Should Italy Sell Its Nonfinancial Assets to Reduce the Debt?
IMF Policy Discussion Papers, May 1, 2008
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- Should Italy Sell Its Nonfinancial Assets to Reduce the Debt?
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Bibliographic details
- Authors: Stefania Fabrizio
- Published: May 1, 2008
- Series: IMF Policy Discussion Papers
- DOI: https://doi.org/10.5089/9781451945959.003
Summary
- This paper assesses the proposal, publicly debated in recent years in Italy, to reduce public debt by selling public assets, especially nonfinancial tangible assets.
- The main findings indicate that, although selling public assets has some merit if done to make more productive use of them, practical complications abound.
- Such sales might weaken underlying fiscal discipline.
- Other heavily indebted countries have reduced their debt much more than Italy without heavy recourse to extraordinary sales; in this context, the case of Belgium is of particular interest.
- Weighing the trade-offs, if properly and transparently done, the sale of public assets can complement, to a limited extent, fiscal consolidation, but should not be considered as an alternative to it.
Findings and Analysis
- Selling public assets has some merit when aimed at making more productive use of those assets.
- Practical complications abound in executing asset sales.
- Asset sales might weaken underlying fiscal discipline.
- Comparative evidence: other heavily indebted countries reduced debt more than Italy without heavy recourse to extraordinary sales; Belgium is highlighted as particularly relevant.
Policy Recommendations and Caveats
- If asset sales are pursued, they should be done properly and transparently.
- Asset sales can complement fiscal consolidation, but should not be considered an alternative to fiscal consolidation.
- Attention is needed to avoid undermining fiscal discipline through one-off asset sales.
Context and Scope
- Subject classifications: Asset and liability management, Asset management, Debt reduction, Expenditure, Fiscal consolidation, Fiscal policy, Government asset and liability management, Public debt, Public financial management (PFM).
- Keywords include: asset, Asset management, debt, EU country, Europe, exit from the European Exchange Rate Mechanism, fiscal adjustment, Fiscal consolidation, government, Government asset and liability management, government organization, Italy, Italy in EMU, Italy's debt, nonfinancial asset, PDP, Public debt reduction, public net worth, stability programme, strategy for managing public assets, sustainability of public finances, U.K. government.