MEFMI Conducts a Study on Contingent Liabilities

Experiences with the debt crises amongst the developing countries and the ongoing Eurozone debt crisis point to the need for a holistic approach to the management of public and publicly guaranteed debt including the associated obligations such as contingent liabilities.

Consequently, many Governments around the world, with advice of regional and international technical assistance providers, are now keen on monitoring the liabilities of the entire public sector, from a sovereign Assets and Liabilities Management (ALM) perspective. A key building block in this regard is the assessment and reporting of sovereign contingent liabilities together with public sector debt.

Pursuant to this objective, MEFMI is collaborating with United Nations Conference on Trade and Development (UNCTAD, and the Organization for Economic Cooperation and Development (OECD), embarked on a mission to assist MEFMI member States to conduct an assessment of sovereign contingent liabilities. Following the experiences from an assessment done in Zambia and another study undertaken by OECD among the OECD countries MEFMI initiated a study on contingent liabilities. The initial exercise was conducted from 9 September to late October 2013. This was done through administering questionnaires to mainly state-owned enterprises and the relevant departments in Ministries of Finance in the member states. The exercise assessed both explicit and implicit contingent liabilities. Working through Ministries of Finance in the member States, the MEFMI Debt Management Programme identified resource persons to work under MEFMI guidance and in liaison with official contact persons whom the respective Ministries of Finance designated.

MEFMI then undertook a mission to several member countries to brief the identified resource persons and the authorities on the study. The mission provided guidance to the resource persons and contact persons by demonstrating how to administer the assessment questionnaire through applying it to some of the targeted state-owned enterprises in the countries visited. Through this process, the mission sought to assist countries in launching the assessment, with a view to:

•    Identifying sources of and, where available, collecting information on the liabilities; and
•    Reviewing current legal and institutional arrangements and the procedures for managing contingent liabilities in member states’ Finance Ministries.

In each country covered, the mission held briefing meetings with relevant senior officials in Ministries of Finance; particularly those responsible for management of public debt and other government liabilities. This was followed by technical meetings with the resource and contact persons, with the aim of explaining the structure and content of the questionnaire to be administered on the targeted entities. The latter are mainly state-owned enterprises or grant-aided institutions and, where relevant, local authorities.  

The mission, conducted by Mr. Cornilious Deredza, MEFMI Debt Management Programme Officer, involved the following activities:
•    Briefing both the government authorities and the resource and contacts persons responsible for implementation, the objectives, approach and tools of the assessment;
•    Together with the resource and contact persons, determining the Ministry’s legal, institutional and procedural elements necessary to capture in the assessment;
•    Identifying the types of enterprises to target, and discussing how to go about developing the list of targeted entities and engaging them to obtain their responses and related data on contingent liabilities; and,
•    Conducting at least one actual assessment meeting per country with one of the targeted entities, in order to demonstrate to the resource persons how to appropriately undertake the assessment interviews.
Following the mission and subsequent assessments carried out by the resource persons, several countries have submitted draft reports which will be consolidated into a region wide study report. The region wide report will provide a summary of the status of contingent liabilities in the MEFMI region, the existing structures for monitoring and managing contingent liabilities and the recommendations for effective monitoring and management of the liabilities.