IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/2008-245.html
   My bibliography  Save this paper

Contingent Liabilities: Issues and Practice

Author

Listed:
  • Aliona Cebotari

Abstract

Contingent liabilities have gained prominence in the analysis of public finance. Indeed, history is full of episodes in which the financial position of the public sector is substantially altered-or its true nature uncovered-as a result of government bailouts of financial or nonfinancial entities, in both the private and the public sector. The paper discusses theoretical and practical issues raised by contingent liabilities, including the rationale for taking them on, how to safeguard against the fiscal risks associated with them, how to account and budget for them, and how to disclose them. Country experiences are used to illustrate ways these issues are addressed in practice and challenges faced. The paper also points to good practices related to the mitigation, management and disclosure of risks from contingent liabilities.

Suggested Citation

  • Aliona Cebotari, 2008. "Contingent Liabilities: Issues and Practice," IMF Working Papers 2008/245, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2008/245
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=22398
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Honohan, Patrick & Klingebiel, Daniela, 2003. "The fiscal cost implications of an accommodating approach to banking crises," Journal of Banking & Finance, Elsevier, vol. 27(8), pages 1539-1560, August.
    2. Demirgüç-Kunt, A. & Beck, T.H.L. & Honohan, P., 2008. "Finance for all? : Policies and pitfalls in expanding access," Other publications TiSEM aec73d3a-d6eb-457f-9182-3, Tilburg University, School of Economics and Management.
    3. Cardona Bermeo, Jorge Enrique, 2002. "Manejo de pasivos contingentes en el marco de la disciplina fiscal en Colombia," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34872, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    4. José Miguel Benavente & Alexander Galetovic & Ricardo Sanhueza, 2006. "Fogape: an economic analysis," Working Papers wp222, University of Chile, Department of Economics.
    5. Mr. Fabian Valencia & Mr. Luc Laeven, 2008. "Systemic Banking Crises: A New Database," IMF Working Papers 2008/224, International Monetary Fund.
    6. Jón R. Blöndal, 2006. "Issues in Accrual Budgeting," OECD Journal on Budgeting, OECD Publishing, vol. 4(1), pages 103-119.
    7. Mr. Ashok Vir Bhatia, 2002. "Sovereign Credit Ratings Methodology: An Evaluation," IMF Working Papers 2002/170, International Monetary Fund.
    8. Ehrlich, Isaac & Becker, Gary S, 1972. "Market Insurance, Self-Insurance, and Self-Protection," Journal of Political Economy, University of Chicago Press, vol. 80(4), pages 623-648, July-Aug..
    9. Merton, Robert C., 1977. "An analytic derivation of the cost of deposit insurance and loan guarantees An application of modern option pricing theory," Journal of Banking & Finance, Elsevier, vol. 1(1), pages 3-11, June.
    10. Timothy C. Irwin, 2007. "Government Guarantees : Allocating and Valuing Risk in Privately Financed Infrastructure Projects," World Bank Publications - Books, The World Bank Group, number 6638, December.
    11. Edwin J. Elton & Martin J. Gruber & Deepak Agrawal & Christopher Mann, 2001. "Explaining the Rate Spread on Corporate Bonds," Journal of Finance, American Finance Association, vol. 56(1), pages 247-277, February.
    12. Honohan, Patrick, 2010. "Partial credit guarantees: Principles and practice," Journal of Financial Stability, Elsevier, vol. 6(1), pages 1-9, April.
    13. Currie, Elizabeth, 2002. "The potential role of government debt management office in monitoring and managing contingent liabilities," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34871, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    14. Cooper, Russell W. & Ross, Thomas W., 2003. "Protecting underfunded pensions: the role of guarantee funds," Journal of Pension Economics and Finance, Cambridge University Press, vol. 2(3), pages 247-272, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Debra Bloch & Falilou Fall, 2016. "Government Debt Indicators:Understanding the Data," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 7(01), pages 1-28, February.
