Smoke and Mirrors : Infrastructure State-Owned Enterprises and Fiscal Risks
Infrastructure is critical to economic development. When infrastructure companies are owned and operated by the government, however, they create significant sources of fiscal risk. These fiscal risks can be sizable, but they are often preventable w...
| Main Authors: | , , , , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
Washington, DC: World Bank
2022
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/256841647366128576/Smoke-and-Mirrors-Infrastructure-State-Owned-Enterprises-and-Fiscal-Risks http://hdl.handle.net/10986/37158 |
| Summary: | Infrastructure is critical to
economic development. When infrastructure companies are
owned and operated by the government, however, they create
significant sources of fiscal risk. These fiscal risks can
be sizable, but they are often preventable with proper
planning, risk assessment, and strict rules and procedures
for corporate and fiscal governance. This paper examines
fiscal risk stemming from state-owned enterprises (SOEs) in
the infrastructure sector in a sample of 135 firms in 19
countries from an original database of SOE financials for
2009–18. The paper develops a typology of fiscal risks and
their determinants, builds new measures of fiscal injections
to SOEs, and documents them using the novel database. The
results show that governments support SOEs through a
remarkably wide range of fiscal instruments. The fiscal cost
of supporting infrastructure SOEs is usually below 1 percent
of gross domestic product. Support is more prevalent and
frequent than previously thought. The findings show that
fiscal risk stems not only from “tail risk,” but also from
the everyday operation of infrastructure SOEs. The paper
calculates the Altman Z” score (a measure of default risk)
and shows that it can be used to forecast the need for
fiscal injections in SOEs. |
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