Contingent government liabilities : a hidden risk for fiscal stability
This paper points out that Governments are facing increasing fiscal risks and uncertainties. Two of the reasons for this situation are: first, the international integration of financial markets, which has meant greater volumes and volatility of cross-border flows of private capital; and, second, the privatization of state functions, accompanied by implicit or explicit state guarantees. The third reason is that policymakers pursuing a balanced budget or some deficit target tend to favor off-budget forms of state support that do not require immediate cash and that, at least for some time, hide the underlying fiscal cost. This paper first classifies and analyzes the potential obligations and fiscal risks governments face and their sources. It next outlines the options for reducing fiscal risks in the context of fiscal adjustment, with particular attention to the typology and analysis of specific fiscal risks, the high risk exposure of governments of transition and emerging-market economies, and the quality and bias in government decision-making at the time of fiscal adjustment. Several questions are addressed. How can policymakers be made accountable for recognizing the long-term cost of all forms of government activities? How can the moral hazard induced by government interventions be reduced? What standards for public sector accounting, budgeting, reporting, and risk management would foster sound fiscal performance in the long term?
|Date of creation:||31 Oct 1998|
|Contact details of provider:|| Postal: 1818 H Street, N.W., Washington, DC 20433|
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mody, Ashoka & Patro, Dilip K, 1996. "Valuing and Accounting for Loan Guarantees," World Bank Research Observer, World Bank Group, vol. 11(1), pages 119-142, February.
- Peter S. Heller, 1997. "Aging in the Asian â€œTigersâ€ ; Challenges for Fiscal Policy," IMF Working Papers 97/143, .
- William Easterly, 1999.
"When is fiscal adjustment an illusion?,"
CEPR;CES;MSH, vol. 14(28), pages 55-86, 04.
- George G. Pennacchi, "undated". "Government Guarantees for Old Age Income," Pension Research Council Working Papers 97-10, Wharton School Pension Research Council, University of Pennsylvania.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1989. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.