Managing Fiscal Risks from National Airlines in Pacific Island Countries

IMF Working Papers, July 9, 2021

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Canonical URL: Managing Fiscal Risks from National Airlines in Pacific Island Countries

Pacific island countries (PICs) rely on national airlines for connectivity, trade, and tourism.
These airlines are being struck hard by COVID-19.
Losses will weigh on public sector balance sheets and pose risks to economic recovery.
With a backdrop of tight fiscal space and increasing government debt, losses in airlines are adding to fiscal risks in some PICs.
The paper discusses tools to evaluate and manage the fiscal risks from national airlines in the Pacific.
The paper presents a snapshot of the current state of Public Financial Management (PFM) practices in PICs and details the best practices.
The exercise illustrates areas in which PICs have scope to improve their risk management with regard to national airlines.
The paper discusses the use of diagnostic tools and capacity development to enhance monitoring and risk management.
Greater transparency and accountability in the airlines, combined with rigorous oversight, would be the first step towards improved financial management of national airlines.

National airlines in PICs are significant for connectivity, trade, and tourism but are fiscally vulnerable due to COVID-19 losses.
Airline losses translate into contingent and realized fiscal liabilities that exacerbate already tight fiscal space and increasing government debt in some PICs.
Current PFM practices in PICs have gaps that limit effective monitoring and management of fiscal risks arising from national airlines.
Improving transparency, accountability, and oversight in national airlines is critical to mitigating fiscal risks.

Use diagnostic tools to evaluate fiscal risks from national airlines.
Strengthen capacity development to enhance monitoring and risk management related to national airlines.
Adopt best practices in Public Financial Management (PFM) to improve fiscal oversight of national airlines.
Increase transparency and accountability in airline financial reporting and governance as a first step toward improved financial management.

The paper provides a snapshot of the current state of PFM practices in PICs as they relate to national airlines.
It details best practices that PICs can adopt to better identify, quantify, and manage fiscal risks from national airlines.
The analysis illustrates specific areas where PICs have scope to improve risk management for national airlines.

Title: Managing Fiscal Risks from National Airlines in Pacific Island Countries
Authors: Vybhavi Balasundharam, Leni Hunter, Iulai Lavea, Paul G Seeds
Date: July 9, 2021
Series: IMF Working Papers
Working Paper No.: 2021/183
Issue: 183
Volume: 2021
Pages: 27
DOI: https://doi.org/10.5089/9781513588865.001
Stock No: WPIEA2021183
ISBN: 9781513588865
ISSN: 1018-5941
Subjects: Budget planning and preparation, COVID-19, Economic sectors, Financial statements, Fiscal risks, Health, Public enterprises, Public financial management (PFM)
Keywords: airline Support, B. airline planning process, Budget planning and preparation, COVID-19, D. budget execution consideration, Financial statements, financial support, Fiscal risks, national Airlines, Pacific Islands, PFM perspective, Public enterprises

Source: Managing Fiscal Risks from National Airlines in Pacific Island Countries — IMF Working Paper No. 2021/183 (July 9, 2021).