Fiscal Sustainability, Risks and Vulnerabilities

PRMED has developed a comprehensive toolkit for fiscal sustainability in the context of uncertainty.  The tool has its roots in traditional fiscal-sustainability analysis, but incorporates several new features that reflect modern developments.  It allows for explicit analysis of the effects of uncertainty not just through scenario analysis, but also through full stochastic analysis allowing Value-at-Risk assessments.  Given the uncertainty and risks posed by the current oil shock, the tool was extended to account for commodity price risks and possible risks stemming from declining production volumes.

Basic Concepts of Fiscal Sustainability (Key Readings)

• Theoretical Prerequisites for Fiscal Sustainability Analysis - Burnside, 2005.  Chapter. 2 in Craig Burnside, "Fiscal Sustainability in Theory and Practice," World Bank.
• Some Tools for Fiscal Sustainability Analysis - Burnside, 2005.  Chapter 3 in Craig Burnside, "Fiscal Sustainability in Theory and Practice," World Bank.
• Inflation, External Debt, and Financial Sector Reform: A Quantitative Approach to Consistent Fiscal Policy - van Wijnbergen, Rocha and Anand, 1989.  World Bank Working Papers, WPS No. 0261, World Bank.
• Assessing New Approaches to Fiscal Sustainability Analysis - Craig Burnside, 2004.  World Bank.

Assessing Fiscal Sustainability and Managing Uncertainty

• The Fiscal Sustainability Tool

Manual and Applications for the Fiscal Sustainability Tool

• How to of Fiscal Sustainability: A Toolkit for Assessing FS in MICs - World Bank, 2005.  Concept Note, World Bank.
• Quantitative Approaches to Fiscal Sustainability Analysis: A Case Study of Turkey since the Crisis of 2001 - Budina and van Wijnbergen, 2008. The World Bank Economic Review, World Bank.
• The “How to” of Fiscal Sustainability Analysis: A Technical Manual for Using the Fiscal Sustainability Tool - Bandiera, Budina, Klijn and van Wijnbergen, 2007.  World Bank Working Paper No. 4170, World Bank.
• Quantitative Approaches to Fiscal Sustainability Analysis: A New World Bank Template Applied to Turkey - Budina and van Wijnbergen, 2007.  World Bank Working Paper No. 4169, World Bank. [Technical Annex II for the above report]

Toolkit for Assessing Fiscal Sustainability and Managing Uncertainty in Oil-Rich Countries

• The Fiscal Sustainability Tool for Oil-Rich Countries

The Challenge of Oil Revenue Volatility

• Nigeria's Growth Record: Dutch Disease or Debt Overhang? - Budina, Pang and van Wijnbergen, 2007.  World Bank Working Paper No. 4256, World Bank.
• Fiscal Sustainability Analysis in Oil-Rich Developing Countries - 2007.  PRMED Note, World Bank.

Applications of the Fiscal Sustainability Tool

• Managing Oil Revenue Volatility in Nigeria: The Role of Fiscal Policy - Budina and van Wijnbergen, 2008.  Chapter 10 in edds. Delfin and Page, "Africa at a Turning Point?"  World Bank.

Fiscal Risks and Valuation of Contingent Liabilities

• Contingent Liabilities – a Threat to Fiscal Stability - Polackova, 1998.  PREM Note No. 9, World Bank.
• Contingent Government Liabilities: A Hidden Risk for Fiscal Stability - Polackova, 1998.  World Bank Working Paper, WPS No. 1989, World Bank.
• An Option-Pricing Approach to Secondary Market Debt Applied to Mexico - Claessens and van Wijnbergen, 1990.  World Bank Working Paper WPS No. 333, World Bank.
• Public-Private Partnerships in the New EU Member States: Managing Fiscal Risks - Budina, Brixi and Irwin, 2007.  World Bank Working Paper No.114, World Bank.
• Government at Risk: Contingent Liabilities and Fiscal Risk, Brixi and Schick, 2002.  The World Bank and Oxford University Press.
• Background Papers - World Bank Staff. 2007.  APEC Finance Minister's Meeting, Australia, August 2-3, 2007.

Support to APEC FMM Workshop on Fiscal Risk Management

• Fiscal Risk Management: Summary - Budina, Irwin and Liu, 2007.  Briefing Note for APEC Meeting, Washington DC.
• Understanding the Fiscal Effects of Public-Private Partnerships - Irwin, 2007.  Briefing note for APEC Meeting, Washington DC.
• Managing Sunbational Fiscal Risks - Liu, 2007.  Briefing note for APEC Meeting, Washington DC.