Managing Fiscal Risk in Bulgaria

Managing Fiscal Risk in Bulgaria

To understand the fiscal position of a country, contingent liabilities and other sources of fiscal risk need to be considered. The authors develop a framework to assess and manage fiscal risk in Bulgaria. Bulgaria's Currency Board Arrangement...

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Bibliographic Details
Main Authors:	Brixi, Hana Polackova, Shatalov, Sergei, Zlaoui, Leila
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2015
Subjects:	ASSET AND LIABILITY MANAGEMENT ASSETS BALANCE SHEET BANK RESERVES BANKING SECTOR BENCHMARKS BONDS BORROWING BORROWING POLICIES BUDGET DEFICIT BUDGET DEFICITS BUDGET EXPENDITURES BUDGET REVENUES BUDGETARY EXPENDITURES CAPITAL FLOWS CAPITAL MARKETS CASH FLOWS CENTRAL BANK CENTRAL GOVERNMENT COMMERCIAL BANKS COMMERCIAL CREDITORS CREDITORS CURRENCY RISK DAMAGES DEBT DEBT BURDEN DEBT BUYBACK DEBT CRISES DEBT FINANCING DEBT INSTRUMENTS DEBT INTEREST DEBT MANAGEMENT DEBT MARKETS DEBT MATURITY DEBT PAYMENT DEBT SERVICE DEBT SERVICE PAYMENTS DEBT SERVICE RATIO DEBTORS DEFICIT FINANCING DEPOSITS DISCLOSURE DOMESTIC DEBT EXCHANGE RATE EXPORTS EXTERNAL DEBT EXTRABUDGETARY FUNDS FACE VALUE FINANCIAL DISCIPLINE FINANCIAL INSTITUTIONS FINANCIAL MARKETS FINANCIAL SECTOR FISCAL FISCAL EXPANSION FISCAL MANAGEMENT FISCAL POLICY FISCAL PRESSURE FISCAL PRESSURES FISCAL REVENUES FISCAL SUSTAINABILITY FISCAL YEAR FOREIGN DEBT FOREIGN EXCHANGE FOREIGN EXCHANGE EXPOSURE FOREIGN RESERVES FOREIGN TRADE GDP GOVERNMENT AGENCIES GOVERNMENT BORROWING GOVERNMENT BUDGETS GOVERNMENT EXPENDITURES GOVERNMENT REVENUES GOVERNMENT SUBSIDIES HEALTH EXPENDITURES IMPORTS INCOME INCOME TAX INFLATION INSOLVENT INSTITUTIONAL ARRANGEMENT INSTITUTIONAL ARRANGEMENTS INSTITUTIONAL CAPACITY INSTITUTIONAL WEAKNESSES INSURANCE INTEREST COSTS INTEREST RATE INTEREST RATE RISK INTEREST RATES INTERNATIONAL FINANCIAL MARKETS LENDER OF LAST RESORT LEVELS OF GOVERNMENT LIABILITY MANAGEMENT LIQUIDATION LIQUIDITY LONDON CLUB MARKET RISK MONETARY POLICY MORAL HAZARD MUNICIPALITIES MUNICIPALITY NET EXPORTS OPPORTUNITY COST PAYROLL TAX PENSIONS POLICY INSTRUMENTS POLICY MAKERS PORTFOLIO PRIVATE SECTOR PARTICIPATION PRIVATIZATION PUBLIC DEBT PUBLIC EXPENDITURE PUBLIC INVESTMENT PUBLIC SECTOR PUBLIC SERVICES REAL INTEREST RATE REFINANCE REFINANCING RISK REPAYMENT RESERVE REQUIREMENT REVENUE COLLECTION RISK MANAGEMENT SOCIAL INSURANCE SOCIAL PROTECTION SOCIAL SECURITY SOCIAL WELFARE SOLVENCY SOVEREIGN DEBT STATE AGENCY STATE BUDGET STATE-OWNED ENTERPRISES TAX ADMINISTRATION TAX RATE TAX RATES TAX REVENUES TELECOMMUNICATIONS TRADE FLOWS TRADE LIBERALIZATION TREASURY BILLS VALUATION VALUE ADDED VALUE ADDED TAX WAGES YIELD CURVE
Online Access:	http://documents.worldbank.org/curated/en/2000/01/438955/managing-fiscal-risk-bulgaria http://hdl.handle.net/10986/22361

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Summary:	To understand the fiscal position of a country, contingent liabilities and other sources of fiscal risk need to be considered. The authors develop a framework to assess and manage fiscal risk in Bulgaria. Bulgaria's Currency Board Arrangement has effectively imposed fiscal discipline, but leaves only limited room to accommodate potential fiscal shocks. Through risks embedded in the portfolio of government contingent and direct liabilities, significant fiscal pressures could arise in the future. Major sources of risk include environmental liabilities and investment requirements, collection capacities of the social protection institutions, and further engagement in off-budget programs, such as government guarantees. To limit the Government's exposure to risks, yet accommodate investment needs crucial to growth and development, Bulgaria must find an optimal strategy for liability management, fiscal reserves, and risk mitigation. Priorities for dealing with existing risks and limiting further accumulation of risks include: 1) Mitigating currency and interest rate risks in the government liability structure. 2) Implementing proposed institutional and finance reform of the country's pension and health care systems. 3) Building adequate contingency reserves. 4) Introducing risk-sharing arrangements. 5) Prioritizing and placing strict limits on the amounts of new guaranteed obligations. 6) Developing government capacity to analyze and manage risks. 7) Fully integrating fiscal risk management with other policy considerations in fiscal management, as part of an integrated asset and liability management strategy.

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