Mar 18, 2021

Managing Fiscal Risks from State-Owned Enterprises Is Crucial

We are pleased to have been partnering with the International Monetary Fund's Fiscal Affairs Department (IMF FAD) in the delivery of a recent online course that addressed ways of strengthening the fiscal oversight of state-owned enterprises (SOEs) and the related fiscal risks.

In times when countries are and will be facing severe fiscal constraints, it is important to continue comprehensive discussions aimed at improving the management of SOE-related risks. Ensuring that SOEs are efficient and managed wisely is important for economic and social reasons. As Ms. Carolina Renteria from the IMF FAD noted, “Globally SOEs represent 40% of output, 20% of investment, and 5% of employment. They are responsible for key services and they are some of the largest companies in the world. What is more, the crisis posed by the COVID-19 pandemic has had significant macroeconomic effects that will likely lead to the materialization of fiscal risks in the coming years. How countries monitor and manage those risks will be critical to minimize their impact.”

During the course participants were introduced the tools that the IMF FAD has been developing to improve the management of SOE-related risks. They had the opportunity to use the SOE Health Check and SOE Fiscal Stress Test tools, interpret the results of the analyses that these tools generated, and identify risks arising from SOEs. Participants acknowledged the need to develop stronger capacity to monitor and mitigate the risks from SOEs and welcomed the support offered in the region to further advance the SOE fiscal risk oversight.

As Mr. Besjon Tanuzi from Albania remarked, “This course is an effective and helpful way to understand the basics of fiscal risks emerging from SOEs and the importance of monitoring and analyzing these risks. The course provided some very concrete tools, such as the SOE Health Check tool and SOE Fiscal Stress Test tool that help evaluate and analyze the financial performance of companies. I am confident that this learning experience will help the fiscal risk units in the region, especially in Albania, considering the wide range of improvements needed for better risk assessment and mitigation measures practices. It is our responsibility now to integrate this set of skills and tools into our everyday tasks and try to keep developing our risk analysis, which in a later stage translates into strengthening the public financial management culture in our countries.”

Similarly, Ms. Aida Soko from Bosnia and Herzegovina noted, “For me, the course was a unique experience to learn about the SOEs performance analysis from a new angle, looking at the fiscal risk perspective. SOEs in the Federation of Bosnia and Herzegovina have a very big impact on the overall economy and may be seen as either an accelerator of growth or an immense obstacle. The learning course introduced several very useful tools. We already started to use the SOEs Health Check tool and will further explore the use of the stress-testing tool in our future work.”

In closing, Ms. Jana Repanšek, CEF Director, congratulated the participants for their eagerness to learn throughout the course that contributed to the overall success of the event. “You have shared an impressive amount of your experiences, knowledge, and to-the-point questions, which reflect the readiness of you and your institutions to further develop the SOE fiscal risk oversight of your respective country. Most of you are involved in establishing a dedicated fiscal risk unit or team, improving systematic access to key data sources, and enhancing capacities to analyze and present fiscal risks of SOEs for better decision-making.”

This online course was delivered as part of the “Revenue Administration and Public Financial Management Reform in Southeast Europe” project, implemented by the IMF FAD and funded by the European Commission and Switzerland State Secretariat for Economic Affairs (SECO).