Fiscal Risk Management Research Articles

Exploration and Improvement Path of Local Government Debt Risk Warning Mechanism Based on KMV Model: Taking Bengbu, Anhui as an Example

This article is based on the KMV model and explores methods for improving the local government debt risk warning mechanism under the backdrop of the pandemic, with a case study of Bengbu City in Anhui Province, China. In the context of an economic downturn and the impact of the COVID-19 pandemic, accurately understanding and effectively managing the fiscal risks of local governments is particularly important. The study focuses on analyzing the impact of changes in fiscal revenue and expenditure structures during the pandemic on local debt risks, using the KMV model for in-depth analysis. By comparing fiscal data from different time periods, the effectiveness of the existing local government debt risk warning mechanisms was evaluated. This paper also discusses how to improve risk management and proposes specific strategies and suggestions. These recommendations aim to enhance the efficacy of local government debt warning systems, especially considering the unique challenges brought about by the pandemic and economic changes. The study shows that by improving fiscal risk management and optimizing warning mechanisms, it is possible to better respond to various economic challenges that may arise in the future, providing local governments with more robust and reliable financial risk control plans.

DEVELOPMENT OF INFORMATION SUPPORT FOR FISCAL RISK MANAGEMENT WITHIN CRISES

Crisis phenomena, such as economic downturns, health emergencies and geopolitical conflicts, had a significant impact on the transparency of information support for public financial management processes and the development of digitalization of the economy.The objective of the study is to assess the current state of information support and transparency of the management of fiscal risks caused by state-owned enterprises' activities under uncertainty.Within the study, the existing international approaches to identifying and assessing fiscal risks are analyzed; the areas for improving information support for managing fiscal risks caused by the activities of state-owned enterprises in emergency situations are identified; the impact of digital finance development on mitigating fiscal risks caused by emergencies is assessed. Proposals to increase the transparency of public finances and create additional revenues to the state budget by the development of innovative technologies are substantiated.Implementation of fiscal and monetary policy measures to mitigate the impact of COVID-19 and ensure sustainable post-pandemic recovery requires relevant financial information reflecting the country's financial position. A reliable source of such information is public financial and budgetary statements prepared by IPSAS and on an accrual basis. Given the negative impact of uncertainty caused by the coronavirus pandemic and war on the activities of state-owned enterprises, an important tool for improving the efficiency of fiscal risk management is the unification of approaches to establishing indicators for assessing relevant risks and providing information for their calculation. In response to lockdowns and social distancing measures during crises, citizens have increasingly relied on digital channels to access government services, pay taxes, and receive financial support. This has necessitated improved digital infrastructure and service delivery mechanisms.

Інформаційне забезпечення планування діяльності державних підприємств в умовах економічної невизначеності

Introduction. The period of economic uncertainty has led to the globalization of fiscal risks, which is marked by a significant decline in budget revenues and the intensity of economic processes in general. The deterioration in the performance of state-owned enterprises played an important role in this. Problem Statement. The need to mitigate fiscal risks arises at the planning stage of business entities' activities, which requires reliable and relevant information support. Purpose. Assessment of the impact of state-owned enterprises on the planned indicators of the state budget and study of the information basis for the formation of a financial plan as a source of data for managing fiscal risks in the context of the COVID-19 pandemic. Methods. General scientific and special methods of cognition are used: analysis, synthesis, grouping, averages and relative values, coefficient analysis, comparison, modeling, generalization. Results. The most vulnerable type of state budget revenues to the effects of the COVID-19 pandemic was the receipt of part of the net profit of state-owned enterprises and dividends on the state share. It is determined that one of the key information bases for managing fiscal risks is the financial plan of state-owned enterprises. It is substantiated that retrospective and prospective information for the formation of the financial plan is produced in the accounting system, which ensures the identification and systematization of data on the types of taxes and the amount of payments incurred. The information is grouped by functional basis, which makes it possible to structure the sources of planning at the national and micro levels and will help to improve the quality of information support for fiscal risk management to offset the negative impact of the COVID-19 pandemic on the performance of budget revenues. Conclusions. The COVID-19 pandemic has had a significant negative impact on the planning process of state-owned enterprises and the stability of the state budget revenues. The key source of information for fiscal risk management at all stages of the budget process is reliable and valid accounting and reporting data and indicators.

