## Mitigating Fiscal Risks in Oman

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---

### A. Context
- Hydrocarbons represent about 40 percent of GDP, nearly 80 percent of total fiscal revenue, and 65 percent of total export of goods.
- Fiscal risks are defined as potential shocks to government revenues, expenditures, assets, or liabilities not reflected in fiscal forecasts.
- Cross-country evidence: governments experienced on average an adverse fiscal shock of 6 percent of GDP once every 12 years (IMF 2016).
- Key risks identified by the Ministry of Finance in the 2023 General Budget: oil price volatility, tighter global financial conditions, global inflationary pressures, climate change and natural disasters, and geopolitical tensions.

### Fiscal Risk Management — Overview
- Objective: identify, monitor, transparently report, and effectively manage fiscal risks to underpin fiscal credibility and sustainability.
- Focus of Section 1: exposure of Oman’s fiscal position to oil price volatility and SOE-related risks; actions taken and planned by policymakers to mitigate these risks.

### Key Fiscal Risks — Oil Price Volatility
- Nature and historical impact
  - Volatility and unpredictability of oil prices are the major fiscal risk for Oman.
  - Sharp declines in oil prices over the past decade resulted in sizable fiscal deficits of 20 percent and 16 percent of GDP in 2016 and 2020, respectively, and surging public sector indebtedness (central government and SOEs) by close to 80 percent of GDP during 2015-2020.
- Stress scenario
  - A downside oil price scenario (one standard deviation below the WEO oil price from 2023 to 2028, assuming no change in government spending, non-hydrocarbon revenue collections, or external borrowing relative to the baseline) would turn overall fiscal balances from surpluses under the baseline to persistent deficits and revert the gains in rebuilding fiscal buffers.
- Mitigation strategies pursued by authorities
  - Fiscal adjustment: rationalizing expenditure and mobilizing non-hydrocarbon revenue (excises in 2019; VAT in 2021). Further measures needed to achieve MTFP objectives: comprehensive tax administration reform, introduction of PIT, and phasing out untargeted energy subsidies.
  - Medium-term Fiscal Framework: 2023 budget assumed a conservative oil price of $55 per barrel to contain public spending; authorities are working to adopt a full-fledged and legally binding Medium-term Fiscal Framework with quantifiable fiscal targets and near- and medium-term aggregate expenditure ceilings.
  - Fiscal buffers: annual transfers to the Petroleum Reserve Fund (oil revenue equivalent to the value of 20,000 barrels per day, on average). Central government deposits with domestic commercial banks equal 14.4 percent of GDP and with the Central Bank of Oman equal 3.5 percent of GDP as of end-2022. Oman Investment Authority (OIA) holds liquid assets amounting to about 10 percent of GDP.

