Quasi-Fiscal Operations of Public Financial Institutions

Occasional Papers, October 24, 1996

Source details

Central banks and other public financial institutions act as agents of fiscal policy in many countries.
Their "quasi-fiscal" operations and activities can:
- affect the overall public sector balance without affecting the budget deficit as conventionally measured;
- have important allocative effects; and
- increase the effective size of the public sector.
The paper analyzes the macroeconomic and financial effects of such quasi-fiscal activities, as well as the taxes, subsidies, and other expenditures that such activities introduce outside the budget.
Measurement and accounting issues are addressed, and policy recommendations are offered.

Quasi-fiscal activities can alter the overall public sector balance while bypassing the conventionally measured budget deficit.
Such activities may produce significant allocative effects across the economy.
Quasi-fiscal operations increase the effective size of the public sector.
The analysis covers taxes, subsidies, and other expenditures introduced outside the budget by public financial institutions.

The paper addresses measurement and accounting issues related to quasi-fiscal activities of public financial institutions.
Emphasis is placed on how quasi-fiscal operations are recorded (or not recorded) in conventional budgetary measures and public sector accounts.

The paper offers policy recommendations aimed at:
- improving the measurement and accounting of quasi-fiscal activities;
- recognizing and managing the macroeconomic and financial effects of quasi-fiscal operations; and
- addressing the fiscal implications of taxes, subsidies, and other expenditures that occur outside the budget.