OECD Working Papers on Public Governance

Selected studies on public governance policy prepared for use within the OECD. These papers address such issues as pensions, ageing, management, pay and decentralistion in the public sector.


Managing disaster-related contingent liabilities in public finance frameworks

Natural disasters have caused, and continue to cause, a significant amount of economic costs. The costs of disasters are often, and to a large extent, shouldered by governments, especially in economies where private insurance markets are not well developed. Governments are asked to provide financing for explicit commitments made prior to a disaster, and are often under pressure to make payments for which no such commitments were made earlier. Ex-post costs to governments take the form of contingent liabilities within national budgeting and government balance sheet frameworks. Disasters can thereby cause both downside risks to government revenue as well as to expenditure. There is little evidence, and hence limited policy advice, on how disaster-related contingent liabilities are managed by governments. This paper sets out to clarify the concept of contingent liabilities and the channels through which they can impact government balance sheets, including fiscal risks. It provides a framework for identifying and quantifying disaster-related contingent liabilities with a view to inform country case studies for comparative policy analysis.


Keywords: government disaster assistance, contingent liabilities, disaster risk financing, Disasters
JEL: H68: Public Economics / National Budget, Deficit, and Debt / Forecasts of Budgets, Deficits, and Debt; H12: Public Economics / Structure and Scope of Government / Crisis Management; H84: Public Economics / Miscellaneous Issues / Disaster Aid; H3: Public Economics / Fiscal Policies and Behavior of Economic Agents; H7: Public Economics / State and Local Government; Intergovernmental Relations; H54: Public Economics / National Government Expenditures and Related Policies / National Government Expenditures and Related Policies: Infrastructures; Other Public Investment and Capital Stock; H63: Public Economics / National Budget, Deficit, and Debt / Debt; Debt Management; Sovereign Debt; H81: Public Economics / Miscellaneous Issues / Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
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