Title page
Contents
Abstract 3
1. Introduction 4
2. Main types of risks for the subnational finances 5
2.1. Macroeconomic risks 5
2.2. Risks from climate change and natural disasters 7
2.3. Public health risks 8
2.4. Contingent liabilities 9
2.5. Weaknesses in budget institutions and processes 10
2.6. Digitalisation-related challenges 11
3. The role of subnational governments in the management of fiscal risks 12
3.1. Risk identification, analysis, reporting and disclosure 12
3.2. Risk mitigation 18
3.3. Management of residual risks 21
4. Role of NGs in the management of subnational fiscal risks 23
4.1. Macroeconomic risks 23
4.2. Risks from natural and health hazards 24
5. Conclusions 26
References 27
Figure 1. Share of SNG's debt exposed to interest rate risk in the short term 6
Figure 2. Economic losses associated with extreme weather events, 1990-2022 7
Figure 3. SNG's health expenditures as a % of general government spending, 2019 (pre-COVID) 9
Figure 4. Stock of government guarantees in European countries 10
Boxes
Box 1. Estimation of the impact of natural disasters 14
Box 2. Estimating the likelihood and loss from the calling of guarantees 16
Box 3. US states' practices with rainy-day funds 22
Box 4. Cost-sharing arrangements: International experience 25