Contingent liabilities create managementproblems for governments. They have a cost, but judging whatthe cost is and whether it is worth incurring is difficult.Except in the case of contingent liabilities created bysimple guarantees of debt, governments usually can incurcontingent liabilities without budgetary approval orrecognition in the governments accounts. So governments mayprefer contingent liabilities to other obligations. (Theuncertainty surrounding contingent liabilities can workdifferently. It is well known that PPPs create contingentliabilities, and the International Monetary Fund (IMF), theWorld Bank, and others often warn of the risks. The initialreaction of a cautious Ministry of Finance may be to seek toavoid all contingent liabilities.) Management problems alsoarise once a government has incurred a contingent liability.Projects need to be monitored to reduce risks if possible.Spending on contingent liabilities must sometimes beforecast, despite the difficulty.