2. FISCAL SUSTAINABILITY
SUSTAINABILITY OF PUBLIC FINANCES
Fiscal sustainability, or public
finance sustainability, is the ability of a
government to sustain its current spending,
tax and other policies in the long run
without threatening government solvency or
defaulting on some of its liabilities or
promised expenditures.
3. FISCAL SUSTAINABILITY
FISCAL SOUNDNESS
Fiscal sustainability is generally defined
as the government’s ability to meet and
service its obligations in the short run and in
the long run.
Fiscal soundness: the capability of
governments to honour their obligations in
the short run and in the long run.
4. SOUND PUBLIC FINANCES
The preservation of the soundness of
public finances is a necessary
condition for macroeconomic stability
and sustainable growth.
6. FISCAL STIMULUS
an attempt by
a government to increase
economic activity by
reducing taxes, increasing governme
nt spending, or both.
DISCRETIONARY FISCAL POLICY
7. FISCAL STIMULUS ??? !!!
FISCAL DEFICIT
The use of government fiscal stimulus to
support the economy may result in
increases in government deficits and
increased government debt.
8. EROSION OF FISCAL DISCIPLINE
AND FISCAL RESPONSIBILITY :
FISCAL VULNERABILITY
Fiscal vulnerability describes a
situation where a government is
exposed to the possibility of failure
to meet its aggregate fiscal policy
objectives
9. THE FOLLIES AND FALLACIES OF
KEYNESIAN ECONOMICS & FUNCTIONAL FINANCE
ABBA LERNER
10. FISCAL VULNERABILITY : Indicators
1.Indicators of external and domestic
debt
2.Indicators of reserves adequacy .
Financial soundness
3.Indicators Corporate sector indicators
11. FISCAL VULNERABILITY : Indicators
Indicators of external and domestic
debt
The ratios of external debt to exports
and to GDP are useful indicators of
trends in debt and repayment capacity.
12. FISCAL VULNERABILITY : Indicators
Indicators of reserves adequacy are
central to assessing a country's ability to
avert liquidity crises. The ratio of
reserves to short-term debt in particular
is key to gauging the vulnerability of
countries with significant but uncertain
access to capital markets.
13. FISCAL VULNERABILITY : Indicators
Financial soundness indicators are
used to assess the strengths and
weaknesses of countries' financial
sectors. They cover the capital
adequacy of financial institutions, the
quality of assets and off-balance sheet
positions, profitability and liquidity, and
the pace and quality of credit growth.
14. FISCAL VULNERABILITY : Indicators
Corporate sector indicators
potential impact of exchange rate and
interest rate changes on corporate
sector balance sheets.
Indicators related to corporate
leverage, profitability, cash flow, and
financial structure are also relevant.
16. How High a Budget Deficit Can We Sustain?
Many economists set the sustainable
deficit threshold at 3% of GDP, and EU
rules formally set the budget deficit
threshold at 3% as well.
What is the basis for the idea of a
“sustainable” budget deficit, and is the
3% figure too high or too low?
17. How High a Public Debt Can We Sustain?
Which debt-to-GDP ratio could be labelled as
optimal, and should, therefore be pursued?
A high level of outstanding government debt
can put fiscal sustainability.
EU government debt-to-GDP ratio:
60% of GDP
What is the optimal “sustainable” public debt.