STATE-OWNED ENTERPRISE (SOE) HEALTH CHECK TOOL (HCT)

Source details

The tool assesses the financial vulnerability and risks emerging from state-owned enterprises (SOEs).
It allows governments to identify and monitor high-risk SOEs and to inform early and targeted interventions where necessary.
The tool is designed as a starting point for SOE vulnerability assessment and can be complemented by more in-depth analysis of the underlying drivers of financial performance.

Assesses the financial vulnerability of up to 40 non-financial SOEs.
Computes a set of financial vulnerability indicators based on income and balance sheet information.
Assigns an overall risk rating to each SOE based on a combination of selected indicators.
Provides ratios, charts, and a risk matrix to enable analysis of individual SOEs.
Produces summary outputs of the financial soundness of the SOE sector.
Supports compilation of aggregate liabilities and balance sheet for the SOE sector as a whole.

SOEs comprise a significant share of economic and public sector activity in many countries, managing public assets equivalent to half of global GDP.
Well-governed SOEs can promote economic development, support the provision of important goods and services, and generate financial returns for taxpayers.
Poorly performing SOEs can be costly for public finances and generate significant fiscal risks, including:
- lower than expected dividends, royalties or taxes received from SOEs;
- higher subsidies;
- non-repayment of loans;
- need to service guarantees on SOE borrowing;
- equity injections to cover previous losses.
Historically, equity injections or other support provided to individual SOEs have cost on average, about 3 percent of GDP, and in some cases have been as large as 15 percent of GDP.
Policymakers should regularly monitor the financial position and performance of SOEs and assess their potential impact on public finances.

Identifies SOEs with largest liabilities as an indication of government fiscal risk exposure.
Provides high-level analysis to help identify which SOEs are more financially vulnerable and may be at higher risk of generating fiscal risks.
Informs which SOEs may require more intense monitoring, in-depth analysis, or remedial actions to strengthen their financial position.
Informs decisions on whether, and on what terms, to extend public support to SOEs.
Provides the basis for disclosing information relating to SOEs in line with sound fiscal transparency principles.

Can be used in conjunction with the forward looking SOE Stress Test Tool to provide complementary information about SOE financial vulnerabilities.
Is based on the same methodology as the Discrete Loan and Guarantee Tool, which can help assess potential fiscal costs arising from state support provided to SOEs.
Outputs can inform further fiscal risk analysis using the IMF's Fiscal Stress Test approach, Public Sector Balance Sheet Assessments, or Debt Sustainability Analyses by providing information on the overall assets and liabilities of SOEs, their exposures, and potential risks they pose.