12. The Outcome of Recovery

The recovery process can have three possible outcomes:

Financial resiliency. The most favorable outcome is financial resiliency. Here the government has recovered its financial stability and gone on to implement strategies, control mechanisms, budgeting techniques, and early warning systems to make sure it can withstand future financial shocks. A resilient government has eight essential characteristics.

Financial sustainability. Financial sustainability is where structural balance has been achieved, but the institutional practices have not been adopted necessary to withstand future shocks. A sustainable system is balanced, but potentially brittle. For example, perhaps financial policies or budget reforms were not adapted to guard against the types of financial decisions that caused distress in the first place.

Relapse. A relapse can take place if a sufficient shock occurs – a new economic downturn or new decision makers who do not have the benefit of experience from the recovery process. A relapse could also be caused by the use of unsustainable recovery strategies that simply deferred the financial reckoning day or failure to address looming long-term liabilities as part of the recovery process.

Continue to Characteristics of a Financially Resilient Government 

Continue to Step 13 - When Recovery Fails

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