ABSTRACT
This chapter reviews the risks from the different types of government liability such as loan guarantees, government lending, quasi-fiscal activity and public-private partnerships. It explores the meaning of fiscal responsibility, and summarizes the pros and cons of formal fiscal rules that are designed in part to reduce fiscal risk by committing the government in advance to follow certain policies or achieve particular fiscal outcomes. Aside from the rules on fiscal outcomes at central government level, tax and expenditure limitations (TELs) have been often legislated or mandated administratively as an instrument of control of subnational budgeting. The traditional approach is to foster fiscal responsibility by assuring that governance and public management processes are strong and effective, and otherwise leaving it to the decisions of the elected political leadership to define fiscal policies and the overall fiscal stance as it judges best under the circumstances.
