Workshop On Managing Loan Guarantees

BACKGROUND

Contingent liabilities are a source of fiscal risks due to their embedded structural uncertainty. The costs and risks arising from contingent liabilities can manifest in different forms. The materialisation of contingent liabilities often leads to a reallocation of resources from developmental projects towards debt servicing as most governments in developing countries have limited fiscal space. Contingent liabilities can also crowd out social expenditures such as spending towards health and education, hence affecting governments’ social inclusion programmes. Furthermore, the lack of comprehensive frameworks for the management of contingent liabilities, as well as inconsistencies in government policies may result in moral hazard problems. Unless they are managed effectively, contingent liabilities can cause a substantial burden on the budget, resulting in large unanticipated cash outflows and increased debt burden. To strengthen the management of contingent liabilities in the region, MEFMI with the support of FSD Africa has developed Guidelines for managing contingent liabilities. The Guidelines provide a conceptual framework on managing contingent liabilities with a specific emphasis on those emanating from loan guarantees. MEFMI will offer a course on Managing Loan Guarantees to build the capacity of member countries in managing contingent liabilities and raise awareness on the newly developed Guidelines.

OBJECTIVES

This workshop aims to achieve the following:

1. To enhance participants’ skills to manage loan guarantees;

2. To raise awareness on the credit risk assessment tool for managing loan guarantees;

3. To capacitate officials with knowledge on the requisites for developing guidelines for managing guarantees; and

4. Raise awareness on the MEFMI Guidelines for managing loan guarantees.

CONTENT

The workshop will focus on the following key issues:

1. Overview of contingent liabilities;

2. Legal and institutional framework for managing loan guarantees;

3. Developing a credit risk assessment framework, including identifying and quantifying risk emanating from loan guarantees; and

4. Reporting and monitoring loan guarantees.

TARGET GROUP

The workshop targets middle to senior level officials responsible for managing loan guarantees.