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This chapter discusses three issues — accounting frameworks, risk and uncertainty, and the political economy — that have been largely overlooked by the mainstream ‘conservative’ and ‘Keynesian’ perspectives. The first section examines accounting frameworks; this is the lens used to ascertain whether an economy is likely to overheat or slip into recession. We find that widely used accounting frameworks, such as accounting for GDP, often provide misleading information and bear some responsibility for poor economic advice and performance. The chapter next considers how the issues of risk, uncertainty, and information imperfections are at the center of macroeconomic analysis. Risk is always prevalent in an economy, and policies often have unintended consequences. As a result, economists and policy-makers must subject policy decisions to a risk assessment, and should also be responsive to new information. The final section of this chapter looks at the political economy and institutional frameworks within which policy decisions are made.

This chapter discusses the importance of ratio analysis in appraisal and monitoring. A manger could use the information contained in a ratio for purposes of controlling and monitoring, a banker, for securing funds, and a shareholder for ensuring his yield. Interpretation of ratios thus vary depending upon the relative purposes and goals. This chapter discusses various ratios used in operational, financial, and debt service management.

In recognition of the significant role the private sector can play in the provision, financing, and implementation of infrastructure projects, the Philippine government has adopted specific measures to encourage private-sector participation in infrastructure. The acute budgetary constraints facing the Philippine government motivated the entry of the private sector in the provision of certain infrastructure services. The passage of Republic Act 6957 or the Build-Operate-Transfer Law in 1990, as amended by Republic Act 7718, provides the avenue for tapping private-sector expertise and resources in infrastructure. The Electric Power Industry Reform Act (EPIRA), enacted in 2002, laid down the basis for competition in power generation and supply segments of the industry. A newly created Energy Regulatory Commission was created to regulate the price of transmission and distribution of electricity. Focusing on the Philippines, this chapter looks at the fiscal risk brought by contingent liabilities arising from government guarantees given to privately driven infrastructure projects. It also examines how the Philippine government may organize a management framework for contingent liabilities.

How should the contingent liabilities of a sovereign be treated in a general restructuring of the debts of that sovereign? This question has played only a minor role in past sovereign debt restructurings because the size of such contingent liabilities has in most cases been small. In recent years, however, slathering government guarantees on third party debt has become the tool of choice for many countries in their efforts to quell an incipient panic in their financial markets. Some of those sovereigns are now, or may soon be, in the position of needing to restructure their debts. Ignoring large contingent liabilities in a sovereign debt restructuring may plant a land mine on the road to debt sustainability once the restructuring closes. That said, the answers to the questions of whether and how to restructure contingent liabilities are not obvious. Is the restructurer to assume that some, all or none of those contingent liabilities will eventually wind up as direct claims against the sovereign? Even if the underlying instrument can be successfully restructured, the guarantee will typically stand as an independent obligation of the guarantor that will require separate treatment in the restructuring.

This chapter examines the support provided by central banks and governments to the financial sector during the 2007 financial crisis, with particular emphasis on the extent to which costs differed across countries. More specifically, it considers the types of central bank and government support received by the financial sector during the crisis and quantifies the initially pledged and actually utilized government support measures across countries. The chapter shows that extensive public support has been provided to restore confidence in the financial system. As the crisis unfolds, its fiscal costs remain uncertain, but so far it is evident they have differed widely across countries. Compared to previous crises, governments to date have relied more on containment—through central bank liquidity provision and guarantees of bank liabilities—and less on restructuring bank assets. This approach has given rise to large contingent liabilities as risks are transferred from private to government balance sheets, but in most cases the approach has limited initial fiscal outlays, especially the much needed restructuring of banking and corporate sectors.

Chapter 4 illustrated the factors that can undermine debt sustainability; this chapter builds on that by exploring the role of debt managers in reducing these risks. The chapter begins with the motives of the debt managers, including to minimize the risk–cost trade-off; but also bigger picture motives, such as the allocation of risk between the public and private sector. It also shows how the composition of sovereign debt can have important macroeconomic implications, such as via the monetary policy transmission mechanism. The chapter details the risks from maturity, currency, and residency, including the “original sin” problem faced by some countries. It concludes with a discussion of the role of debt managers in pursuing other objectives, such as financial deepening.

An examination of the appropriation remedy under the Financial Collateral Arrangements Regulations, including as an alternative to pre-packaged administration and receivership sales. In particular, the chapter considers in detail the requirements of the legislation in order for the right to arise and provides practical guidance as to how the right should be exercised. The analysis of the remedy includes an examination of the terms in the legislation and also determinations from case law. In addition, the chapter considers the validity of the legislation before Brexit. The chapter examines various issues and challenges that may arise in connection with an appropriation, such as a valuation of the collateral (enterprise value versus other forms of valuation), the treatment of contingent liabilities, whether or not the equity of redemption is extinguished, appropriation before or after a valuation is obtained, and how the secured liabilities are affected by the appropriation. The chapter also summarizes the disapplication of certain provisions of insolvency legislation when the appropriation remedy is invoked and considers the benefits of the use of appropriation by secured creditors.

Creditor responses to sovereign debt crises suggest that they view such crises as problems of debt management on the part of the countries facing debt repayment difficulties. Thus, for example, debt relief and restructuring mechanisms coordinated by the international financial institutions place emphasis on correcting perceived imprudent debt management through a series of economic adjustment measures. Little attention, if any, is paid to addressing the underlying causes of the debt crises. This chapter examines the various causes of sovereign debt crises and the role that debt management plays in their eruption or in addressing them in a sustainable manner.

This book highlights the problems and challenges faced by East Asia's developing countries, as well as Japan and the United States, in managing fiscal policy. It explores taxation in developing countries, the relationship between public and private sector economic behavior, the direct substitution between government and private consumption in East Asia, the effectiveness of fiscal policy in Korea, income risk and the benefits of social insurance in Indonesia and the United States, and the transition paths of Japan, China, the United States, and the European Union. The book also discusses the link between external debts, economic growth, capital accumulation, and productivity. Moreover, it looks at balance sheet management in Australia, contingent liabilities in the Philippines, and the impact of population aging, fiscal policies, and national saving on the Korean economy. Finally, the book examines the Japanese experience regarding sustainability, debt management, and public debt policy, as well as policy options for financing future health and long-term care costs in Japan.

The chapter reviews the fiscal performance and reforms during the last two decades in Gujarat. In the early 1990s, various deficits and interest payment crossing prudent limits had raised serious concerns about sustainability. The state had to design and carry out fiscal reforms under tremendous pressure by the late 1990s. The devastating earthquake of 2001, however, forced the government to divert efforts and funds to meet emergent needs of the affected population and infrastructure. During the last decade, fiscal reforms with simplification and rationalization of taxes and expenditures started moving fast. It led to a sharp decline in the size of the government from 17% to about 13%. The state has been comfortably achieving almost all Fiscal Responsibility Legislation targets including the cap on contingent liabilities. A clear strategic shift in expenditure allocation in favor of social sectors is visible during the last decade vis-à-vis the previous decade.