Analyzing Contingent Liabilities in EM Offtaker / FX Convertibility Risk
Working on an infrastructure deal in a frontier market where the sovereign is under real reserve pressure. Trying to build a framework for contingent liability analysis in the context of offtaker credit and FX convertibility/transfer risk.
Offtaker is a state-owned utility. The issue is that offtaker payment risk and convertibility risk are both downstream of the same macro shock, so they’re highly correlated and hard to treat independently.
A few specific questions:
1. How are people estimating the stock of contingent liabilities (SOE debt, PPP obligations, explicit guarantees) when fiscal disclosure is thin?
2. Any frameworks for stress-testing reserve adequacy against a crystallization scenario where SOE FX obligations come due at the same time import cover is collapsing?
Curious how others are handling this at the deal level.
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