### Key Fiscal Risks — State-Owned Enterprises (SOEs)
- Exposure and trends
  - SOE debt increased from 16 percent in 2015 to 41 percent of GDP in 2021, then declined to 30 percent in 2022.
  - Explicit government guarantees to SOEs reached 8 percent of GDP in 2022; guarantees are extended to the development phase of an SOE’s project until the start of operations. To date, no guarantee has been called.
  - Example of contingent fiscal cost: temporary support to Oman Air amounted to 0.3 percent of GDP in 2022.
- SOE scale and sectoral footprint (end-2022 / 2021–2023)
  - SOE assets: about 31.4 percent of GDP; SOE liabilities: 29.9 percent of GDP (end-2022).
  - Capital spending by SOEs (OIA-affiliated and EDO): 13.6 percent and 9.3 percent of GDP in 2021 and 2022, respectively; projected at 8.2 percent of GDP in 2023. Central government capital expenditure averaged 3 percent of GDP over the same period.
  - SOE capital spending concentrated in energy and services (about 90 percent of total capital spending during 2021-2023).
  - SOE debt concentrated in OQ (Oman Oil Company), Energy Development Oman, NAMA (Electricity Holding Company), Oman Air, Asyad’s Group, and Omantel (representing 90 percent of total SOEs debt in 2022). Most SOE indebtedness is project-based financing.
- OIA and Rawabet program — risk mitigation actions
  - OIA established in 2020 to manage sovereign financial assets and most state-owned companies; EDO established in 2020 to manage oil and gas exploration and renewable projects.
  - Rawabet program objectives: enhance SOE governance and efficiency, set strategic priorities and evaluation framework across OIA-affiliated entities.
  - Key Rawabet reforms and measures:
    - Governance: restructuring SOE boards, capping board membership to two terms, issuing a Code of Governance.
    - Accountability: boards’ KPIs covering financial sustainability, governance, in-country value, divestments, and other strategic initiatives; assessment by a certified external auditor appointed by OIA and approved by the Capital Market Authority.
    - Risk management: quarterly risk-based monitoring; annual risk assessments and submission of risk registries with mitigation plans; annual borrowing plans submitted to the Ministry of Finance’s Debt Management Office prior to any funding activity.
    - Deleveraging and divestment: deleveraging initiatives reduced SOE debt by about $10 billion during 2022-2023. Since 2020, 16 SOEs privatized and 5 partially divested. The 2023 divestment plan approved by the OIA Board consisted of divesting 8 companies through 3 IPOs and 5 trade sales.
  - Financial performance: for five of the six SOEs representing 90 percent of total SOE debt in 2022, financial performance improved from 2021 to 2022, except Oman Air. Leverage declined in 2022; profitability and interest coverage ratios are strong; liquidity ratios relatively healthy.

### Public Sector Balance Sheet and Institutional Reforms
- Consolidated position (estimated, end-2022)
  - Consolidated public sector net assets (net financial assets) of 674 (-33) percent of GDP at end of 2022.
  - Net present value of hydrocarbon assets: about 500 percent of GDP.
  - OIA’s assets (SOEs under management and liquid assets): about 40 percent of GDP.
  - Liabilities: about 88 percent of GDP, largely central government and SOE debt.
- Institutional reforms to improve asset and liability management
  - OIA created to manage public enterprises and invest fiscal surplus efficiently.
  - Development of an integrated central system to account for government assets (tangible assets, financial assets, oil and gas reserves, PPPs, real estate investments, and SOEs).
  - Debt Management Committee established to coordinate sovereign debt issuance and expanded to oversee sovereign assets and liabilities.
  - Forthcoming Medium-Term Debt Strategy to help manage risk exposures from the government’s debt portfolio.
  - Unification of pension funds from 11 fragmented institutions into a unified entity to improve medium- to long-term sustainability.

### Other Fiscal Risks
- Global financial conditions
  - Near-term refinancing risk and interest rate exposure:
    - About 12.5 percent of total debt matures in the next 12 months as of end-2023.
    - 84 percent of the total debt portfolio have a fixed rate.
    - Central government gross financing needs projected below 1.0 percent of GDP on average over the period 2024-2028.
  - Policy actions:
    - Liability management operations in 2022-2023 used hydrocarbon windfall to repay, prepay, and buyback part of external debt—amounting to 7.2 percent of GDP in 2022 and 4.6 percent of GDP in 2023—to reduce future debt service costs and gross financing needs.
    - Creation of debt provisions since the 2021 budget, amounting to 0.5-0.8 percent of GDP annually to the Debt Reserve Account to meet future borrowing requirements.
- Public-Private Partnerships (PPPs)
  - PPPs at an incipient stage; Public Private Partnership Law adopted in 2019 to encourage private sector investment in infrastructure and public services.

