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Fiscal Risks Are Not Only in the Budget

Author

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  • Hana Poláèková-Brixi

Abstract

The article demonstrates the importance of incorporating contingent liabilities into fiscal analysis. When explicit expenditures are shifted off budget or replaced by guarantees, achieved fiscal balance is an illusion. In the Czech Republic, fiscal adjustment may have been overstated by some three to four percent of annual GDP during the 1990's. A stabilization program accompanied by a build-up of contingent liabilities, particularly, state guarantees and obligations to cover liabilities emerging from directed credit and from the purchases of bad assets by state-sponsored agencies, may not be sustainable. The study concludes that the government of the Czech Republic should aim at reducing its overall fiscal vulnerability rather than the budget deficit, develop a more effective strategy to resolve the problem of hidden debt, and enhance the public-finance institutional framework to create adequate incentives for policy makers in dealing with contingent liabilities.

Suggested Citation

  • Hana Poláèková-Brixi, 2000. "Fiscal Risks Are Not Only in the Budget," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 50(3), pages 147-159, March.
    • Handle: RePEc:fau:fauart:v:50:y:2000:i:3:p:147-159
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    File URL: http://journal.fsv.cuni.cz/mag/article/show/id/207
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    Cited by:

    1. Ivan Matalik & Michal Slavik, 2003. "Fiscal issues and central bank policy in the Czech Republic," BIS Papers chapters, in: Bank for International Settlements (ed.), Fiscal issues and central banking in emerging economies, volume 20, pages 122-130, Bank for International Settlements.

    More about this item

    Keywords

    public finance; transition; hidden debts;
    All these keywords.

    JEL classification:

    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • P35 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Public Finance

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