Fiscal risk management in Ukraine under new challenges

This article examines fiscal risks and their management in Ukraine and abroad, drawing on international best practices. The main aim is to analyze global risks in the short and long term and evaluate how public finances have been managed in Ukraine and other countries during economic crises, while suggesting areas for improvement. The study utilized various scientific methods, including the structural-functional method to uncover risk management mechanisms within public finance systems and the comparative method to contrast key indicators of Ukraine's public finance system with those of other nations. Key findings include the identification of primary tools used nationally and internationally to mitigate the impact of fiscal shocks during crises. Budgetary practices from different countries were also examined, emphasizing fiscal rules, social expenditure allocation, and incentives for innovation and investment. The research highlights how global challenges and economic crises have led countries to adopt different approaches based on their economic development and risk management integration into fiscal processes. Recommendations are provided to enhance fiscal risk management measures in Ukraine, particularly in the ongoing wartime context. In conclusion, this article underscores the importance of effective fiscal risk management and offers specific suggestions to strengthen fiscal risk management practices in Ukraine, considering current circumstances and unforeseen challenges.

Fiscal Risk Management of Public–Private Partnership Projects: A Multidimensional Identification and Assessment Framework

In public–private partnership (PPP) projects, governments often need to provide guarantees to investors because of the risks created by the large scale of the investments and the long tenures of the projects. Yet, research on the assessment of fiscal risk in PPP projects remains scarce. Based on the theory of project life-cycle management, this study constructed a multidimensional identification and assessment framework for PPP fiscal risk. A fiscal risk matrix model was developed, and feasibility, standardization, and sustainability were identified. These were categorized into three dimensions of PPP fiscal risk, and their indicators’ hierarchical levels were evaluated and ranked. A risk model, called the fuzzy evaluation model of PPP fiscal risk, which shows the value of the comprehensive evaluation of PPP fiscal risk based on a fuzzy analytic hierarchy process (FAHP) approach, is proposed. The results demonstrate the significance of this valuation for both governments and investors, providing a clear reference when they face pressure from the fiscal risks of PPP projects.

The management of fiscal risks as a source of effective financial management: case of Moroccan companies

The objective of our study is to obtain a clearer vision of the origins of the sources of fiscal risks. In order to conduct our research, we realised a survey to determine the real origins of the sources of fiscal risks faced by Moroccan companies. The findings indicate that fiscal risks have both internal and external origins, which brings Moroccan companies to ask themselves how to deal with these risks in order to enhance their results and attain performance.

The Management of Fiscal Risks as a Source of Effective Financial Management: Case of Moroccan Companies

The Management of Fiscal Risks as a Source of Effective Financial Management: Case of Moroccan Companies

Прогнозування втрат державного бюджету в післявоєнний період через фіскальні ризики, пов’язані з діяльністю суб’єктів господарювання державного сектору

The article reviews the world practice of fiscal risks management, describes positive development fiscal risks management in pre-war period in Ukraine. The role public sector companies in the structure of fiscal risks and forecast trends are determined according to requirements of the post-war period. The activities of the largest state-owned companies Naftogaz of Ukraine, Ukrzaliznytsia, Ukrenergo, Energoatom were analyzed. The high risk of a negative impact associated with the activities of state-owned companies on the indicators of the state budget were determined. The existing mechanisms for modeling the expected results of the activities of companies in the economic public sector are described. They are only estimates and reflect only the possible trends of financial forecasts, and cannot be considered as a guarantees to the occurrence of relevant events. The facts are substantiated, that now need to correct approaches to fiscal risk management, the need to use modern scientific apparatus, in particular a multifactorial approach based on artificial neural networks for forecasting state budget losses due to fiscal risks.

The Analysis of Sub-National Fiscal Risk in Indonesia

A Fiscal Risk Management will increase fiscal sustainability in the nation development. The International Monetary Fund revealed that one source of fiscal risk for the government is Sub-national Risk or a fiscal pressure which came from the local governments. Until 2021, the Government of Indonesia has not assessed the Sub-national fiscal risk as a source of fiscal risk in the preparation of the State Revenue and Expenditure Budget (APBN). This study aims to propose a sub-national fiscal risk assessment model and carried out an assessment of the risk level in the provincial governments, and analyzed it for the year 2023. The data used was The Budget Realization Report and Balance Sheet of the Provincial Government for the year 2015 - 2020. The method used is literature study, quantitative descriptive analysis, and forecasting time series analysis. The results of this study are the definition of subnational fiscal risk, a measurement formula, and a map of Indonesia's subnational fiscal risk. The Local Government which lowest fiscal risk in the year 2023 is DKI Jakarta and the highest fiscal risk is DI Aceh. A deeper analysis shows the results that regions with the Trade development sector have better fiscal management and lower levels of fiscal risk. This study provides new insights for the Government of Indonesia in develop a strategy to improve a fiscal capacity of local government and the formulation of policies regarding the financial balance between central government and local government.

