Officials trained on fiscal risks and debt sustainability analysis

Many African countries are experiencing severe macroeconomic shocks and considerable uncertainty around their economic and fiscal outlook. The COVID-19 pandemic has created substantial fiscal risks, both through the potential for large errors in fiscal forecasts, and potential realisation of contingent liabilities.  Building the capacity of governments to identify, quantify, and manage these fiscal risks and associated public debt vulnerabilities is a key priority.

In view of this, MEFMI, in collaboration with the International Monetary Fund (IMF) Fiscal Affairs Department (FAD), IMF AFRITAC South (AFS) and the Africa Training Institute, conducted a virtual seminar focusing on how fiscal risks impact debt sustainability in African countries with access to concessional debt. The seminar, which was conducted in English and French from 21 to 30 September 2020, began with a general overview of key concepts and the analytical framework to classify, assess, and manage fiscal risks. Participants learnt about good practices in fiscal risk management, drawing on international and regional experiences. Good practices in reporting fiscal risks, and how countries can use the IMF Fiscal Transparency Code to structure their fiscal risk statements were also illustrated.

The seminar provided hands-on training on several aspects of fiscal risk management, including the quantification of risk exposure from State-Owned Enterprises and Public-Private Partnerships, using exercises developed by FAD staff. The exercises included spreadsheet models and the Low-Income Countries Debt Sustainability Framework. In addition, a detailed overview of key concepts in debt sustainability, including debt sustainability indicators, concessionality and grant-element, the importance of establishing baselines in debt forecasts, the role of debt dynamics in determining a baseline, the value of applying realism tests to debt strategies and how fiscal shocks affect the path of debt sustainability was also provided. An overview of FAD tools to assess and manage fiscal risk was also demonstrated to participants.

Participants are expected to use knowledge and skills from the seminar to classify, assess and manage fiscal risks as well as analyse the sustainability of debt to support the process of better fiscal policy analysis.

The seminar was attended by 62 participants from 19 African countries. These participants were from national treasury, macro-fiscal, fiscal risks, and debt units of finance ministries, with some representatives from central banks and PPP/SOE oversight units. The participants were guided by the resource team which comprised of Camilo Gomez Osorio (team leader, AFS), Avril Halstead (FAD expert), Tjeerd Tim (FAD expert), Juan Carlos Vilanova (FAD expert), Bryn Welham (FAD expert), and Cristina Dimande (MEFMI).

By: Sayed Timuno