Assessment of Contingent Liabilities and Their Impact on Debt Dynamics in South Africa
The aim of this analysis is to quantify the losses from potential materialization of contingent liabilities by applying a new methodology for the case of South Africa and, to assess their impact on debt dynamics. Accordingly, we bring a novelty to...
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World Bank, Washington, DC
2018
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| Online Access: | http://documents.worldbank.org/curated/en/645381528134003501/Assessment-of-contingent-liabilities-and-their-impact-on-debt-dynamics-in-South-Africa http://hdl.handle.net/10986/29910 |
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okr-10986-299102021-05-25T09:14:55Z Assessment of Contingent Liabilities and Their Impact on Debt Dynamics in South Africa Bachmair, Fritz Florian Bogoev, Jane CONTINGENT LIABILITY DEBT DEBT SUSTAINABILITY PUBLIC DEBT DEBT SERVICE DEBT MANAGEMENT PUBLIC FINANCE The aim of this analysis is to quantify the losses from potential materialization of contingent liabilities by applying a new methodology for the case of South Africa and, to assess their impact on debt dynamics. Accordingly, we bring a novelty to this research by utilizing probabilities of distress, which is a different approach compared to the existing, already applied methodology. The central finding of the simulations conducted is that estimated losses from contingent liabilities, are significantly lower in the first year when they materialize compared to the existing applied methodology, and will gradually add up over time. Accordingly, the solvency and liquidity situation in the country will deteriorate. For example, the largest deterioration will occur in the debt to GDP ratio where the debt accumulation may be higher by 2.1 percent of GDP within three years, compared to the baseline projection. What is more concerning is that the debt trajectory is not stabilizing and losses incurred from materialization of contingent liabilities may become significant driving factor of debt accumulation in medium-term. Ultimately, the current estimates suggest that contingent liabilities may constitute a drag to fiscal policy in medium-term and their long-term accumulation may jeopardize the debt sustainability of the country. In that respect, this analysis suggests remedial measures and building protective buffers by the South African Treasury in the case CLs materialize. 2018-06-19T20:05:59Z 2018-06-19T20:05:59Z 2018-05 Working Paper http://documents.worldbank.org/curated/en/645381528134003501/Assessment-of-contingent-liabilities-and-their-impact-on-debt-dynamics-in-South-Africa http://hdl.handle.net/10986/29910 English MTI Global Practice Discussion Paper;No. 1 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Working Paper Africa South Africa |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
CONTINGENT LIABILITY DEBT DEBT SUSTAINABILITY PUBLIC DEBT DEBT SERVICE DEBT MANAGEMENT PUBLIC FINANCE |
| spellingShingle |
CONTINGENT LIABILITY DEBT DEBT SUSTAINABILITY PUBLIC DEBT DEBT SERVICE DEBT MANAGEMENT PUBLIC FINANCE Bachmair, Fritz Florian Bogoev, Jane Assessment of Contingent Liabilities and Their Impact on Debt Dynamics in South Africa |
| geographic_facet |
Africa South Africa |
| relation |
MTI Global Practice Discussion Paper;No. 1 |
| description |
The aim of this analysis is to quantify
the losses from potential materialization of contingent
liabilities by applying a new methodology for the case of
South Africa and, to assess their impact on debt dynamics.
Accordingly, we bring a novelty to this research by
utilizing probabilities of distress, which is a different
approach compared to the existing, already applied
methodology. The central finding of the simulations
conducted is that estimated losses from contingent
liabilities, are significantly lower in the first year when
they materialize compared to the existing applied
methodology, and will gradually add up over time.
Accordingly, the solvency and liquidity situation in the
country will deteriorate. For example, the largest
deterioration will occur in the debt to GDP ratio where the
debt accumulation may be higher by 2.1 percent of GDP within
three years, compared to the baseline projection. What is
more concerning is that the debt trajectory is not
stabilizing and losses incurred from materialization of
contingent liabilities may become significant driving factor
of debt accumulation in medium-term. Ultimately, the current
estimates suggest that contingent liabilities may constitute
a drag to fiscal policy in medium-term and their long-term
accumulation may jeopardize the debt sustainability of the
country. In that respect, this analysis suggests remedial
measures and building protective buffers by the South
African Treasury in the case CLs materialize. |
| format |
Working Paper |
| author |
Bachmair, Fritz Florian Bogoev, Jane |
| author_facet |
Bachmair, Fritz Florian Bogoev, Jane |
| author_sort |
Bachmair, Fritz Florian |
| title |
Assessment of Contingent Liabilities and Their Impact on Debt Dynamics in South Africa |
| title_short |
Assessment of Contingent Liabilities and Their Impact on Debt Dynamics in South Africa |
| title_full |
Assessment of Contingent Liabilities and Their Impact on Debt Dynamics in South Africa |
| title_fullStr |
Assessment of Contingent Liabilities and Their Impact on Debt Dynamics in South Africa |
| title_full_unstemmed |
Assessment of Contingent Liabilities and Their Impact on Debt Dynamics in South Africa |
| title_sort |
assessment of contingent liabilities and their impact on debt dynamics in south africa |
| publisher |
World Bank, Washington, DC |
| publishDate |
2018 |
| url |
http://documents.worldbank.org/curated/en/645381528134003501/Assessment-of-contingent-liabilities-and-their-impact-on-debt-dynamics-in-South-Africa http://hdl.handle.net/10986/29910 |
| _version_ |
1764470691606822912 |