Arab Republic of Egypt: Technical Assistance Report-Improving Surveillance of Public-Private Partnerships

This report summarizes key findings and recommendations of two off-site visits made by Mr. Benoit Wiest, Public Financial Management Advisor at METAC, and Ms. Katja Funke, Expert, between December 2020 and April 2021. The mission worked with the Public-Private Partnerships (PPPs) unit to develop capacities and transparency of fiscal risk management, and support the update of the regulatory framework, as well as the analysis of fiscal risks from PPPs.

STATE POLICY OF INCOME REGULATION IN THE CONDITIONS OF INCREASING FISCAL RISKS CAUSED BY THE COVID-19 PANDEMIC

Introduction. Today, in the conditions of the COVID-19 pandemic, a number of economic problems have arisen in the country, which can be prevented by improving revenue policy. As the revenue part is formed in the current conditions of the budget decentralization reforms, the risks arising during the pandemic have become an important challenge for the entire economic system of the state and each territorial community in particular. The purpose of the article is to highlight current issues of state regulation of the domestic economy related to global economic challenges and fiscal risk management caused by the COVID-19 pandemic. Results. The high dependence of budget revenues on tax and debt policies, the growth of their role in the economic downturn are analyzed. Emphasis is placed on the need and importance of developing tactics and strategies for budget and tax policies, as well as the possibility of their flexible change in the face of unpredictable economic downturns. The need for state revenue policy to take into account fiscal incentives and fiscal decentralization is indicated. Particular attention is paid to the opportunities and threats posed by the deepening of decentralization processes in Ukraine, emphasis is placed on the components of the financial capacity of local communities and the adequacy of financial resources. It was mentioned that the territorial redistribution of funds must take into account the requirements of the most rational allocation of productive forces, promote business, resolve conflicts that arise in the process of balancing budget revenues and constitutional social obligations. Processes of decentralization of budgetary and tax relations should be accompanied by strengthening of their social orientation. It is noted that the financial literacy of the population plays a significant role in reducing the level of emotional turmoil during economic downturns. At the same time, the study proposed a hypothesis for further research about the dependence of the effectiveness of decentralization policy on the use of modern approaches to financial management at the regional level, which require the implementation of innovative regulatory levers for change management. Conclusions. A number of conclusions and recommendations were formulated. In particular, it is proposed to implement a number of measures to identify and counter the risks of destabilization as a basis for ensuring the financial and economic security of the state. The need to further improvement of the institutional coordination of the application of regional regulatory fiscal instruments and mechanisms with national and international norms and rules was emphasized. It was noted that in the conditions of quarantine restrictions due to the COVID-19 pandemic, the implementation of a set of measures of tax and budget support for citizens, small and medium businesses should be carried out in accordance with a clearly defined and approved program. Keywords: fiscal policy, budget policy, consequences of COVID-19, decentralization, public finance, financial literacy.

Risk Management Implementation in Indonesian State Budget Fiscal Risk Disclosure

Fiscal risk management is part of the management of financial risk in the State Budget. Basically, these risks are interrelated although they are different things. State financial risk as an inherent risk of State Budget has a different process from fiscal risk management. This study aims to evaluate the management process and disclosure of fiscal risk in the State Budget using a case study-qualitative approach. The integration of the risk management system between the risk management unit and the fiscal risk management unit, and development of fiscal risk management framework could improve the process of managing and disclosing fiscal risk in the Budget Statement.

Growth in the debt burden of the global economy: the scale and directions of counteraction in the context of the crisis

The article analyzes the key aspects of the debt burden, which has taken on an unprecedented scale in the economies of developed and developing countries. The coronavirus pandemic has led to a significant increase in government support for households and companies, while the volatility of global financial markets has increased. Given the continuing uncertainty about the further recovery of the global economy, the timing of countries’ return to pre-crisis levels of borrowing remains unclear. At the same time, we note a growing mismatch between risk assessments in financial markets and the expected outlook for economic recovery. Central banks of countries have taken unprecedented measures to counter the growth of debt burden, but in developing countries, the limited fiscal space does not allow effective measures to prevent the continued growth of debt. The article also notes that the cheapness of new loans is an aggravating factor in the growth of borrowings and the deterioration of the balance of payments. The author came to the conclusion that a sharp increase in public debt in many countries will preserve the vulnerability of the world economy, therefore, it is necessary to carefully adjust the fiscal policies of the countries of the world, modernize fiscal risk management strategies and modernize tax reforms. In addition, in conditions of high debt, approaches to assessing the risks of attracting foreign direct investment are changing, which in the future will have a significant impact on the redistribution of international capital flows. However, even in the face of excessive debt burden, governments need to continue lending support to households and companies in shortterm policies, in parallel with measures to manage capital outflows and achieve exchange rate flexibility.