### Public-Private Partnerships (PPPs) and the PPP Unit
- Projects undertaken under PPPs are expected to address delivery on-time and on-budget, optimize life cycle costs, bring in private sector knowledge, and enhance efficiency, innovation, and value of money by improving production efficiency and governance framework.
- Sector focus: education, health, transport, and port sectors.
- The PPP Unit, under the Ministry of Finance, is preparing detailed policy measures to mitigate potential fiscal risks, including its rights, obligation, and other exposures under PPP contracts.
- Role of the Unit: steer the PPP process and procedures from the project planning stage to the tendering stage.
- Every new PPP initiative must be approved by the Ministry of Finance before tendering.
- As part of project preparation (detailed project feasibility studies), fiscal exposures, obligations and guarantees will be explicitly analyzed.
- The Unit works closely with relevant government entities to ensure risks are thoroughly understood, mitigated, and approved.
- The government provides a comfort letter detailing the budgeting approval process and budget allocations to various ministries and government related entities, but it does not provide any guarantees.
- Recommendation: Given expected recourse to PPPs in coming years, set ceilings on either the stock or the annual flow of PPP projects to prevent excessive exposure to fiscal risk.

### Climate-Related Events and Fiscal Exposure
- Oman has experienced changes in the number and intensity of tropical cyclones, with 14 events since 2002.
- Natural disasters have inflicted moderate fiscal costs to date; example: the fiscal cost of cyclone Shaheen in 2021 was about 0.5 percent of GDP.
- Policy and funding mechanisms:
  - National Fund for Emergency (NFE) established in 2022 with an initial contribution of 0.3 percent of GDP to tackle aftermath of tropical cyclone Shaheen and similar future natural disasters.
  - The NFE is supported annually by allocations from the State’s General Budget and donations from companies, associations, and philanthropists.
  - Authorities have access to funding support from the Green Climate Fund (GCF) covering six areas: water resources, agriculture, marine and fisheries, urban areas, health, and energy efficiency.
- Fiscal risk channels from climate events:
  - Direct impacts: increased public spending (repairing damaged infrastructure, social transfers to households).
  - Indirect impacts: disruption of economic activity (including reduction of tax revenue), materialization of contingent liabilities affecting SOEs and private institutions.
  - Fiscal costs may also arise from implementing adaptation and mitigation actions committed under Oman’s National Determined Contribution (NDCs).

### Policy Implications and Recommendations
- Steadfast implementation of fiscal reforms would mitigate fiscal risks, requiring:
  - Pressing ahead with additional measures to mobilize non-hydrocarbon revenue.
  - Rationalizing expenditure.
  - Utilizing hydrocarbon windfalls to increase buffers and reduce debt burden.
  - Developing a full-fledge medium-term fiscal framework to entrench fiscal discipline and provide predictability of government expenditures.
- Comprehensive analysis, management, and reporting of fiscal risks would ensure sound public finances, macroeconomic stability, and fiscal transparency:
  - Build on the summary of fiscal risks published in the 2023 budget by developing a comprehensive fiscal risk statement.
  - The fiscal risk statement should include sensitivity analysis and alternative macroeconomic and fiscal forecast scenarios to assess impact on public finances.
  - Expand reporting of fiscal risks to promote better understanding of public finances, build support for prudent fiscal policies, and strengthen accountability for risk management.
- Recommendations on fiscal instruments and priorities:
  - Develop appropriate strategies for management and mitigation of key fiscal risks, including budget allocations and limits on exposure to specific types of risk.
  - Strike a balance between benefits from reducing exposure to risks and the probability and costs of mitigation (e.g., use of buffers and budget contingencies).
  - Specify conditions under which the government is prepared to accept specific fiscal risks, define the level of risk it is willing to bear, specify decision-making processes, and define instruments to manage risks.
  - Phased withdrawal of untargeted energy subsidies should be a priority, including lifting the fuel cap and resuming reforms through the authorities’ targeted National Subsidy System.
  - Develop a multilayer strategy for additional revenue from high global oil prices — options include reducing public debt, accumulating fiscal buffers, or accelerating economic diversification.

