## Discussion: Ahmed Mazin — Fiscal Risk Analysis & Management

## Source details

**Canonical URL:** [Discussion: Ahmed Mazin — Fiscal Risk Analysis & Management](https://www.imf.org/-/media/files/news/seminars/1a_discussant_mazin.pdf)

## Other formats

- [Markdown version](/-/media/files/news/seminars/1a_discussant_mazin.pdf.md)
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### Sources of Fiscal Risks
- Macroeconomic shocks
  - High likelihood
  - Cost as share of GDP around 9%
- Financial Sector
  - Less likely than macroeconomic shocks
- Natural disaster
  - Costs 1.5 % of GDP on average

### Sources of Fiscal Risks – Maldives Perspective
- Macroeconomic shocks
  - 30% of GDP directly by tourism
  - Shocks to tourism industry
  - External factors : global recessions, fuel price hikes, pandemics, terrorism
  - Government revenue depends on tourism, and cyclical
  - 2009 Recession : GDP fell by 5%, fiscal deficit : 20.5% of GDP
- Natural disaster risk
  - 2004 Tsunami fiscal risk
  - GDP fell 8.1% in 2005

### Maldives – revenue breakdown (2016, Source : Government Budget 2017)
- Tourism Goods and Services tax: 22%
- Other Non Tax: 16%
- Import duty: 13%
- Business Profit Tax: 13%
- Goods and Services Tax: 13%
- Resort lease rent: 8%
- Other tax: 7%
- Airport Service Charge: 3%
- Bank profit tax: 3%
- Lease Period Extension Fee: 2%

### Fiscal Risks in LICs — Sources of Contingent Liabilities
- Guarantee on SOE loans
- Shortfalls in pension schemes

### Fiscal Risks in LICs – Maldives Perspective (Contingent Liabilities)
- Guarantee on SOE loans
  - SOEs loan guarantees and on-lending facilities for SOEs for major public sector infrastructure projects
  - Example: US$ 800 million upgrade of International Airport
  - Sovereign Development Fund – set aside funds to service development loans
  - Improve corporate governance of SOE incentives for greater financial accountability
- Shortfalls in pension schemes
  - Pension system reform-funded pension scheme
  - Rationalize the unfunded pension systems that remains

### Fiscal Risk Analysis (for low capacity countries)
- Macro-fiscal sensitivity analysis
- Financial balance sheet
- Disclosing explicit contingent liabilities

### Fiscal Risk Analysis – Maldives Perspective (Implementation and Tools)
- Addressing data issues
  - Availability and reliability issues with data
  - PFM reform – strengthen the systems to improve the data recording and reporting
- Macro-fiscal sensitivity analysis
  - Utilize macro-fiscal tools in budgeting process
  - Medium Term Fiscal Framework, Medium Terms Debt Management Strategy, Debt Sustainability Analysis, Financial Programming and Policy model

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_Source: https://www.imf.org/-/media/files/news/seminars/1a_discussant_mazin.pdf_