Strengthening Fiscal Frameworks in the Presence of Rising Risk of Natural Disasters
IMF Working Papers, February 7, 2025
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- Strengthening Fiscal Frameworks in the Presence of Rising Risk of Natural Disasters
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Bibliographic details
- Authors: Olusegun Ayodele Akanbi, Jessie Kilembe, Do Yeon Park
- Published: February 7, 2025
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400298851.001
Authors and publication
- By Olusegun Ayodele Akanbi, Jessie Kilembe, Do Yeon Park
- February 7, 2025
- IMF Working Papers
- Pages: 38
- Volume: 2025
- Issue: 038
- Series: Working Paper No. 2025/038
- DOI: https://doi.org/10.5089/9798400298851.001
- Stock No: WPIEA2025038
- ISBN: 9798400298851
- ISSN: 1018-5941
Research objective
- Investigates the impact of rising risk of natural disasters on rule-based fiscal frameworks.
- Explores the extent to which countries adhere to their fiscal rules in the presence of rising risk of natural disasters.
Methodology
- Construct an index measuring the strenghth of fiscal rules, utilizing principal component analysis for a panel of 104 countries.
- Employ a panel two-stage least squares estimation method to assess the impact of natural disaster risks on fiscal rules.
- Results tested for robustness across various country groupings.
Key findings
- Natural disaster risks play a significant role in the determination of rule-based fiscal framework.
- After controlling for other determinants, countries with established fiscal rules are strengthening these rules in response to rising natural disaster risks.
- Results are mixed across different country groups, with varying magnitude of impact.
- Conclusion: Countries currently operating fiscal rules will need to enhance their efforts to more comprehensively integrate natural disaster risks into their fiscal frameworks.
Subject areas and keywords
- Subject: Environment, Expenditure, Fiscal governance, Fiscal policy, Fiscal risks, Fiscal rules, Natural disasters, Public financial management (PFM)
- Keywords: exposure risk index, Fiscal Framework, Fiscal governance, Fiscal risks, Fiscal Rules, Fiscal sustainability, Global, government climate investment profile, high-ERI country, natural disaster risk, Natural Disasters, risk of natural disasters
Implications for policy and practice
- Strengthening existing fiscal rules in response to rising natural disaster risks is already observed among countries with established rules.
- Heterogeneous impacts across country groups imply the need for tailored enhancements to fiscal frameworks to integrate natural disaster risks more comprehensively.
Source: IMF Working Paper "Strengthening Fiscal Frameworks in the Presence of Rising Risk of Natural Disasters" (Working Paper No. 2025/038, February 7, 2025).
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- Working Paper