Managing Fiscal Risks from State-Owned Enterprises

IMF Working Papers, September 25, 2020

Source details

Ensuring that state-owned enterprises (SOEs) are efficient and managed prudently is important for economic and social reasons.
Containing fiscal risks and reducing the burden on taxpayers from recurrent and large bailouts is crucial.
Governments need to develop stronger capacity to monitor and mitigate the risks from SOEs.
A strategy to mitigate risks requires the right incentives for managers to perform and for government agencies to conduct effective oversight.
Incorporating SOEs in overall fiscal targets would promote greater fiscal discipline and transparency.

The paper presents a risk tool to benchmark the performance of SOEs relative to their peers and assess their vulnerabilities.
Vulnerability assessment includes stress tests.

Develop stronger capacity to monitor and mitigate SOE risks.
Provide the right incentives for SOE managers to perform.
Strengthen government agencies' ability to conduct effective oversight of SOEs.
Incorporate SOEs in overall fiscal targets to promote fiscal discipline and transparency.

Subjects: Budget planning and preparation; Contingent liabilities; Economic sectors; Financial crises; Fiscal risks; Public enterprises; Public financial management (PFM); Public sector.
Keywords: Budget planning and preparation; Caribbean; company c; company C; company level; company's leverage; contingent liabilities; electricity company; Europe; financial support; fiscal risks; Global; holding company; line ministry; Middle East and Central Asia; negative equity; oversight unit; Public enterprises; Public sector; return on assets; sectoral strategy; SOEs cost; SOEs financials; SOEs manager; State-owned enterprises; Sub-Saharan Africa.