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How to deal with contingent liabilities – Lessons from the Dutch experience

Author

Listed:
  • Heleen M.J. Hofmans
  • Clement R. van de Coevering

Abstract

commission has reviewed all the guarantees, loans and financial interventions provided by the Dutch government. This review shows that policy makers often perceive these measures as a “free lunch”, do-not-ask (sufficiently high) premiums and do-not-build reserves to cover potential damages. The commission concluded that the Dutch government needs to reduce these measures where possible (e.g. by including sunset clauses), implement policies that reduce implicit risks, increase transparency, and consider asking for an external opinion regarding premiums in case of large and complex risks. Also internationally, an increased focus on budget systems that ensure transparency and provide the right incentives is necessary, as in recent years contingent liabilities increased while government finances deteriorated, making countries less resilient to these risks. Countries seem to use very different definitions and reporting methods with regard to contingent liabilities, making an international comparison and monitoring very difficult.

Suggested Citation

  • Heleen M.J. Hofmans & Clement R. van de Coevering, 2014. "How to deal with contingent liabilities – Lessons from the Dutch experience," OECD Journal on Budgeting, OECD Publishing, vol. 14(1), pages 35-45.
    • Handle: RePEc:oec:govkaa:5jxv7kmx9fbq
    DOI: 10.1787/budget-14-5jxv7kmx9fbq
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    Citations

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    Cited by:

    1. Semih ŞEN & Mircan TOKATLIOĞLU, 2020. "Contingent Liabilities as a Risk Factor in Public Finance: The Case of Turkey," Sosyoekonomi Journal, Sosyoekonomi Society, issue 28(44).
    2. Choy, Swee Yew & Chit, Myint Moe & Teo, Wing Leong, 2021. "Sovereign credit ratings: Discovering unorthodox factors and variables," Global Finance Journal, Elsevier, vol. 48(C).

    More about this item

    Keywords

    Budget systems; contingent liabilities; fiscal policy; risk management; sunset clauses; the Netherlands;
    All these keywords.

    JEL classification:

    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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