THE IMF's ROLE — FISCAL RISK MANAGEMENT

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THE IMF's ROLE — FISCAL RISK MANAGEMENT

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Importance of Fiscal Risk Management

• Fiscal risks can have a significant impact on government finances; recent experiences, including the COVID-19 pandemic and the global financial crisis, have led to large increases in government deficits and debt.
• Fiscal risks arise from a variety of sources:
  • macroeconomic and financial sector shocks
  • environmental risks
  • bailouts of state-owned enterprises and subnational governments
  • calls on government guarantees
  • obligations in public private partnerships
• A government's ability to respond to fiscal risks depends on:
  • quality of information about the sources and size of risks
  • capacity to assess the likelihood of risks materializing
  • strength of underlying public financial management institutions

IMF tools, diagnostics, and guidance

• The IMF has developed practical tools, diagnostics, and guidance notes to help countries identify, quantify, disclose, and manage fiscal risks.
• The IMF's Fiscal Risk Assessments and Fiscal Transparency Evaluations:
  • help countries identify the scope and scale of fiscal risks
  • evaluate strengths and weaknesses in fiscal risk management practices
  • chart a course of actions to address fiscal risks
  • The Assessment draws on Pillar III of the Fiscal Transparency Code.
• The IMF's Fiscal Risk Toolkit provides practical tools to help countries assess and monitor fiscal risks.

Capacity development and implementation

• The IMF’s Fiscal Affairs Department works closely with member countries to build capacity to identify, analyze, and manage fiscal risks.
• Capacity development supports:
  • application of the fiscal risk toolkit
  • strengthening institutional arrangements for monitoring and managing fiscal risks
  • enhancing fiscal transparency by disclosing fiscal risks, including through development of comprehensive fiscal risk statements
  • integration within broader public financial management and macro-fiscal capacity development offerings

Fiscal risk management in numbers

• Over the past year the IMF's Fiscal Affairs Department and Regional Capacity Development Centers:
  • have been engaged in close to 100 fiscal risk capacity development activities
  • supported more than 50 member countries
  • delivered 8 regional workshops
• The IMF’s fiscal risk assessment tools:
  • have been applied in around 40 countries over the past two years
• Fiscal risk assessments have been undertaken as part of 35 Fiscal Transparency Evaluations completed since 2014

Fiscal Transparency Evaluations (summary)

• IMF Fiscal Transparency Evaluations assess Fiscal Risk Analysis, Disclosure and Management Practices.
• Average scores by income group use the scale:
  • 3 = advanced practices
  • 2 = good practices
  • 1 = basic practices
• Country group abbreviations:
  • AE = Advanced Economies
  • EME = Emerging Markets and Middle-Income Economies
  • LIDC = Low-Income Developing Countries

Content in this bundle

• Regional Capacity Development Centers
  • Regional Capacity Development Centers (Markdown version)
  • Regional Capacity Development Centers (PDF)
• Fiscal Transparency Code (PDF)

References

• Fiscal Transparency Evaluations
• IMF's Fiscal Risk Toolkit
• IMF’s broader public financial management and macro-fiscal capacity development
• here.