The risks to national budgets in Africa, posed by contingent liabilities and PPPs, during the COVID-19 pandemic

Feature Image September 22 And 23 Event

Contingent liabilities are becoming a significant source of fiscal risks, which has been exacerbated by the financial impact of the COVID-19 pandemic. In several cases, failure to prepare for such risks has led to large increases in public debt and the cost of debt is now crowding out other essential government services. Even though progress has been made in the management and monitoring of contingent liabilities, the risks contingent liabilities are posing, have increased. The extent to which guarantees were issued for infrastructure projects, together with weak governance, poor oversight and costly policy decisions have resulted in cost escalations, extended delivery dates of related projects and the inability of State-Owned Corporations (SOCs) to fulfil their mandate or financial obligations. Bailouts and capital injections to support SOCs in financial distress have become the norm. Even with bailouts, the problems persist due to the lack of /or slow pace of reforms, leading to the further need for bailouts which contribute to the rising public debt burden. The peer learning and exchange event went beyond the operational arrangements in managing contingent liabilities, to understand the issues on why the balance sheets of SOCs are deteriorating and the challenges countries are facing in the management of contingent liabilities and provided a platform for practitioners from ministries of finance and budget and selected SOCs in Africa to share and learn from the experiences of their peers, and where appropriate, apply the lessons in their own countries.

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