirmanagement of fiscal risks. The book addresses some of the difficult analytical and institutional challenges that face reformers tooling up to manage government fiscal risks. It discusses the inadequacies of conventional practices as well as recent advances in dealing with fiscal risk.
Contingent Government Liabilities
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Author : Hana Polackova
language : en
Publisher: World Bank Publications
Release Date : 1998
Contingent Government Liabilities written by Hana Polackova and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998 with Disclosure of information categories.
October 1998 Many governments have faced serious fiscal instabilities as a result of their growing contingent liabilities. But conventional fiscal analysis and institutions fall short in addressing contingent fiscal risks. What approaches in fiscal analysis and standards for public sector management would foster sound fiscal performance? And how can policymakers be made accountable for recognizing the long-term costs of both direct and contingent forms of government activity in their decisions? Governments are increasingly exposed to fiscal risks and uncertainties for three main reasons: * The increasing volume and volatility of international flows of private capital. * The state's transformation from financing services to guaranteeing that the private sector will achieve particular outcomes. * Moral hazards arising in markets because the government is perceived to have residual responsibility for market outcomes. Sources of fiscal risk may be direct or contingent (a liability only if a particular event occurs). Whether direct or contingent, they are either explicit (recognized as a government liability by law or by contract) or implicit (a moral obligation reflecting public expectations and pressure from interest groups). The recent Asian crisis revealed that major moral hazards exist in markets and that sizable hidden fiscal risks may arise from contingent forms of government support. Governments must understand and know how to handle contingent liabilities if they are to avoid the danger of sudden fiscal instability and realize their long-term policy objectives. They can reduce fiscal risks by incorporating contingent liabilities into their analytical, policy, and institutional public finance frameworks. Governments can address fiscal risk through three channels in particular, says Polackova: * By including contingent and implicit financial risks in their fiscal analysis and (to deter moral hazard in the market) by publicly acknowledging the limits of state responsibilities. * By reflecting the cost of contingent liabilities in policy choices, budgeting, financial planning, reporting, and auditing. * By developing institutional capacity to evaluate, regulate, control, and prevent financial risk in both the public and private sectors. Given the increasingly serious implications of contingent government liabilities for the fiscal outlook of countries, Polackova argues that it is time for the World Bank, the International Monetary Fund, and others to: * Incorporate government contingent fiscal risks in their analysis of a country's fiscal sustainability, policies, and institutions. * Require countries to disclose information regarding their exposure to contingent fiscal risks. * Help countries embrace contingent liabilities in their analytical, policy, and institutional public finance frameworks. This paper-a product of the Poverty Reduction and Economic Management Sector Unit, Europe and Central Asia Region-is part of a larger effort in the region to enhance the Bank's analytical and operational work in public finance. The author may be contacted at [email protected].
Government Contingent Liabilities And The Measurement Of Fiscal Impact
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Author : International Monetary Fund
language : en
Publisher: International Monetary Fund
Release Date : 1990-06-01
Government Contingent Liabilities And The Measurement Of Fiscal Impact written by International Monetary Fund and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1990-06-01 with Business & Economics categories.
Conventional fiscal accounting methodologies do not appropriately account for governments’ noncash policies, such as their contingent liabilities. When these liabilities are called, budget costs can be large, as evidenced by the United States’ saving and loan crisis. In general, deficit measures may underestimate the macroeconomic impact of government policies, promoting the substitution of noncash for cash expenditure and increasing future financing requirements. The paper describes extended deficit measures to address the problem, but notes their limited practical value. Nonetheless, some alternative methods of valuing contingent liabilities are proposed to gauge fiscal impact and facilitate budgetary control.
How To Manage The Fiscal Costs Of Natural Disasters
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Author : Mr.Serhan Cevik
language : en
Publisher: International Monetary Fund
Release Date : 2018-06-11
How To Manage The Fiscal Costs Of Natural Disasters written by Mr.Serhan Cevik and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-06-11 with Nature categories.
This how-to note focuses on the management of the fiscal costs associated with natural disaster risks. Unlike other types of fiscal risks (for example, unexpected macroeconomic changes or materialization of contingent liabilities), a natural disaster presents a unique challenge to fiscal risk-management and budget processes because of its exogenous nature and potentially overwhelming scale. This note discusses how governments can build fiscal resilience against natural hazards and strengthen fiscal management after a disaster, including through budgeting frameworks and other fiscal policies. The note aims to answer three central questions: How large should fiscal buffers be? How should fiscal buffers be built up? How should fiscal buffers be used efficiently and transparently once a natural disaster has struck? These three questions directly relate to fiscal policy, fiscal risk management, and the budget process—all core areas of IMF expertise. To address them, the note focuses on fiscal strategies for financing recovery efforts and considers approaches to mitigate disaster impact. The note also provides guidance on how to conduct regular risk analyses of natural disasters’ potential fiscal consequences and outlines best practices for defining and accounting for the contingent liabilities associated with natural disasters in budgeting frameworks. Finally, the note touches on approaches for risk reduction, disaster risk financing strategies, and risk transfer mechanisms, such as various insurance instruments.