### Fiscal Data, Coverage, and Reporting Enhancements
- Need for comprehensive and timely fiscal data, extending coverage beyond the central government and specific fiscal risks, to identify, manage, and mitigate fiscal risks.
- Authorities’ ability to respond to fiscal risks depends on:
  - Quality of information about sources and size of risks.
  - Capacity to assess likelihood of risks materializing.
  - Strength of underlying public financial management institutions.
- Ongoing efforts by OIA to privatize some assets are welcomed to stimulate private sector participation.
- Priority actions:
  - Disclose key financial performance metrics of SOEs.
  - Move ahead with OIA’s divestment process.
  - Expand coverage of fiscal risk reporting to PPP and pension funds to raise awareness among policymakers and the public.
- Annual budget disclosures should include:
  - Guarantees, related beneficiaries, expected duration, and intended purpose.
  - Government’s rights, obligations, and other exposure under PPP contracts.
  - Enhanced transparency of allocations for contingencies, including publishing criteria that must be met before expenditure may be charged to the contingency reserve and reporting on the use of contingency appropriations for the previous fiscal year.

### Long-Term Sustainability and Fiscal Frameworks
- Long-term sustainability analysis should be part of fiscal risk management given reliance on finite natural resources:
  - Uncertainty about volume and value of resource endowments is a significant fiscal risk.
  - Estimating the value of natural resource assets can identify whether public debt is on a sustainable path and provide guidance on how public debt will evolve under different prices scenario.
  - Such analysis informs public deliberation over sustainability and intergenerational equity issues.
- Developing a sovereign asset and liability framework is paramount to managing fiscal risks:
  - The framework would enhance understanding of public sector financial strengths and vulnerabilities.
  - It should set out the government’s overall financial objectives and procedures for managing cost/risk trade-offs.
  - By consolidating what the public sector owns and owes, the framework provides the basis for improved fiscal risk management.

### Institutional Coordination
- Effective fiscal policymaking and fiscal risk management require appropriate coordination of decision making between central government and other parts of the public sector.
- The National Committee, which advises on economic policies, has nominated representatives from MoF, MoE, NCSI, CBO, and OIA to coordinate identification, analysis, monitoring, and mitigation of fiscal risks.

*Prepared by Abdullah AlHassan and Dalia Aita; SIP/2024/017 (Section 1). Source: Section 2, sipea2024017 (IMF).*

### Section 1

### Mitigating Fiscal Risks in Oman

### A. Context
- Fiscal structure and exposure
  - Hydrocarbons represent about 40 percent of GDP, nearly 80 percent of total fiscal revenue, and 65 percent of total export of goods.
  - Fiscal risks are defined as potential shocks to government revenues, expenditures, assets, or liabilities not reflected in fiscal forecasts.
  - Cross-country evidence: governments experienced on average an adverse fiscal shock of 6 percent of GDP once every 12 years (IMF 2016).
- Key risks identified by the Ministry of Finance in the 2023 General Budget: oil price volatility, tighter global financial conditions, global inflationary pressures, climate change and natural disasters, and geopolitical tensions.

### B. Fiscal Risk Management — Overview
- Objective: identify, monitor, transparently report, and effectively manage fiscal risks to underpin fiscal credibility and sustainability.
- Focus of Section 1: exposure of Oman’s fiscal position to oil price volatility and SOE-related risks; actions taken and planned by policymakers to mitigate these risks.

### Key Fiscal Risks — Oil Price Volatility
- Nature and historical impact
  - Volatility and unpredictability of oil prices are the major fiscal risk for Oman.
  - Sharp declines in oil prices over the past decade resulted in sizable fiscal deficits of 20 percent and 16 percent of GDP in 2016 and 2020, respectively, and surging public sector indebtedness (central government and SOEs) by close to 80 percent of GDP during 2015-2020.
- Stress scenario
  - A downside oil price scenario (one standard deviation below the WEO oil price from 2023 to 2028, assuming no change in government spending, non-hydrocarbon revenue collections, or external borrowing relative to the baseline) would turn overall fiscal balances from surpluses under the baseline to persistent deficits and revert the gains in rebuilding fiscal buffers.
- Mitigation strategies pursued by authorities
  - Fiscal adjustment: rationalizing expenditure and mobilizing non-hydrocarbon revenue (excises in 2019; VAT in 2021). Further measures needed to achieve MTFP objectives: comprehensive tax administration reform, introduction of PIT, and phasing out untargeted energy subsidies.
  - Medium-term Fiscal Framework: 2023 budget assumed a conservative oil price of $55 per barrel to contain public spending; authorities are working to adopt a full-fledged and legally binding Medium-term Fiscal Framework with quantifiable fiscal targets and near- and medium-term aggregate expenditure ceilings.
  - Fiscal buffers: annual transfers to the Petroleum Reserve Fund (oil revenue equivalent to the value of 20,000 barrels per day, on average). Central government deposits with domestic commercial banks equal 14.4 percent of GDP and with the Central Bank of Oman equal 3.5 percent of GDP as of end-2022. Oman Investment Authority (OIA) holds liquid assets amounting to about 10 percent of GDP.