    2. Mr. Marc C Dobler & Mr. Simon T Gray & Diarmuid Murphy & Bozena Radzewicz-Bak, 2016. "The Lender of Last Resort Function after the Global Financial Crisis," IMF Working Papers 2016/010, International Monetary Fund.
    3. Agnès Bénassy-Quéré & Guillaume Roussellet, 2014. "Fiscal sustainability in the presence of systemic banks: the case of EU countries," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(3), pages 436-467, June.
    4. Mohammed Aliu Momoh & Maurice Aghedo, 2018. "Public Private Partnership, Infrastructure Guarantee and Sovereign Debt Default," Romanian Economic Business Review, Romanian-American University, vol. 13(1), pages 25-34, March.
    5. Bachmair,Fritz Florian, 2016. "Contingent liabilities risk management : a credit risk analysis framework for sovereign guarantees and on-lending?country experiences from Colombia, Indonesia, Sweden, and Turkey," Policy Research Working Paper Series 7538, The World Bank.
    6. Alaa Soliman & Mohammad Aliu Momoh & Ibrahim L. Awad, 2017. "Infrastructure Guarantees: Making It Simple," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 178-202.
    7. Delorme, Francois, 2014. "Viabilité et vulnérabilité des finances publiques du Québec à moyen terme : une proposition d’un cadre d’analyse et une évaluation [Sustainability and vulnerability of Québec's public finances in t," MPRA Paper 85050, University Library of Munich, Germany.
    8. Alexander D. Andryakov, 2018. "International Experience and Russian Practice," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 6, pages 59-70, December.
    9. Emek, Uğur, 2015. "Turkish experience with public private partnerships in infrastructure: Opportunities and challenges," Utilities Policy, Elsevier, vol. 37(C), pages 120-129.
    10. Elva Bova & Marta Ruiz-Arranz & Frederik Giancarlo Toscani & Hatice Elif Ture, 2019. "The impact of contingent liability realizations on public finances," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(2), pages 381-417, April.
    11. Mr. Ian Lienert, 2010. "Should Advanced Countries Adopt a Fiscal Responsibility Law?," IMF Working Papers 2010/254, International Monetary Fund.
    12. Koffie Ben Nassar & Mr. Joel Chiedu Okwuokei & Mike Li & Timothy Robinson & Mr. Saji Thomas, 2016. "National Insurance Scheme Reforms in the Caribbean," IMF Working Papers 2016/206, International Monetary Fund.
    13. World Bank, 2009. "Contingent Liability Risks from State-Owned Enterprises," World Bank Publications - Reports 10543, The World Bank Group.
    14. Ian Lienert, 2013. "Fiscal Responsibility Laws: Are They Needed?," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 4(03), pages 1-32.
    15. Ms. Elva Bova & Marta Ruiz-Arranz & Mr. Frederik G Toscani & H. Elif Ture, 2016. "The Fiscal Costs of Contingent Liabilities: A New Dataset," IMF Working Papers 2016/014, International Monetary Fund.
    16. Elsie Addo Awadzi, 2015. "Designing Legal Frameworks for Public Debt Management," IMF Working Papers 2015/147, International Monetary Fund.
    17. Narayan, Laxmi, 2017. "Growth of Public Debt in Haryana – Dynamism or Misplaced Priorities," MPRA Paper 79431, University Library of Munich, Germany, revised 05 May 2017.
    18. Wei Li & Jie Li & Siwei Sun, 2023. "Influence of public credit risk on private capital in public–private partnership models," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 1330-1343, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Agnès Bénassy-Quéré & Guillaume Roussellet, 2014. "Fiscal sustainability in the presence of systemic banks: the case of EU countries," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(3), pages 436-467, June.
    2. Carlos Gozzi, & Schmukler, Sergio, 2016. "Public Credit Guarantees and Access to Finance," The Warwick Economics Research Paper Series (TWERPS) 1122, University of Warwick, Department of Economics.
