DISPLACEMENT POLICY WORKING PAPER NO. 1 Fiscal Architecture of Displacement: Sovereign Finance and the Recurrent Fiscal Obligation Problem

This working paper reframes displacement governance as a structural fiscal challenge rather than primarily a humanitarian financing, coordination, or legal-gap problem. It argues that sovereign financing systems are organized around bounded liabilities, temporary expenditure, and reversible commitments, while displacement is often mobile, recurrent, and long-term. This mismatch produces what the paper calls the recurrent fiscal obligation problem: the difficulty of converting exceptional displacement expenditure into ordinary sovereign obligation.

Drawing on public finance literature, sovereign risk frameworks, and displacement governance experience in Southeast Asia, the paper examines how categorical, temporal, and territorial fault lines are reproduced through budget systems, debt sustainability frameworks, and expenditure management architectures. It identifies a reform opportunity in the “resilience turn” in contemporary public finance, including IFI resilience instruments, adaptive social protection frameworks, and sovereign sustainability financing.

The paper argues that sustainable inclusion requires engaging sovereign fiscal systems directly, rather than relying primarily on parallel humanitarian financing architectures. Practical reform pathways include integrating displacement into sovereign resilience analysis, designing fiscally bounded inclusion mechanisms, and using Article IV surveillance and Public Expenditure Reviews as entry points for treating displacement as a macro-fiscal risk and resilience investment category.