Keywords: Pacific Island Countries, National Airlines, fiscal risks, Public Financial Management Author’s E-Mail Address: vbalasundharam@imf.org , lhunter@imf.org , ilavea@imf.org , and pseeds@imf.org Contents I. INTRODUCTION II. STATE OF NATIONAL AIRLINES IN PICs III. THE PFM PERSPECTIVE: STRENGTHENING GOVERNANCE, OVERSIGHT AND TRANSPARENCY A. Governance and Institutional Frameworks B. Airline Planning Process C. Transparency of Airline Support in the National Budget D. Budget Execution Considerations E. Reporting and Monitoring IV. RISK
increasing the budget for marketing and airline support by up to EC$10 million (0.6 percent of GDP), and the provision of temporary tax relief on hotels’ food imports. The mission recommended that the government choose measures that are time bound and have limited fiscal impact. The marketing and airline support, which the authorities classify as capital expenditure, would need to be accommodated by cutting some other projects. 16. The government recognizes the seriousness of fiscal challenges in 2009, and is undertaking adjustment measures : On the revenue side
contingent liabilities. These include liabilities where the airline plans to borrows on the strength of its own balance sheet, and liabilities emanating from lease contracts, e.g. leasing a new airplane. C. Transparency of Airline Support in the National Budget Best practice: Clear and transparent publication of budgeted inflows and outflows, ideally via an annex to the budget, covering all SOEs. A strong budget challenge process requiring robust justification for support from the budget, e.g. via a cost benefit analysis. All CSOs should be remunerated
have often been necessary to prevent bankruptcies of hard-hit strategic firms, such as national airlines, albeit with the risk of delaying sectoral reallocation that is crucial for the recovery. In some cases ( New Zealand, Singapore ), governments provided convertible loans to national airlines with options to convert bonds into common equity, which ensures that the risks and rewards are better shared by the state and shareholders ( OECD 2020c ). In France , airline support was combined with conditionality on cutting emissions, which helps with “greening” the
through their national development banks for improvement of tourism-related facilities. 19 33. Post September 11, the CARICOM governments tried to stem the decline in airlift by increasing subsidies to regional airlines and negotiating with foreign airlines to maintain the level of service . For example, BWIA received an injection of US$13 million and LIAT received US$4 million (EC$11) to keep them flying. 20 An air access strategy now aims to negotiate air services agreements on a regional basis; 21 provide incentives to improve cooperation among regional airlines
loan-restructuring schemes should be timebound and targeted to minimize banking system strains. Mechanisms for corporate restructuring and resolution should be strengthened and simplified (see also Annex IV ). 12 Solvency support for viable firms . A case can be made for the government to intervene selectively to help viable, strategic firms facing pandemic-related difficulties, as is being considered for the national airlines. Support could take the form of equity injections, and transparently reported and monitored, with clear exit strategies. Nonviable firms