HARARE – The Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI) is helping Governments in the region in identifying and limiting the impact of contingent liabilities on their books.
Contingent liability essentially refers to a potential liability that may occur, depending on the outcome of an uncertain future event. It is recorded in the accounting records if the contingency is likely and the amount of the liability can be reasonably estimated.
In view of the dynamic debt management landscape, it is important for debt managers, especially in the public sector, to stay abreast with pertinent developments in macroeconomic and financial management, including public debt management.
“In recognition of the dynamic debt management landscape, MEFMI continues to implement initiatives aimed at ensuring that heads of relevant departments in client institutions are abreast with pertinent developments in macroeconomic and financial management, including public debt management,” said a MEFMI official.
“The aim is to raise awareness among senior officials in the member countries, with the ultimate goal of fostering adoption of sound practices.”
Speaking at a MEFMI hosted event in Harare this morning, Finance and Economic Development permanent secretary George Guvamatanga said contingent liabilities posed a risk for the effective implementation of national fiscal policies.
“The materialisation of contingent liabilities risks has direct adverse consequences on Government’s fiscal position. The fiscal cost is invisible until they are triggered, thus they represent a hidden subsidy, blur fiscal analysis and can drain Government financing by increasing debt service obligations,” he said.
“Given the low fiscal space in most developing countries, including the MEFMI region, this situation results in re-allocation of resources from capital and social projects towards debt service.
“In addition, contingent liabilities could also crowd out social expenditures on health and education, hence affecting Government’s inclusion programs.”
MEFMI is a regionally owned institute currently with 14 member countries, including: Angola, Botswana, Burundi, Kenya, Lesotho, Malawi, Mozambique, Namibia, Rwanda, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe.