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Friday, August 14, 2020

Contingent liabilities pose greater fiscal risk to developing countries – Governor Jammeh

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By Tabora Bojang

The Governor of Central Bank of The Gambia Bakary K Jammeh, has stated that contingent liabilities have become a major item in the sovereign balance sheets and presents greater fiscal risks in most developing countries including West Africa.
He called on governments, to that effect, to initiate developed skills for monitoring and managing contingent liabilities, to minimise its potential impacts.

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Speaking at the opening of a weeklong regional course on planning, measuring and managing contingent liabilities and government fiscal risks organised by WAIFEM, governor Jammeh highlighted the need for government officials to appreciate the sources and potential impact of contingent liabilities, as it has the potential to severely constraint government resources available for development interventions.
The objective of the workshop was to provide comprehensive training to develop and strengthen the skills of participants in the methodologies of monitoring and managing contingent liabilities.

According to the former IMF special appointee for Africa, public debt and debt service levels have risen across a wide range of low-income developing countries putting them at a high-risk debt distresses, key drivers of which are falling commodity prices, loser financial policies, unexpected legal claims, corruption and host of natural disasters.

He said: “The government’s exposure to fiscal risks should be incorporated into fiscal sustainability analysis to have in place a fiscal policy strategy for unexpected changes in revenue or expenditures.
“Effective identification of fiscal risks especially contingent liabilities requires allocation of responsibilities for the various parts of the public sector in assessing and reporting it,” governor Jammeh added.
Recent studies in West Africa have revealed that contingent liabilities have become a bigger risk to governments in the region, according to the director general of WAIFEM, Professor Akpan Ekpo.

“Therefore,” he continued, “in the Waifem countries, a formal framework for managing contingent liabilities has become necessary to enable governments to make informed decisions to calibrate the amount of core and noncore risks to assume in public private partnerships and other projects, to strike a balance between minimising exposure to fiscal costs and offering an attractive risk-return proposition to ensure adequate investor response competitive tension and bankability.”

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