### Key Fiscal Risks — State-Owned Enterprises (SOEs)
- Exposure and trends
  - SOE debt increased from 16 percent in 2015 to 41 percent of GDP in 2021, then declined to 30 percent in 2022.
  - Explicit government guarantees to SOEs reached 8 percent of GDP in 2022; guarantees are extended to the development phase of an SOE’s project until the start of operations. To date, no guarantee has been called.
  - Example of contingent fiscal cost: temporary support to Oman Air amounted to 0.3 percent of GDP in 2022.
- SOE scale and sectoral footprint (end-2022 / 2021–2023)
  - SOE assets: about 31.4 percent of GDP; SOE liabilities: 29.9 percent of GDP (end-2022).
  - Capital spending by SOEs (OIA-affiliated and EDO): 13.6 percent and 9.3 percent of GDP in 2021 and 2022, respectively; projected at 8.2 percent of GDP in 2023. Central government capital expenditure averaged 3 percent of GDP over the same period.
  - SOE capital spending concentrated in energy and services (about 90 percent of total capital spending during 2021-2023).
  - SOE debt concentrated in OQ (Oman Oil Company), Energy Development Oman, NAMA (Electricity Holding Company), Oman Air, Asyad’s Group, and Omantel (representing 90 percent of total SOEs debt in 2022). Most SOE indebtedness is project-based financing.
- OIA and Rawabet program — risk mitigation actions
  - OIA established in 2020 to manage sovereign financial assets and most state-owned companies; EDO established in 2020 to manage oil and gas exploration and renewable projects.
  - Rawabet program objectives: enhance SOE governance and efficiency, set strategic priorities and evaluation framework across OIA-affiliated entities.
  - Key Rawabet reforms and measures:
    - Governance: restructuring SOE boards, capping board membership to two terms, issuing a Code of Governance.
    - Accountability: boards’ KPIs covering financial sustainability, governance, in-country value, divestments, and other strategic initiatives; assessment by a certified external auditor appointed by OIA and approved by the Capital Market Authority.
    - Risk management: quarterly risk-based monitoring; annual risk assessments and submission of risk registries with mitigation plans; annual borrowing plans submitted to the Ministry of Finance’s Debt Management Office prior to any funding activity.
    - Deleveraging and divestment: deleveraging initiatives reduced SOE debt by about $10 billion during 2022-2023. Since 2020, 16 SOEs privatized and 5 partially divested. The 2023 divestment plan approved by the OIA Board consisted of divesting 8 companies through 3 IPOs and 5 trade sales.
  - Financial performance: for five of the six SOEs representing 90 percent of total SOE debt in 2022, financial performance improved from 2021 to 2022, except Oman Air. Leverage declined in 2022; profitability and interest coverage ratios are strong; liquidity ratios relatively healthy.

### Public Sector Balance Sheet and Institutional Reforms
- Consolidated position (estimated, end-2022)
  - Consolidated public sector net assets (net financial assets) of 674 (-33) percent of GDP at end of 2022.
  - Net present value of hydrocarbon assets: about 500 percent of GDP.
  - OIA’s assets (SOEs under management and liquid assets): about 40 percent of GDP.
  - Liabilities: about 88 percent of GDP, largely central government and SOE debt.
- Institutional reforms to improve asset and liability management
  - OIA created to manage public enterprises and invest fiscal surplus efficiently.
  - Development of an integrated central system to account for government assets (tangible assets, financial assets, oil and gas reserves, PPPs, real estate investments, and SOEs).
  - Debt Management Committee established to coordinate sovereign debt issuance and expanded to oversee sovereign assets and liabilities.
  - Forthcoming Medium-Term Debt Strategy to help manage risk exposures from the government’s debt portfolio.
  - Unification of pension funds from 11 fragmented institutions into a unified entity to improve medium- to long-term sustainability.

