FISCAL RISK ASSESSMENT TOOL (FRAT)

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The Fiscal Risk Assessment Tool (FRAT) provides a high-level portfolio perspective on a wide range of fiscal risks which governments are typically exposed to.
The FRAT provides a starting point for fiscal risk analysis by helping countries identify the largest and most important sources of fiscal risks that can be the focus of more detailed quantification using specific tools in the IMF's Fiscal Risk Toolkit.
The tool is Microsoft Excel-based with an intuitive interface and user-guidance embedded in the template (following 15 steps).

Provides a qualitative identification of fiscal risks complemented by some quantitative analysis.
Offers a high-level portfolio perspective on a wide spectrum of 14 fiscal risks, covering macroeconomic, specific, and institutional risks.
Provides outputs at risk-by-risk level and portfolio level, including:
- historical risk realizations
- information and data gaps
- impact-likelihood matrix
- risk mitigation
- macro-fiscal forecast error analysis
- time series analysis
Provides international comparisons along 24 indicators.
Allows users to choose flexible effort level (from 3 hours to 3 weeks).

Fiscal risks can have a significant impact on government finances and originate from a wide range of sources.
Recent experiences, including the COVID-19 pandemic and the Global Financial Crises, have illustrated how the realization of fiscal risks from various sources, including environmental risks, the financial sector, macroeconomic developments, and others, can lead to significant increases in government deficits and debt liabilities, and a deterioration of public sector net worth.
The realization of fiscal risks can be:
- large
- biased towards the downside
- highly correlated
- nonlinear in impact
A holistic, portfolio perspective helps governments understand interactions among risks, macro-criticality, and how to prioritize scarce resources for risk management.

Helps countries identify the scale and source of their fiscal risk exposures.
Supports fiscal risk management by helping countries:
- prioritize fiscal risk monitoring and mitigation efforts
- assign institutional responsibilities for risk management
- identify information and data gaps
Contributes to macro-fiscal policy analysis by identifying risks to:
- strengthen baseline projections
- design stress scenarios for debt sustainability analysis
- design fiscal stress tests
- calibrate fiscal rules
Informs amounts of budget provisions or fiscal buffers that may be required to accommodate risks.
Helps foster fiscal transparency and accountability by supporting fiscal risk reporting (e.g., fiscal risk statements), accounting and statistical reporting.

Insights generated by the FRAT can serve as inputs to macro-fiscal tools, including:
- the Debt Sustainability Analysis for Low-Income as well as Market-Access Countries
- the Medium-Term Debt Management Strategy Analytical Tool
- the Fiscal Stress Test (to enhance baseline projections and to derive shock scenarios)
The FRAT can help identify priority risks for which in-depth analysis can be conducted using risk-specific tools, including:
- the SOE Health Check Tool
- the SOE Stress Test Tool
- the PPP Fiscal Risk Assessment Model
- the Discrete Guarantee & Loan Assessment Tool
- the Standardized Guarantee Assessment Tool
Users who initially use risk-specific tools can use their outputs as inputs to the FRAT.
The sources of risks used in the FRAT are largely aligned with Pillar III of the Fiscal Transparency Code.
Analyses from the FRAT (e.g., international comparisons, the availability of information and data) can be used to inform the Fiscal Transparency Evaluation of a country.