{
  "title": "Analyzing and Managing Fiscal Risks - Best Practices",
  "publication": "Policy Papers, May 4, 2016",
  "sourceUrl": "https://www.imf.org/en/publications/policy-papers/issues/2016/12/31/analyzing-and-managing-fiscal-risks-best-practices-pp5042",
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  "summary": "Comprehensive analysis and management of fiscal risks can help ensure sound fiscal public finances and macroeconomic stability.",
  "sections": [
    {
      "heading": "Key findings",
      "content": "- Over the past quarter century, governments experienced on average an adverse fiscal shock of 6 percent of GDP once every 12 years, with some of the largest stemming from financial crises.\n- Existing fiscal risk disclosure and analysis practices tend to be incomplete, fragmented, and qualitative in nature.\n- Comprehensive, reliable, and timely fiscal data covering all public entities, stocks, and flows are a necessary foundation for credible fiscal risk analysis."
    },
    {
      "heading": "Fiscal stress testing and analysis",
      "content": "- A comprehensive and integrated assessment of potential shocks—implemented as a fiscal stress test—can help policymakers simulate:\n  - effects of shocks to their central forecasts;\n  - implications for government solvency;\n  - implications for government liquidity; and\n  - implications for government financing needs.\n- Fiscal stress tests combined with probabilistic tools can provide information on the probabilities that a country will stay within debt ceilings embedded in fiscal rules."
    },
    {
      "heading": "Data, institutions, and capacity",
      "content": "- Countries need a more complete understanding of potential threats to their fiscal position.\n- The Fund supports technical assistance in:\n  - constructing public sector balance sheets;\n  - developing institutions and capacity to identify specific fiscal risks and to quantify their potential impact;\n  - undertaking fiscal stress tests; and\n  - integrating risks into the design of medium-term fiscal targets."
    },
    {
      "heading": "Fiscal risk management tools and strategies",
      "content": "- Current fiscal risk management practices are often blunt, ad hoc, and too focused on imposing limits on the creation of exposures.\n- Countries should expand their toolkits for fiscal risk management and adopt instruments to:\n  - transfer risks;\n  - share risks; and\n  - provision for risks.\n- Policymakers need to weigh the benefits of reducing exposure to shocks against the financial and other costs of the policies used to do so."
    },
    {
      "heading": "Probabilistic forecasting and fiscal targets",
      "content": "- Greater use of probabilistic forecasting methods is recommended when setting long-run objectives and medium-term targets for fiscal policy.\n- Simple probabilistic tools can be used to map the uncertainty around medium-term trajectories for public debt and, in combination with fiscal stress tests, inform the likelihood of remaining within debt ceilings.\n\nAnalyzing and Managing Fiscal Risks - Best Practices (May 4, 2016).\n\n---\n\n Content in this bundle\n\n- Analyzing and Managing Fiscal Risks Best Practices; IMF Policy Paper; May 4, 2016\n  - Analyzing and Managing Fiscal Risks Best Practices; IMF Policy Paper; May 4, 2016 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Analyzing and Managing Fiscal Risks Best Practices; IMF Policy Paper; May 4, 2016 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/policy-papers/issues/2016/12/31/analyzing-and-managing-fiscal-risks-best-practices-pp5042"
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    "Published: May 4, 2016",
    "Series: Policy Papers",
    "Over the past quarter century, governments experienced on average an adverse fiscal shock of 6 percent of GDP once every 12 years, with some of the largest stemming from financial crises.",
    "Existing fiscal risk disclosure and analysis practices tend to be incomplete, fragmented, and qualitative in nature.",
    "Comprehensive, reliable, and timely fiscal data covering all public entities, stocks, and flows are a necessary foundation for credible fiscal risk analysis.",
    "A comprehensive and integrated assessment of potential shocks—implemented as a fiscal stress test—can help policymakers simulate:",
    "Fiscal stress tests combined with probabilistic tools can provide information on the probabilities that a country will stay within debt ceilings embedded in fiscal rules.",
    "Countries need a more complete understanding of potential threats to their fiscal position.",
    "The Fund supports technical assistance in:",
    "Current fiscal risk management practices are often blunt, ad hoc, and too focused on imposing limits on the creation of exposures.",
    "Countries should expand their toolkits for fiscal risk management and adopt instruments to:",
    "Policymakers need to weigh the benefits of reducing exposure to shocks against the financial and other costs of the policies used to do so.",
    "Greater use of probabilistic forecasting methods is recommended when setting long-run objectives and medium-term targets for fiscal policy.",
    "Simple probabilistic tools can be used to map the uncertainty around medium-term trajectories for public debt and, in combination with fiscal stress tests, inform the likelihood of remaining within debt ceilings.",
    "**Analyzing and Managing Fiscal Risks Best Practices; IMF Policy Paper; May 4, 2016**"
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