STATE-OWNED ENTERPRISE (SOE) STRESS TEST (ST) TOOL

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Provides a forward-looking assessment of the resilience of an SOE's financial position under a range of alternative scenarios.
Projects individual SOEs financial position, including cash flows, liquidity and debt servicing ability under baseline and stress scenarios, over a multi-year horizon.
Scenarios can be designed to be relevant for individual SOEs and may comprise macroeconomic and market-specific elements.
Estimates net inflows to the budget and the contribution of SOEs to the public sector balance sheet under both scenarios.
Benchmarks the performance of SOEs against peer comparators, using profitability, to help identify the most vulnerable SOEs and prioritize them in the stress testing analysis.

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.
SOE financial performance is shaped by external factors such as demand, input prices, exchange rates, and uncompensated public policy obligations, as well as by internal governance and management quality.
Forward-looking assessment tools help identify the economic conditions under which fiscal costs may materialize and their consequences for public sector finances.

Supports fiscal risk analysis and monitoring by assessing the potential for fiscal costs to be realized under different scenarios.
Provides inputs for monitoring fiscal risks by highlighting the main dynamic vulnerabilities of SOEs.
Helps identify SOEs that may be underperforming, whether financial weaknesses are structural, and whether remedial actions may be required.
Supports fiscal sustainability analysis by identifying potential fiscal costs that can be included in baseline and shock scenarios for debt sustainability analysis.

The Stress Test Tool and SOE Health Check Tool are complementary and help policymakers identify SOEs that may be financially vulnerable and at higher risk of generating fiscal costs.
The tool can support analysis related to the Discrete Loan and Guarantee Tool by projecting the stock and service payments of SOEs' debt guaranteed by the government and identifying concrete triggers of financial distress that hamper those payments.
Outputs of the Stress Test can inform broader Fiscal Stress Tests and public sector balance sheet analysis by generating baseline and stress scenarios for individual SOE cash flows and balance sheets and inform the size of potential contingent liability realizations.
Provides inputs on SOEs debt stock and contingent liability realizations to IMF Debt Sustainability Analysis.