    3. Morten Balling & Peter Egger & Ernest Gnan & Axel A. Weber & Harald W. Stieber & Stavros Vourloumis & António Afonso & João Tovar Jalles & Franco Bruni & André van Poeck & Maartje Wijffelaars & Séveri, 2013. "States, Banks, and the Financing of the Economy: Fiscal Policy and Sovereign Risk Perspectives," SUERF Studies, SUERF - The European Money and Finance Forum, number 2013/2 edited by Morten Balling & Peter Egger & Ernest Gnan, May.
    4. Tobias Adrian & Nellie Liang, 2018. "Monetary Policy, Financial Conditions, and Financial Stability," International Journal of Central Banking, International Journal of Central Banking, vol. 14(1), pages 73-131, January.
    5. Georges Dionne, 2013. "Risk Management: History, Definition, and Critique," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 16(2), pages 147-166, September.
    6. Lim, Terence & Lo, Andrew W. & Merton, Robert C. & Scholes, Myron S., 2006. "The Derivatives Sourcebook," Foundations and Trends(R) in Finance, now publishers, vol. 1(5–6), pages 365-572, April.
    7. Sanjeev Gupta & João Tovar Jalles, 2022. "Can COVID-19 induce governments to implement tax reforms in developing countries?," Applied Economics, Taylor & Francis Journals, vol. 54(20), pages 2288-2301, April.
    8. Bhanot, Karan & Larsson, Carl F., 2018. "Uncovering the impact of regulatory uncertainty on credit spreads: A study of the U.S. covered bond experience," Journal of Financial Markets, Elsevier, vol. 39(C), pages 84-110.
    9. Thomas Holzheu & Ginger Turner, 2018. "The Natural Catastrophe Protection Gap: Measurement, Root Causes and Ways of Addressing Underinsurance for Extreme Events†," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 43(1), pages 37-71, January.
    10. Honohan, Patrick, 2010. "Partial credit guarantees: Principles and practice," Journal of Financial Stability, Elsevier, vol. 6(1), pages 1-9, April.
    11. Alaa Soliman & Mohammad Aliu Momoh & Ibrahim L. Awad, 2017. "Infrastructure Guarantees: Making It Simple," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 178-202.
    12. Alessio D’Ignazio & Carlo Menon, 2020. "Causal Effect of Credit Guarantees for Small‐ and Medium‐Sized Enterprises: Evidence from Italy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(1), pages 191-218, January.
    13. Nam Kyu Kim, 2018. "Transparency and currency crises," Economics and Politics, Wiley Blackwell, vol. 30(3), pages 394-422, November.
    14. Mikhail V. Oet & John M. Dooley & Stephen J. Ong, 2015. "The Financial Stress Index: Identification of Systemic Risk Conditions," Risks, MDPI, vol. 3(3), pages 1-25, September.
    15. Honohan, Patrick, 2009. "Resolving Ireland’s Banking Crisis," The Economic and Social Review, Economic and Social Studies, vol. 40(2), pages 207-231.
    16. Thorsten Beck & Samuel Munzele Maimbo & Issa Faye & Thouraya Triki, 2011. "Financing Africa : Through the Crisis and Beyond," World Bank Publications - Books, The World Bank Group, number 2355, December.
    17. Hrychiewicz, Aneta, 2012. "Government Interventions - Restoring or Destructing Financial Stability in the Long-Run?," Working Papers 12-02, University of Pennsylvania, Wharton School, Weiss Center.
    18. Tagkalakis, Athanasios, 2013. "The effects of financial crisis on fiscal positions," European Journal of Political Economy, Elsevier, vol. 29(C), pages 197-213.
    19. Peter Hennecke & Doris Neuberger & Dirk Ulbricht, 2019. "The economic and fiscal benefits of guarantee banks in Germany," Small Business Economics, Springer, vol. 53(3), pages 771-794, October.
    20. Laeven, Luc & Valencia, Fabián, 2012. "The use of blanket guarantees in banking crises," Journal of International Money and Finance, Elsevier, vol. 31(5), pages 1220-1248.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:2008/245. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Akshay Modi (email available below). General contact details of provider: https://edirc.repec.org/data/imfffus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.