The Budgetary Control and Fiscal Impact of Government Contingent Liabilities

Christopher M. Towe
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Christopher M. Towe: International Monetary Fund

IMF Staff Papers, 1991, vol. 38, issue 1, 109-134

Abstract: Conventional fiscal accounting methodologies do not appropriately account for governments' noncash policies, such as their contingent liabilities. When these liabilities are called, budget costs can be large, as evidenced by the U.S. savings and loan crisis. In general, deficit measures may underestimate the macroeconomic impact of government policies, promoting the substitution of noncash for cash expenditure and increasing future financing requirements. This paper describes extended deficit measures to address the problem, but notes their limited practical value. Nonetheless, some alternative methods of valuing contingent liabilities are proposed to gauge fiscal impact and facilitate budgetary control.

Date: 1991
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