### Other Fiscal Risks
- Global financial conditions
  - Near-term refinancing risk and interest rate exposure:
    - About 12.5 percent of total debt matures in the next 12 months as of end-2023.
    - 84 percent of the total debt portfolio have a fixed rate.
    - Central government gross financing needs projected below 1.0 percent of GDP on average over the period 2024-2028.
  - Policy actions:
    - Liability management operations in 2022-2023 used hydrocarbon windfall to repay, prepay, and buyback part of external debt—amounting to 7.2 percent of GDP in 2022 and 4.6 percent of GDP in 2023—to reduce future debt service costs and gross financing needs.
    - Creation of debt provisions since the 2021 budget, amounting to 0.5-0.8 percent of GDP annually to the Debt Reserve Account to meet future borrowing requirements.
- Public-Private Partnerships (PPPs)
  - PPPs at an incipient stage; Public Private Partnership Law adopted in 2019 to encourage private sector investment in infrastructure and public services.

_Prepared by Abdullah AlHassan and Dalia Aita; SIP/2024/017 (Section 1)._

### Section 2

### Section 2

### Public-Private Partnerships (PPPs) and the PPP Unit
- Projects undertaken under PPPs are expected to address delivery on-time and on-budget, optimize life cycle costs, bring in private sector knowledge, and enhance efficiency, innovation, and value of money by improving production efficiency and governance framework.
- Sector focus: education, health, transport, and port sectors.
- The PPP Unit, under the Ministry of Finance, is preparing detailed policy measures to mitigate potential fiscal risks, including its rights, obligation, and other exposures under PPP contracts.
- Role of the Unit: steer the PPP process and procedures from the project planning stage to the tendering stage.
- Every new PPP initiative must be approved by the Ministry of Finance before tendering.
- As part of project preparation (detailed project feasibility studies), fiscal exposures, obligations and guarantees will be explicitly analyzed.
- The Unit works closely with relevant government entities to ensure risks are thoroughly understood, mitigated, and approved.
- The government provides a comfort letter detailing the budgeting approval process and budget allocations to various ministries and government related entities, but it does not provide any guarantees.
- Recommendation: Given expected recourse to PPPs in coming years, set ceilings on either the stock or the annual flow of PPP projects to prevent excessive exposure to fiscal risk.

### Climate-Related Events and Fiscal Exposure
- Oman has experienced changes in the number and intensity of tropical cyclones, with 14 events since 2002.
- Natural disasters have inflicted moderate fiscal costs to date; example: the fiscal cost of cyclone Shaheen in 2021 was about 0.5 percent of GDP.
- Policy and funding mechanisms:
  - National Fund for Emergency (NFE) established in 2022 with an initial contribution of 0.3 percent of GDP to tackle aftermath of tropical cyclone Shaheen and similar future natural disasters.
  - The NFE is supported annually by allocations from the State’s General Budget and donations from companies, associations, and philanthropists.
  - Authorities have access to funding support from the Green Climate Fund (GCF) covering six areas: water resources, agriculture, marine and fisheries, urban areas, health, and energy efficiency.
- Fiscal risk channels from climate events:
  - Direct impacts: increased public spending (repairing damaged infrastructure, social transfers to households).
  - Indirect impacts: disruption of economic activity (including reduction of tax revenue), materialization of contingent liabilities affecting SOEs and private institutions.
  - Fiscal costs may also arise from implementing adaptation and mitigation actions committed under Oman’s National Determined Contribution (NDCs).

