Financing Infrastructure and Monitoring Fiscal Risks at the Subnational Level

This paper explores the building blocks of an institutional framework to govern borrowing by subnational entities to finance infrastructure investment. The framework should help in achieving sustainable financing of development needs and sound management of fiscal risks. Based on international exper...

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Bibliographic Details
Main Authors:	Liu, Lili, Pradelli, Juan
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ACCOUNTING ACCOUNTING STANDARDS AGGREGATE DEBT AMORTIZATIONS ARREARS AVAILABILITY OF CREDIT BAILOUT BAILOUTS BALANCE SHEET BALANCE SHEETS BANKRUPTCY BANKRUPTCY LAW BLOCK GRANTS BOND BOND HOLDERS BOND INSTRUMENTS BOND ISSUANCE BONDS BORROWER BORROWING CAPACITY BORROWING COSTS BORROWING PLANS BUDGET BALANCE BUDGET CONSTRAINT BUDGET DEFICITS BUDGET EXPENDITURE BUDGET SURPLUSES BUDGETING CAPITAL EXPENDITURE CAPITAL EXPENDITURES CAPITAL INVESTMENT CAPITAL INVESTMENTS CAPITAL MARKETS CASH FLOWS CENTRAL GOVERNMENT COLLATERAL COMMODITY PRICES CONTINGENT LIABILITIES CONTINGENT LIABILITY COORDINATION FAILURES CREDIBILITY CREDIT RATING CREDIT RATINGS CREDIT RISK CREDIT RISK ASSESSMENT CURRENCY CURRENT EXPENDITURES DEBT DEBT BURDEN DEBT FINANCING DEBT FLOWS DEBT INSTRUMENTS DEBT INTEREST DEBT LEVELS DEBT OBLIGATIONS DEBT OVERHANG DEBT RATIO DEBT REPAYMENT DEBT RESTRUCTURING DEBT RESTRUCTURING AGREEMENTS DEBT SERVICE DEBT SERVICING DEBT STOCK DEBTS DECENTRALIZATION DEDICATED REVENUES DEFICITS DEPOSIT DEVELOPING COUNTRIES DISCRETIONARY FISCAL POLICY DISTRICT DISTRICTS EMERGING ECONOMIES EXCESSIVE BORROWING EXCESSIVE INDEBTEDNESS EXPENDITURE EXPENDITURES FACE VALUE FEDERAL COUNTRY FINANCES FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL INSTITUTIONS FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL RESOURCES FINANCIAL RISKS FINANCIAL STABILITY FINANCIAL STATEMENTS FINANCIAL STRUCTURE FINANCIAL SUPPORT FINANCIAL SYSTEM FINANCING REQUIREMENT FISCAL AUTONOMY FISCAL FRAMEWORK FISCAL PERFORMANCE FISCAL POLICIES FISCAL POLICY FISCAL SPACE FISCAL SUSTAINABILITY FISCAL TRANSFERS FOREIGN EXCHANGE GOVERNMENT BONDS GOVERNMENT BORROWING GOVERNMENT BUDGET GOVERNMENT BUDGET DEFICIT GOVERNMENT DEBT GOVERNMENT FINANCING GOVERNMENT GUARANTEES GOVERNMENT REVENUE GOVERNMENT REVENUES IMPLICIT GUARANTEES INCOME GROWTH INCOME LEVEL INCOME LEVELS INDEBTEDNESS INFLATION INFRASTRUCTURE DEVELOPMENT INFRASTRUCTURE FINANCING INFRASTRUCTURE INVESTMENT INFRASTRUCTURE INVESTMENTS INITIAL DEBT INSTITUTIONAL ARCHITECTURE INTEREST COSTS INTEREST PAYMENTS INTEREST RATE INTEREST RATES INTERGOVERNMENTAL RELATIONS INTERGOVERNMENTAL TRANSFER INTERMEDIATION INTERNATIONAL BANK INVENTORIES INVESTMENT PROJECTS INVESTMENT RATE INVESTMENT REQUIREMENTS INVESTMENT VEHICLES ISSUANCE LAND VALUES LEGAL FRAMEWORK LENDERS LIQUIDITY LIQUIDITY PROBLEMS LOCAL ECONOMIES LOCAL ECONOMY LOCAL GOVERNMENT LOCAL GOVERNMENTS MACROECONOMIC POLICIES MACROECONOMIC STABILITY MACROECONOMIC VARIABLES MARKET BORROWING MARKET DISCIPLINE MARKET PARTICIPANTS MARKET PRICES MATURITY MONETARY POLICY MORAL HAZARD MORTGAGE MUNICIPALITIES NET CURRENT REVENUE NONPERFORMING LOANS PENSIONS PHYSICAL ASSET PHYSICAL ASSETS POLICY CHOICES POLICY COORDINATION POLICY DECISION POLICY DECISIONS POLICY FRAMEWORK PRICE VOLATILITY PRIVATE CREDITORS PRIVATE DEBTS PRIVATE INVESTMENT PRIVATE LENDERS PUBLIC AGENCY PUBLIC DEBT PUBLIC DEBT STOCK PUBLIC DEFICIT PUBLIC FINANCE PUBLIC FINANCES PUBLIC INVESTMENT PUBLIC INVESTMENTS REGULATORY FRAMEWORK REPAYMENT REPAYMENT CAPACITY RESERVES RETURN RETURNS REVENUE COLLECTION REVENUE RATIO REVENUE SOURCES REVENUE STRUCTURE RISK EXPOSURE RISK MANAGEMENT RISK PROFILES RISKY BORROWERS SAFETY NETS SALE OF PROPERTY SAVINGS RATIO SHORT-TERM DEBT SOLVENCY SOVEREIGN DEBT SOVEREIGN ENTITIES SOVEREIGN RISKS STATE GOVERNMENTS STRUCTURAL REFORMS SUBNATIONAL SUBNATIONAL DEBT SUBNATIONAL ENTITIES SUBNATIONAL FINANCE SUBNATIONAL GOVERNMENT SUBNATIONAL GOVERNMENTS TAX TAX BASES TAX BURDENS TAX COLLECTION TAX LAWS TAX RATE TAXATION TOTAL DEBT TOTAL EXPENDITURES TRANSPARENCY TREATY VALUATIONS
Online Access:	http://documents.worldbank.org/curated/en/2012/05/16263533/financing-infrastructure-monitoring-fiscal-risks-subnational-level http://hdl.handle.net/10986/9352

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Summary:	This paper explores the building blocks of an institutional framework to govern borrowing by subnational entities to finance infrastructure investment. The framework should help in achieving sustainable financing of development needs and sound management of fiscal risks. Based on international experience, the authors suggest a minimum set of indicators for monitoring fiscal and debt developments. Recognizing the different nature and operations of the subnational entities, they propose specific indicators for special purpose vehicles and the government's general budget. The paper outlines an analytical framework to inform policy decisions concerning subnational debt limits, which are country-specific and should not be mechanically applied. Basic notions underpinning medium-term macro-fiscal frameworks and debt sustainability analyses provide effective guidance for identifying prudent levels of subnational debt. The authors argue that developing fiscal and debt indicators and setting borrowing limits should be part of a broader strategy to put in place an adequate fiscal architecture to coordinate and monitor the budgetary and borrowing policies conducted by individual subnational governments. Consistent with this general principle, they explore several areas of subnational public finance and management that need to be addressed with adequate governance structures and policy choices.

Financing Infrastructure and Monitoring Fiscal Risks at the Subnational Level

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