MEFMI Introduces Training on Management of Contingent Liabilities Issues

Contingent Liabilities have become a major item in sovereign balance sheets and present greater fiscal risks in most developing countries, including within Eastern and Southern Africa. From guarantees given to state owned enterprises to public sector pension obligations as well as obligations arising from complex transactions such as the Public Private Partnerships (PPPs), the amount of contingent liabilities are quite significant and are even higher than the total public debt in some MEFMI member countries.

Given this environment, the need for capacity building on management of contingent liabilities cannot be over emphasized. Government officials need to clearly appreciate the sources and potential impact of contingent liabilities. In addition, there is need to develop skills on the methodologies for monitoring and managing contingent liabilities to ensure that their potential impact is minimized, since their realization can severely constrain government resources available for development interventions.

It is against this background that MEFMI in collaboration with the Organisation of Economic Cooperation and Development (OECD) organized a regional workshop on Management of Contingent Liabilities. The workshop, held in Victoria Falls, Zimbabwe, from 17^th to 21^st March 2014, was officially opened by Mr. Willard Manungo, Zimbabwe’s Secretary for Finance and Economic Development. In his remarks, Mr. Manungo commended MEFMI and the OECD for organizing a workshop on a topical issue for the region. He said that contingent liabilities are a major concern because, when they materialize, they often commit governments to substantial payments which are often not budgeted for, thus limiting the amount of resources available for financing development activities. In this regard, Mr. Manungo urged MEFMI member states to design methodologies for monitoring contingent liabilities as well as put in place appropriate legal and institutional frameworks for minimizing their occurrence and managing the associated fiscal risks.

Prior to the opening address, the Director of the MEFMI Debt Management Programme, Mr. Raphael Otieno, thanked the Government of Zimbabwe for being a strong supporter of MEFMI. He welcomed the collaboration with OECD in the workshop and noted that he looked forward to a stronger working relationship between MEFMI and the OECD in future. He also requested the participants to give a candid assessment of this course considering that MEFMI was delivering it for the first time, adding that such assessments would help in the design and delivery of future workshops. 

The OECD was represented at the workshop by Mr. Hakan Bingol.  In his remarks during the closing session, Mr. Bingol said that it is OECD’s intention to organize more joint activities with MEFMI, particularly on design and execution of public debt management policies as well as bond market development.

The workshop which targeted middle to senior level debt management officials from the Ministries of Finance and of Economic Planning, State Owned Enterprises as well as Central Banks was attended by 26 officials from Botswana, Kenya, Lesotho, Malawi, Mozambique, Namibia, Tanzania, Uganda, Zambia and Zimbabwe.  The major focus of the workshop was to introduce debt managers to the concepts and key issues on monitoring and management of contingent liabilities, including the related institutional arrangements. It also provided a platform for disseminating the preliminary findings of the MEFMI study on Contingent Liabilities in the region. The OECD also used the platform to highlight some of the findings of their study on contingent liabilities.

The workshop equipped participants with knowledge and facilitated the sharing of experiences on the key issues regarding management of contingent liabilities, including risk identification, risk assessment, budgeting, reporting, risk minimization as well as the appropriate legal and institutional arrangements. It is envisaged that the knowledge gained will enable them to design and update efficient frameworks and strategies for managing such liabilities.