Contingent liabilities as a risk factor in public finance: The case of Turkey

Abstract

One of the conditions for governments to sustain public finance in a healthy way is to analyze and minimize the possible risks that may arise in the future. In this context, the upward trend in contingent liabilities seen in many countries in recent years has become one of the major risk factors to be considered and monitored. The increase in contingent liabilities has the potential to lead to an increase in public debt and public deficits, as well as the potential for fiscal transparency and moral hazard in the public sector. In this study, the aim is to analyze Turkey's contingent liabilities for the period 1990-2018. The study shows that contingent liabilities has increased in recent years in Turkey. It can be said that this increase is a risk to fiscal stability of Turkey. Another result is that there are important problems, including especially the fiscal transparency, in the management of contingent liabilities.