### Policy Implications and Recommendations
- Steadfast implementation of fiscal reforms would mitigate fiscal risks, requiring:
  - Pressing ahead with additional measures to mobilize non-hydrocarbon revenue.
  - Rationalizing expenditure.
  - Utilizing hydrocarbon windfalls to increase buffers and reduce debt burden.
  - Developing a full-fledge medium-term fiscal framework to entrench fiscal discipline and provide predictability of government expenditures.
- Comprehensive analysis, management, and reporting of fiscal risks would ensure sound public finances, macroeconomic stability, and fiscal transparency:
  - Build on the summary of fiscal risks published in the 2023 budget by developing a comprehensive fiscal risk statement.
  - The fiscal risk statement should include sensitivity analysis and alternative macroeconomic and fiscal forecast scenarios to assess impact on public finances.
  - Expand reporting of fiscal risks to promote better understanding of public finances, build support for prudent fiscal policies, and strengthen accountability for risk management.
- Recommendations on fiscal instruments and priorities:
  - Develop appropriate strategies for management and mitigation of key fiscal risks, including budget allocations and limits on exposure to specific types of risk.
  - Strike a balance between benefits from reducing exposure to risks and the probability and costs of mitigation (e.g., use of buffers and budget contingencies).
  - Specify conditions under which the government is prepared to accept specific fiscal risks, define the level of risk it is willing to bear, specify decision-making processes, and define instruments to manage risks.
  - Phased withdrawal of untargeted energy subsidies should be a priority, including lifting the fuel cap and resuming reforms through the authorities’ targeted National Subsidy System.
  - Develop a multilayer strategy for additional revenue from high global oil prices — options include reducing public debt, accumulating fiscal buffers, or accelerating economic diversification.

### Fiscal Data, Coverage, and Reporting Enhancements
- Need for comprehensive and timely fiscal data, extending coverage beyond the central government and specific fiscal risks, to identify, manage, and mitigate fiscal risks.
- Authorities’ ability to respond to fiscal risks depends on:
  - Quality of information about sources and size of risks.
  - Capacity to assess likelihood of risks materializing.
  - Strength of underlying public financial management institutions.
- Ongoing efforts by OIA to privatize some assets are welcomed to stimulate private sector participation.
- Priority actions:
  - Disclose key financial performance metrics of SOEs.
  - Move ahead with OIA’s divestment process.
  - Expand coverage of fiscal risk reporting to PPP and pension funds to raise awareness among policymakers and the public.
- Annual budget disclosures should include:
  - Guarantees, related beneficiaries, expected duration, and intended purpose.
  - Government’s rights, obligations, and other exposure under PPP contracts.
  - Enhanced transparency of allocations for contingencies, including publishing criteria that must be met before expenditure may be charged to the contingency reserve and reporting on the use of contingency appropriations for the previous fiscal year.

### Long-Term Sustainability and Fiscal Frameworks
- Long-term sustainability analysis should be part of fiscal risk management given reliance on finite natural resources:
  - Uncertainty about volume and value of resource endowments is a significant fiscal risk.
  - Estimating the value of natural resource assets can identify whether public debt is on a sustainable path and provide guidance on how public debt will evolve under different prices scenario.
  - Such analysis informs public deliberation over sustainability and intergenerational equity issues.
- Developing a sovereign asset and liability framework is paramount to managing fiscal risks:
  - The framework would enhance understanding of public sector financial strengths and vulnerabilities.
  - It should set out the government’s overall financial objectives and procedures for managing cost/risk trade-offs.
  - By consolidating what the public sector owns and owes, the framework provides the basis for improved fiscal risk management.

### Institutional Coordination
- Effective fiscal policymaking and fiscal risk management require appropriate coordination of decision making between central government and other parts of the public sector.
- The National Committee, which advises on economic policies, has nominated representatives from MoF, MoE, NCSI, CBO, and OIA to coordinate identification, analysis, monitoring, and mitigation of fiscal risks.

*Source: Section 2, sipea2024017 (IMF).*

---


_Source: https://www.imf.org/-/media/files/publications/selected-issues-papers/2024/english/sipea2024017.pdf_