世界银行-隐性债务：避免南亚下一次金融危机的解决方案（英）-2021.6-199页_5mb

Hidden Debt: Solutions to Avert the Next Financial Crisis in South Asia

Core Content

This report, Hidden Debt: Solutions to Avert the Next Financial Crisis in South Asia, authored by Martin Melecky, explores the growing risks associated with hidden debt in South Asian countries, particularly from public-private partnerships (PPPs), state-owned enterprises (SOEs), and state-owned commercial banks (SOCBs). It emphasizes the need for better fiscal management, transparency, and policy reforms to prevent future financial crises.

Main Views

• Hidden Debt Risks: South Asian countries face significant risks from hidden debt, including contingent liabilities from PPPs, SOEs, and SOCBs, which can threaten debt sustainability and long-term productivity.
• Fiscal Vulnerability: The reliance on off-balance sheet operations makes South Asian governments more vulnerable to financial shocks. These operations are often underreported and lack transparency.
• Inefficiency and Mismanagement: SOEs and SOCBs in South Asia are generally less efficient than their counterparts in other regions, contributing to higher risks of distress.
• Distress Patterns: Early termination of PPPs and financial distress in SOEs and SOCBs can result in substantial fiscal costs, with some projects being more vulnerable than others.
• Policy Trade-offs: Governments must balance the benefits of direct interventions with the risks of hidden debt and fiscal sustainability.
• Need for Reforms: The report advocates for improved transparency, better contract design, and stronger fiscal rules to manage hidden liabilities effectively.

Key Information

1. Public-Private Partnerships (PPPs)

• Fiscal Risks: Early termination of PPPs can lead to large fiscal costs. For example, a profound macrofinancial crisis could cost South Asian governments up to 4% of revenues.
• Distress in PPPs: About 8% of PPPs in South Asia are canceled early. Highway projects in India are particularly vulnerable.
• Efficiency Gains vs. Risks: While PPPs offer efficiency gains, they also carry risks that must be carefully managed.
• Policy Recommendations: Strengthen government capacity, due diligence, and contract design to reduce fiscal risks from PPPs.

2. State-Owned Commercial Banks (SOCBs)

• Dominance and Underperformance: South Asia has the largest share of SOCBs in terms of total banking assets. However, these banks underperform compared to private banks.
• Distress and Bailouts: SOCBs are more likely to enter distress and receive bailouts, especially when government ownership is high.
• Impact on Private Firms: SOCBs' underperformance can negatively affect private firms, as they often provide credit to less efficient businesses.
• Policy Recommendations: Address agency tensions, improve transparency, and ensure better fiscal oversight to reduce the risks of SOCB distress.

3. State-Owned Enterprises (SOEs)

• Size and Vulnerability: The SOE sector in India and Pakistan is more than twice the size of the international benchmark.
• Contingent Liabilities: SOEs in South Asia contribute to significant contingent liabilities, with the top 10 loss-making SOEs accounting for over 80% of total losses.
• Fiscal Costs: Distressed SOEs can impose heavy fiscal costs. In Pakistan, liabilities of chronic loss-makers reached 8–12% of GDP, while in Sri Lanka, they hovered around 4–5% of GDP.
• Role in Development: SOEs play a crucial role in long-term investments, such as R&D, which can have positive spillovers on private firms.
• Policy Recommendations: A combination of internal and external reforms is needed to better manage contingent liabilities from SOEs.

4. Subnational Governments

• Fiscal Decentralization: Subnational governments (SNGs) in South Asia are increasingly involved in fiscal operations, but they face significant contingent liability shocks.
• Fiscal Shocks and Adjustments: Contingent liability shocks hit SNGs about 10% of the time over the past two decades. These shocks lead to reduced economic activity and increased reliance on central government support.
• Transparency and Rules: Improved transparency and fiscal rules are essential to prevent fiscal imbalances and ensure better subnational fiscal outcomes.
• Policy Recommendations: Strengthen fiscal reporting, implement intergovernmental frameworks, and leverage market discipline to manage subnational fiscal risks.

Conclusion

The report highlights that hidden debt, particularly from SOEs, SOCBs, and PPPs, poses a significant risk to the fiscal stability of South Asian governments. While these entities have played a key role in economic development, their inefficiencies and lack of transparency can lead to large contingent liabilities. The report calls for comprehensive policy reforms, including better governance, clearer mandates, and enhanced transparency, to ensure that public resources are used effectively and that the risk of future financial crises is mitigated.

Key Figures and Tables

• Figure O.1: South Asian governments use SOEs, SOCBs, and PPPs more than the global benchmark.
• Figure O.6: A macrofinancial crisis could cost South Asian governments up to 4% of revenues due to PPP failures.
• Figure 3.7: In India, a significant share of SOEs reported losses between 1989 and 2017.
• Figure 4.2: Subnational governments in South Asia have legal authority to borrow and issue guarantees.
• Table 2B.1: Probability of distress for Indian banks based on regression analysis.
• Table 3B.4: Financial performance of SOEs is influenced by state ownership.
• Table 4.1: Categorization of fiscal risks at the subnational level.

Appendices and Supporting Materials

• Annexes: Include detailed methodologies, variable definitions, and regression tables for each chapter.
• Boxes: Provide insights into the PITA framework and specific cases like the Indian National Highways PPPs.
• References: List sources and data used in the analysis, supporting the empirical findings and policy recommendations.

This report serves as a critical analysis of the hidden debt challenges in South Asia and offers actionable solutions to safeguard fiscal sustainability and promote inclusive growth.