Impact of Governments’ Fiscal Behaviors on Public Finance Sustainability: A Comparative Study

The aim of this research is to highlight the specificity of fiscal sustainability in some developing EU countries by analyzing the implications of fiscal rules on governments’ fiscal behaviors. We employ a panel data analysis to evaluate developing EU countries for the period 2000–2014 and we investigate the status of convergence of fiscal responsibility coordinates by computing the convergence score of fiscal responsibility. The research is based on interdisciplinary coordinates and helps to consolidate judgments from both legal and financial perspectives, making a contribution to the literature that investigates the relationship between the legal framework related to government decision-making and public finance sustainability. The choice of the study sample in relation to developing EU countries represents a contribution and a point of reference for the literature that investigates the sustainability of developing EU countries and highlights the importance of fiscal risk management and control mechanisms in enhancing the performance of the public sector and fiscal sustainability. The results suggest that it is important to reinforce the interaction between the legal framework and the institutional one by identifying good practices for designing and operating effective independent fiscal institutions, making them capable not only of advising the government on fiscal policy matters but also of promoting sound fiscal policy and sustainable public finance.

Islamic Republic of Afghanistan

This remote mission provided the authorities with advice in fiscal risk management. The mission covered three interrelated topics: (i) the Public Finance and Expenditure Management (PFEM) Law and fiscal risks oversight and management; (ii) the Stated-Owned Corporations (SOC); and (iii) the Public-Private Partnerships (PPP). This report focuses especially on reforms that could be implemented during the life of the next IMF program.

Сучасні підходи до управління фіскальними ризиками: методологія та практика

The formation of public finances in Ukraine is significantly influenced by fiscal risks, which, first of all, are associated with macro-economic shocks, accumulated through the State and guaranteed debt, natural disasters and other circumstances that have a significant negative impact on the stability of indicators of the budget system. The article is aimed at disclosing the essence, systematize methodological principles and practical approaches to managing fiscal risks for assessment, minimization of their impact on budget indicators in modern conditions of economic uncertainty. Comparison and generalization of existing developments of this problematics made it possible to systematize and characterize the following: the main approaches to understanding the economic essence of fiscal risks (functional, institutional, causal, structural, managerial); categorize risks in accordance with the current recommendations of international institutions (IMF, World Bank, OECD); reveal the peculiarities of the main components of the best practices of fiscal risk management in the countries of the world. Attention is focused on expanding the classification of fiscal risks in the national methodological provisions and their taking into account in the tax and customs spheres; directions of integration of the fiscal risk management system into the budget process of local budgets, amalgamated hromadas; development of scientific provisions on the substantiation of the integral indicator of assessing the fiscal risks, characterized by the nonlinear nature of the development of economic processes and the creation of powerful think tanks for qualitative measurement and forecasting of possible threats in the sphere of public finances.

"Fiscal-budgetary responsibility and implications on the European budgetary framework in the context of the COVID-19 crisis"

"The aim of this paper is to analyze fiscal-budgetary responsibility and the implications for the European budgetary framework in the context of the COVID-19 crisis. The study incorporates retrospective analysis of the European institutional framework, presentation of concepts and typologies of institutional organization in direct relation to the fiscal responsibility. The research hypotheses are based on the demonstration of inconsistency in the European working framework, regarding budgetary fiscal responsibility, as well as on the foundation of the institutional levels of organization and the demonstration of the existence of warning indicators regarding the vulnerabilities of the budgetary framework. The results of the study confirm the working hypotheses. Therefore, there is a need to establish responsibility mechanisms, which allow the replacement of arbitrary rules with clear directions to be followed by policy makers, so that interference between different institutional levels directly impacts the coordinates of fiscal risk management. The path of combating an economic crisis caused by the COVID-19 pandemic involves coordination, responsibility and common frameworks for action, so that the test of European unity to be passed successfully. The study exemplifies the importance of perceiving fiscal risk in relation to specific vulnerabilities and reveals a number of challenges to fiscal responsibility in the context of the COVID-19 crisis."

