Contingent Liabilities: Issues and Practice; Aliona Cebotari; imf working Paper 08/245; October 1, 2008

Some countries have improved disclosed information on contingent liabilities gradually. 
The valuation of contingent liabilities is costly and the institutional capacity of public sector 
entities to report or value contingent liability varies. Colombia, for example, gradually 
expanded the institutional coverage of contingent liability estimates from the central 
government to decentralized entities to subnational entities. In Chile, on the other hand, the 
government phased in the types of contingent liabilities disclosed, first reporting on 
minimum revenue guarantees under PPPs and minimum pension guarantees (in 2003), later 
including also loan guarantees to public enterprises (in 2005), and finally adding information 
on student loan guarantees and lawsuits (in 2006). 
VI. I
NSTITUTIONAL 
A
RRANGEMENTS FOR 
M
ANAGING 
C
ONTINGENT 
L
IABILITY 
R
ISKS
 
A well-designed framework for managing and disclosing contingent liabilities, which puts in 
place proper safeguards against risks associated with contingent liabilities, is critical in 
limiting the government’s risk exposure. The specific institutional setup under which these 
safeguards operate is of secondary importance, but could have a bearing on the smooth 
functioning of the framework. This setup includes the location of responsibility for 
monitoring and managing contingent liabilities, and the degree of its centralization. 
55
While there is no official guarantee of stable fuel prices, the state has intervened in the past with capital 
injections in its fuel price stabilization funds. 
56
Congressional Budget Office, “Assessing the Public Costs and Benefits of Fannie Mae and Freddie Mac” 
(May 1996) and “Federal Subsidies and the Housing GSEs” (May 2001); a United States Department of the 
Treasury Report, “Government Sponsorship the Federal National Mortgage Association and the Federal Home 
Loan Mortgage Corporation” (July 1996).

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