third annual global network of parliamentary budget officers mostafa askari ottawa, june 11, 2015...
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Sources of Fiscal Risks Changes in economic context Unanticipated events Budget mismanagementTRANSCRIPT
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Th i rd Annua l G loba l Ne twork o f Par l i amentary Budget Officers
Mostafa Askari Ottawa, June 11, 2015
Fiscal Risk Analysis
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Outline1 •Sources of fiscal risks
2 •Changes in economic context
3 •Links between economic context and fiscal risks
4 •How to analyse economic risks
5 •Unanticipated non-economic events
6 •Budget mismanagement
7 •How to minimize fiscal risks
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Sources of Fiscal Risks
Changes in economic context
Unanticipated events
Budget mismanagement
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Changes in Economic Context
Unanticipated international developments
Unanticipated domestic developments
Biased economic forecasts
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Links between economic context and fiscal risks
• GDP Tax baseRevenu
es
•GDP•Unemployment rate•Inflation•Interest rates
Expenses
Incomeprofits
Cons.
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How to analyse economic risks?Assess historical performance of the forecast- forecast errors
Prepare a fan chart –probabilistic assessment of forecast error and bias
Prepare your own forecast
Prepare what if scenarios based on alternative economic developments
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Forecast errors
-2.5
-2
-1.5
-1
-0.5
0
0.5
1
Average Error in Forecasting Real GDP Growth, 2000-2007(Actual –Forecast)
Source: International Monetary Fund
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Fan Charts
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Unanticipated non-economic events
Natural disasters
Conflicts and wars
Can’t analyse risks but can assess if budget has
provisions
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Budget mismanagement
Revenues
• collection problems
Expenses
• Over spending by line ministries• Cost overruns of programs
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Key Questions on Budget Mismanagement
Are there large tax gaps?
Are there clear , enforceable expenditure ceiling targets?
Are there institutional arrangements that prevent line ministries from over spending?
Have programs been costed properly with credible risk analysis?
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How to minimize fiscal risks?A medium-term budget framework
A credible, balanced risk macroeconomic forecast
A top-down budget process
Expenditure ceilings / fiscal anchors
Institutional arrangements and laws
Transparent and comprehensive reporting
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Medium-term Budget Framework
Bottom- Up
Top- Down
Final Decision by MOF and PM
Institutional arrangements and
rules