STRESS TESTING OF FISCAL RISK AND FUNDING PRESSURES ASSOCIATED WITH CONTINGENT LIABILITIES IN MOLDOVA

Abstract

The article develops an integrated framework for assessing fiscal risk in Moldova, focused on stress-testing the budgetary position and quantifying contingent liabilities relevant to the sustainability of public finances. The aim is to estimate the sensitivity of the deficit and public debt to macroeconomic and fiscal shocks, and to incorporate contingent risks (state guarantees, exposures associated with public enterprises, litigation, and contractual commitments) into an operational monitoring tool. The methodology combines early warning indicators for macro-fiscal and financing risks, the estimation of budgetary elasticities of revenues and expenditures with respect to macroeconomic variables, and stress scenarios (baseline/adverse/severe) used for the projection of the deficit, the financing need, and the debt path. The data come from national official sources and are harmonised for the period 2010–2024 / 2014–2024, depending on availability. The applied stress scenario reflects a compound macro-financial shock, defined by GDP contraction, an interest rate increase, and exchange rate depreciation, with cumulative effects on the budget deficit, debt service costs, and financing needs. The implications aim to integrate stress testing and the fiscal risk register into the medium-term budgetary framework and to strengthen fiscal risk reporting.