FINANCIAL AND LEGAL MEASURES TO COUNTER THE NEGATIVE CONSEQUENCES OF THE CORONAVIRUS PANDEMIC (CRP) IN THE SYSTEM OF SOCIO-POLITICAL MEASURES OF BUDGETARY POLICY OF STATES: NATIONAL AND INTERNATIONAL ASPECTS

Introduction. The socio-political and legal prerequisites for enhancing the coordinating role of the state, its budgetary policy and financial and legal regulators to counter the negative consequences of the coronavirus infection pandemic (PKI) are considered. International financial organizations (IMF, World Bank, OECD and others), supporting states in the fight against CRP, propose new standards of fiscal and investment policy developed by them on the basis of financial planning and budgeting with the involvement of budgetary funds and public financial reserves for social and economic support of the population from the consequences of CRP. States use these post-CRP international stability standards as part of their fiscal and development strategies. Materials and methods. The report of the UN Department of Global Communications on measures to counter the destruction of economies as a result of COVID-19 and the implementation of the Sustainable Development Goals 2020 was used. The conceptual provisions of the Analytical Summary of the Department of Fiscal Policy of the IMF (April 2020) with recommendations to government agencies on the restoration of economies destroyed by the CRP were considered. The article provides the norms of the Russian budget, tax, banking legislation, adopted in the implementation of the provisions of the Decree of the President of the Russian Federation dated 02.04.2020 No. 239 on measures against CRP. The Federal Law of the Russian Federation of March 18, 2020 No. 52-FZ on budgetary policy for 2020 and for the planning period of 2021 and 2022 was considered in connection with the CRP. Used a document of the Bank of Russia dated 08/10/2020. on measures to limit the consequences of the coronavirus infection pandemic and other acts. Results. The international recommendations of the IMF on supporting the public sector of the economies in the context of countries overcoming the consequences of the CRP through budget loans, guarantees, fiscal risk management, and coordinated fiscal stimulus are considered. A steady tendency on the part of states and international financial organizations (IFIs) to strengthen the budgetary law of states and promote “soft law” international legal regulation of standards for the implementation of the planning, coordinating and supervisory functions of states, which should be strengthened as overcoming the destroyed CRP economies, finance, education, culture, social sphere. Discussion and conclusions. IMF in their reports emphasize that international financial and other cooperation of states in the context of the fight against CRP should move to a new level of trust and mutual assistance. It is shown that the new financial and legal norms in the budgetary, tax, and banking legislation of the Russian Federation in 2020 act as a set of anti-crisis regulation measures in the face of countering the CRP with the involvement of budgetary funds from the National Welfare Fund (NWF) and other sources of budgetary financing under control by the method of treasury support.

Identification and assessment of threats to the financial security system of the state in the field of customs control

The article is devoted to the study of financial security of the state in the field of customs control. Due to high percentage of customs payments in the amount of tax revenues, one of the important problems of ensuring an adequate level of financial security is the imperfection of the control mechanism for completeness and timeliness of their collection, which requires identification and assessment of threats to financial security in the field of customs control. The purpose of this article is to identify and assess threats to the financial security of the state in the customs sphere, the source of which is the inefficient functioning of the customs control mechanism. The monitoring of the state of customs control in the financial security system revealed a significant number of violations of customs legislation, which requires the identification of the relationship of threats to financial security with the structure of the customs control mechanism. These include ineffective regulatory and legal support for customs control; lack of effective planning and forecasting of indicators of customs payments to the state budget by the Ministry of Finance; lack of methods for assessing the effectiveness and efficiency of control in the customs sphere; ineffective management decisions of territorial bodies; insufficient information support (incomplete implementation of the automated system of control over the circulation of excisable goods); inefficiency of the customs and fiscal risk management system, low percentage of agreement on the results of inspections of accrued amounts of customs duties; non-compliance with the recommendations of the internal audit department to improve the system of customs control, etc. According to the results of the study, it was proposed to differentiate threats according to the components of the customs control mechanism, which made it possible to distinguish threats of the subject-object component and its provision (organizational, regulatory, personnel and information); threats related to the selection and application of control methods; threats caused by the functioning of the unit for assessing the results of control from the standpoint of compliance with the established indicators of financial security and the unit for making management decisions based on the results of customs control. Such identification will contribute to the further development of measures to mitigate the negative impact of these threats through the improvement and development of the components of the customs control mechanism aimed at preventing and avoiding them.

Управління фіскальними ризиками в умовах пандемії COVID-19

Управління фіскальними ризиками в умовах пандемії COVID-19