How to Manage Fiscal Risks from Subnational Governments

September 1, 2022

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Format: Chicago

Sandeep Saxena. How to Manage Fiscal Risks from Subnational Governments, (USA: International Monetary Fund, 2022) accessed November 14, 2024

Summary

Subnational governments can create sizable fiscal risks for central governments. In addition to impacting service delivery at the grassroots level, unsustainable subnational finances can be a continuous drain on central resources. The need for stronger public financial management systems and capacities to analyze and manage risks at the subnational government level cannot be overemphasized. Central governments need to develop sound institutional mechanisms to systematically monitor the health of subnational finances to be able to proactively manage associated risks. This How to Note provides a framework for central governments that seek to assess and manage fiscal risks stemming from weak subnational finances. It analyzes the sources of subnational finance vulnerabilities and argues that central governments would benefit from putting in place the following: (1) a stronger regulatory framework, (2) improved fiscal reporting, and (3) enhanced central oversight. The lessons distilled from the international experience are particularly useful for developing economies where the management of risks can be improved.

Subject: Economic sectors, Financial crises

Keywords: Budget planning, Contingent liabilities, Fiscal institutions, Fiscal policy, Fiscal risks, Public debt, Public financial management (PFM), Subnational debt, Subnational finances

Publication Details

Pages:

29
Volume:

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DOI:

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Issue:

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Series:

How-To Note No 2022/003
Stock No:

HTNEA2022003
ISBN:

9798400216831
ISSN:

2522-7912

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