2026 Perspectives for the Public Sector

III. Advanced Financial Strategies for State- Owned Enterprises: Optimizing Growth and Stability In light of the unique operational environment that SOEs straddle given their dual role, it behooves their managements and their governmental stakeholders to explore innovative and advanced financial strategies to promote fiscal resilience and sustainable growth. Below we delve into several key areas where SOEs can optimize their financial structures, mitigate risks, and secure stable funding for future endeavors. 1. Commodity Hedging: Beyond Conventional Structures The intrinsic link between many SOEs and commodity markets necessitates that they consider sophisticated hedging mechanisms in their financial and operational planning. While traditional hedging instruments are available, there is a compelling case for employing more sophisticated solutions since the exposure of many SOEs to commodity price volatility can translate into substantial financial risk for both the SOE and the central government — especially when debt obligations are fixed in nominal terms. Overview • As an alternative, the SOE could be interested to link the interest rate it pays to the international price of the key commodity • Rationale: i. Commodity Producer: Lower interest expense when commodity prices are lower ii. Commodity Consumer: Lower interest expense when commodity prices are higher • The SOE is not entering into any commodity derivative, just linking the interest of the financing LowCommodity Prices High Commodity Prices USD SOFR + [60] bps USD SOFR + [260] bps Illustrative Cash Flows for Commodity Producer SOE SOE In light of the unique operational environment that SOEs straddle given their dual role, it behooves their managements and their governmental stakeholders to explore innovative and advanced financial strategies to promote fiscal resilience and sustainable growth. 32 FromVulnerability to Viability: Best Practices and Financial Instruments for State-Owned Enterprises