Crisis-Related Policies and Sovereign Balance Sheet Risks

by vimothy

IMF (2009), “Crisis-Related Measures in the Financial System and Sovereign Balance Sheet Risks“.

Policy paper from the IMF. Considers interventions by the authorities in response to the global financial crisis in terms of risks to the sovereign balance sheet, which it defines as the consolidated balance sheet of the budgetary central government, the central bank, other government agencies, plus state enterprises. Recent interventions haven’t had a large impact on deficits, but have nevertheless had a large impact on the size and risk exposure of sovereign balance sheets. Consequently, policy makers face a particular set challenges with respect to managing off-balance sheet contingent risks arising from bank guarantees, developing appropriate frameworks for asset-liability management, establishing strategies for unwinding support, and coordinating the unwinding of programmes internationally where necessary.

The paper briefly summarises government interventions and considers the implications for sovereign balance sheets; a framework for asset liability management is developed and particular issues involving the management of government and central bank balance sheets are discussed; finally, issues surrounding the unwinding of crisis related programmes are explored.