Assessing Fiscal Risks in Bangladesh

IMF Working Papers, May 19, 2015

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Assessing Fiscal Risks in Bangladesh

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Bibliographic details

• Authors: Leandro Medina
• Published: May 19, 2015
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781513551081.001

Summary and objective

• This paper identifies, quantifies, and assesses fiscal risks in Bangladesh.
• It measures risks arising from shocks to GDP growth, the exchange rate, commodity prices, and interest rates.
• It analyzes specific fiscal and institutional risks: the pension system, the issuance of guarantees, the state-owned commercial banks, and the external borrowing and debt management strategy.
• Key finding: fiscal aggregates are particularly sensitive to shocks to commodity prices and exchange rates.
• Other risks that could affect fiscal aggregates are the unfunded pension system and the limited institutional capacity.

Methodology

• Sensitivity analysis.
• Stochastic simulations.

Major identified risk channels

• Macroeconomic shocks:
  • Shocks to GDP growth.
  • Shocks to the exchange rate.
  • Shocks to commodity prices.
  • Shocks to interest rates.
• Specific fiscal and institutional risks:
  • The pension system (noted as unfunded).
  • The issuance of guarantees (contingent liabilities).
  • State-owned commercial banks.
  • External borrowing and debt management strategy.

Findings and implications

• Fiscal aggregates exhibit particular sensitivity to:
  • Commodity price shocks.
  • Exchange rate shocks.
• Institutional and structural vulnerabilities that could exacerbate fiscal risks:
  • An unfunded pension system.
  • Limited institutional capacity.

Subject areas and keywords

• Subject: Aging, Expenditure, Fiscal risks, Labor, Macroeconomic risks, Pension spending, Pensions, Public debt, Public financial management (PFM)
• Keywords include: Bangladesh; commodity price; contingent liabilities; debt; exchange rate; expenditure; fiscal risks; guarantees; Macroeconomic risks; Pension spending; pensions; shocks to GDP growth; sovereign debt; vis-à-vis budget figure; WP

Content in this bundle

• Assessing Fiscal Risks in Bangladesh; by Leandro Medina; IMF Working Paper No. 15/110; May 1, 2015
  • Assessing Fiscal Risks in Bangladesh; by Leandro Medina; IMF Working Paper No. 15/110; May 1, 2015 (Markdown version)
  • Assessing Fiscal Risks in Bangladesh; by Leandro Medina; IMF Working Paper No. 15/110; May 1, 2015 (PDF)