Comprehensive analysis, disclosure and management of fiscal risks – factors that can cause fiscal outcomes to differ from expectations – is needed to ensure sound public finances and macroeconomic stability as well as fiscal transparency. The past two decades have shown that fiscal risk realizations can be costly, occur frequently, and arise from a variety of sources. Macroeconomic shocks, financial crises, commodity price shocks, natural disasters and bailouts of public enterprises have put pressure on public finances across high and lower income countries alike.

The COVID-19 pandemic further underscored these lessons, triggering the largest fiscal risk realization since World War II and leading to policy responses, that while necessary, have in many cases resulted in additional fiscal risk exposures.

The IMF’s Fiscal Risk Toolkit, guidance materials and capacity development help policymakers to identify, monitor, and manage fiscal risks. Better understanding of fiscal risks, combined with their transparent reporting and effective risk management underpin fiscal credibility and the sustainability of public finances.