1. FISCAL RISK DISCLOSURE Mr. Dominick E. Mariano Bureau of the Treasury Department of Finance 18 September 2015 PHILIPPINE COUNTRY EXPERIENCE

2. 2 2 What are Fiscal Risks? Refers to deviations of fiscal outcomes from expectations set at the time of the budget or other forecast Includes both realized risks and forward looking estimates

3. 3 3 Sources of Fiscal Risks Possible sources of fiscal risks include: — Macroeconomic shocks — Economic growth, inflation, exchange rates Public Debt Contingent liabilities — Explicit and Implicit obligations — PPPs — Natural Disasters

4. 4 4 GOP Fiscal Risks 1.Risks stemming from instability in the global macroeconomy have abated but risks persist 2.Initiatives are being taken to further strengthen the management of public finances 3.Fortification of risk mitigation measures with regards to PPPs 4.Strengthened oversight over state owned enterprises 5.Heightened disaster risk awareness and pursuing disaster risk financing

5. 5 5 FISCAL RISKS IDENTIFICATION DISCLOSURE MANAGEMENT Disclosure and Management Requires clear allocation of responsibilities Leads to proper monitoring and oversight Comprehensive Should not engender implicit guarantee Proactive risk mitigation Responsive policies Key Point #1 Identification, disclosure and management are mutually reinforcing activities

6. 6 6 The FRS is an inter-agency effort among departments engaged in  Budget  Economic planning  Finance  Monetary policy Fiscal Risk Statement Key Point #2 Collaboration is crucial Key Point #3: Clear delineation of duties and responsibilities

7. 7 7 Why publish an FRS? 1.Reinforces identification and monitoring of Fiscal Risks (FR) 2.Increases transparency and sends a clear message to stakeholders 3.Aids in formulation of proactive risk management policies 4.Strengthens fiscal performance

8. 8 8 GOP FRS Coverage 1.Macroeconomic Risks 2.Public Debt 3.Contingent Liabilities a.Financial Sector b.State-Owned Enterprises c.Public-Private Partnerships d.Sub-National Government Units e.Natural Disasters Key Point #4: The FRS is a work in Progress

9. 9 9 Identification Macroeconomic Risks could come from:  Accuracy of macroeconomic assumptions  Government fiscal operations  Revenue generation  Expenditures  External factors Sensitivity analysis is done to determine the impact of variances between fiscal outturns and assumptions. Macroeconomic Risks

10. 10 Quantification of Risks  Debt Sustainability Analysis (DSA) used to evaluate trajectory of public debt under alternative scenarios Public Debt

11. 11  The Government is exposed to contingent liabilities arising from awarded PPPs  In response, a Contingent Liability fund has been included in the GAA to cover immediate requirements Mitigation Photos from PPP center website Contingent Liabilities

12. 12 Setting-up the FRS Clear delineation of responsibilities Coordination among involved units Timelines Key Point #5: Institutionalize FRS preparation

13. 13 Benefits of FR Disclosure  Disclosure has increased awareness of FR  Responsive policies have allowed GOP to overperform vis-à-vis fiscal targets  Prudent measures contribute to banking industry resilience  Disaster risk financing has eased the fiscal impact of natural calamities  Increased transparency and sound fiscal management has contributed to credit rating upgrade

14. MABUHAY!