Sierra Leone: The Government provides guarantees against bank loans contracted by state-owned or public enterprises and local councils and as the end of December 2020, these guarantees amounted to Le92.584 billion.
This is according to the General-Purpose Financial Statements (GPFS) of the Consolidated Fund as at December 2020 (un-audited) published by the Accountant General’s Department (AGD).
These bank loans are contracted by Njala University College (2018- Le3,9 billion), Sierra Leone State Lottery (2016- Le1 billion), Sierra Leone Postal Services Ltd (SALPOST)- (2015 -Le394.0), Sierra Leone Broadcasting Corporation (SLBC)- (2013- Le3.8 billion), Guma Valley Water Company (2013- Le2.2 billion), National Hajj Committee (2018-Le15.9 billion), Road Maintenance Fund Administration (2017-Le65 billion) and Sierra Leone Postal Services Ltd (SALPOST) (2018 -Le489 million).
Guarantees are legally binding promises made by the Government to assume responsibility for a debt, or performance of an obligation of another party, should that party default.
Indemnities are legally binding promises where the Government undertakes to accept the risk of loss or damage that another party may suffer and to hold the other party harmless against loss caused by a specific stated event.
In the event of public enterprises or local councils’ failing to pay the loan on time, the guarantees would be invoked and the liabilities for payment will be passed on to Government.
Consequently, the guarantees would eventually become debt to Government. An examination of the stock of current guarantees indicates that risks emanating from guarantees are minimal at the moment. Should they materialize, the impact on public debt would be small.
The AGD also listed pending financial litigations against the government. Contingent liabilities as at year-end, relating to pending financial litigations against the Government of Sierra Leone, amounted to Le 24,097.6 billion.
These liabilities are in nature of Damages in Tort, damages for Termination of Contract and Violation of Human Rights
Contingent assets are possible assets that have arisen from past events but the amount of the asset, or whether it will eventuate, will not be confirmed until a particular event occurs. The AGD stated that there are no Contingent Assets recorded.
Contingent liabilities are costs that the government will have to face if a particular event occurs, or present liabilities that are unable to be measured with sufficient reliability to be captured in the financial statements (unquantifiable liabilities).
The contingent liabilities typically consist of guarantees and indemnities, and through legal disputes and claims (particularly through financial litigations).
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