Contingent Liabilities From Banks
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Author : Mr. Serkan Arslanalp
language : en
Publisher: International Monetary Fund
Release Date : 2015-12-09
Contingent Liabilities From Banks written by Mr. Serkan Arslanalp and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-12-09 with Business & Economics categories.
In this paper, we develop a methodology to assess potential losses to the government that could arise from bank failures. The approach is intended to be simple, parsimonious, and used in real time. It generates an index that we call the banking sector contingent liability index (BCLI), based on the banking sector’s size, concentration, diversification, leverage, and riskiness of assets. The index is illustrated for 32 advanced and emerging market economies from 2006 to 2013, as well as a group of banks including global systemically important banks (G-SIBs).
Fiscal Risks Sources Disclosure And Management
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Author : International Monetary Fund. Fiscal Affairs Dept.
language : en
Publisher: International Monetary Fund
Release Date : 2008-05-31
Fiscal Risks Sources Disclosure And Management written by International Monetary Fund. Fiscal Affairs Dept. and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008-05-31 with Business & Economics categories.
A number of member countries have expressed interest in advice regarding disclosure and management of fiscal risks (defined as the possibility of deviations of fiscal outcomes from what was expected at the time of the budget or other forecast). This paper analyzes the main sources of fiscal risks and—building on an overview of existing practices in a wide range of countries—provides practical suggestions in this area, including a possible Statement of Fiscal Risks and a set of Guidelines for Fiscal Risk Disclosure and Management.
How To Control The Fiscal Costs Of Public Private Partnerships
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Author : Mr.Timothy C Irwin
language : en
Publisher: International Monetary Fund
Release Date : 2018-10-16
How To Control The Fiscal Costs Of Public Private Partnerships written by Mr.Timothy C Irwin and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-10-16 with Business & Economics categories.
This note discusses what finance ministries can do to ensure that public-private partnerships (PPPs) are used wisely. By inviting private participation in infrastructure development and service provision, PPPs can help improve public services. Yet, strong governance institutions are needed to manage risks and avoid unexpected costs from PPPs. While in the short term, PPPs may appear cheaper than traditional public investment, over time they can turn out to be more expensive and undermine fiscal sustainability, particularly when governments ignore or are unaware of their deferred costs and associated fiscal risks. To use PPPs wisely governments should (1) develop and implement clear rules for their use; (2) identify, quantify, and disclose PPP risks and expected costs; and (3) reform budget and government accounting frameworks to capture all fiscal costs comprehensively.
Analyzing And Managing Fiscal Risks Best Practices
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Author : International Monetary Fund. Fiscal Affairs Dept.
language : en
Publisher: International Monetary Fund
Release Date : 2016-04-05
Analyzing And Managing Fiscal Risks Best Practices written by International Monetary Fund. Fiscal Affairs Dept. and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-04-05 with Business & Economics categories.
Comprehensive analysis and management of fiscal risks can help ensure sound fiscal public finances and macroeconomic stability. This has been underscored by the global financial crisis and the more recent collapse in commodity prices, which starkly illustrate the vulnerability of public finances to risk. Indeed, over the past quarter century, governments experienced on average an adverse fiscal shock of 6 percent of GDP once every 12 years, with some of the largest stemming from financial crises. Countries need a more complete understanding of these potential threats to their fiscal position. Existing fiscal risk disclosure and analysis practices tend to be incomplete, fragmented, and qualitative in nature. A more comprehensive and integrated assessment of the potential shocks to government finances, in the form of a fiscal stress test, can help policymakers simulate the effects of shocks to their central forecasts and their implications for government solvency, liquidity, and financing needs. Comprehensive, reliable, and timely fiscal data covering all public entities, stocks, and flows are a necessary foundation for such analysis. Countries should also enhance their capacity to mitigate and manage fiscal risks. Fiscal risk management practices are often blunt, ad hoc, and too focused on imposing limits on the creation of exposures. Countries need to expand their toolkits for fiscal risk management and adopt the use of instruments to transfer, share, or provision for risks. In doing so, countries need to weigh the possible benefits from reducing their exposure to shocks against the financial and other costs of the policies that may be needed. Finally, countries should make greater use of probabilistic forecasting methods when setting long-run objectives and medium-term targets for fiscal policy. The paper illustrates how simple probabilistic tools can be used to map the uncertainty around medium-term trajectories for public debt. In combination with fiscal stress tests, these tools can provide valuable information regarding the probabilities that a country will stay within the debt ceilings embedded in their fiscal rules. The Fund is playing an important role in supporting improvements in fiscal risk analysis and management among its members. This includes technical assistance in constructing public sector balance sheets; developing institutions and capacity to identify specific fiscal risks and to quantify their potential impact; undertaking fiscal stress tests; and integrating risks into the design of medium-term fiscal targets.