The Fiscal Architecture of Displacement: Sovereign Finance and the Recurrent Fiscal Obligation Problem

This working paper develops the concept of the recurrent fiscal obligation problem as the central structural constraint in displacement governance: the institutional difficulty of incorporating displacement-related expenditure into ordinary sovereign budget systems without creating perceptions of unlimited long-term fiscal responsibility.

The paper argues that displacement governance has entered the age of sovereign finance. The categorical, temporal, and territorial fault lines that sustain protection gaps are increasingly reproduced not through legal ambiguity alone, but through sovereign financing architectures organised around bounded liabilities, temporary expenditure, and reversible commitments. In a global sovereign bond market exceeding US$65 trillion, borrowing cost shifts driven by sovereign risk assessments move more capital than the entire annual humanitarian response — yet displacement remains weakly integrated into sovereign resilience planning despite generating substantial long-term fiscal pressure.

The paper examines how contemporary resilience-oriented fiscal frameworks — including IMF and World Bank instruments designed to pre-position financing before shocks occur — already provide operational entry points for displacement-responsive investment, and argues that reform must target sovereign fiscal architecture directly rather than humanitarian financing gaps. Drawing on Southeast Asian cases, it outlines four structural requirements for fiscally sustainable displacement inclusion compatible with sovereign risk constraints.

This is the fourth paper in the Governing Displacement series on displacement governance, institutional design, and development finance.