UNCTAD Virtual Institute for Trade and Development
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Sovereign Asset and Liability Management: An E-Learning Training Course
II. Rationale
III. The Conceptual Balance Sheet
IV. Contingent Liabilities




Sovereign Asset and Liability Management (“SALM”) is the monitoring and quantifying the impact of movements in exchange rates, interest rates, inflation, and commodity prices on sovereign assets and liabilities and identifying other debt-related vulnerabilities in a coordinated and integrated manner (Rosenberg et al., 2005).

“Fiscal risks are deviations of fiscal outcomes from what was expected at the time of the budget or other forecast – arise from macroeconomic shocks and the realization of contingent liabilities.  Sources of risk include various shocks to macroeconomic variables (economic growth, commodity prices, inflation, interest rates, or exchange rates) as well as calls on several types of contingent liabilities” (Cebotari et al., 2009).

Contingent liabilities(2) are obligations triggered by a discrete but uncertain event.  Contingent liabilities may be explicit or implicit.  Explicit contingent liabilities are contractual and legal obligations of the government if a particular event occurs.  Implicit contingent liabilities do not legally or contractually obligate the government if a particular event occurs.  However, due to political and public pressure, social costs, interest groups, “moral obligation,” or other reasons, the government may find it necessary to allocate resources if the event occurs.