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Government asks all departments to review Government Guarantee

Date: 23 April 2019 Tags: Public Finance

Union Finance Ministry has asked all departments to undertake review of government guarantees given by respective ministries to their Central Public Sector Enterprises (CPSEs) or entities. It also has extended date for submission of these details to April 30, 2019 from earlier April 10.  

Review of government guarantees

Guarantees are contingent liabilities have potential to impact the financial performance of the government. The review of government guarantees should undertake aspects like discharge of repayment obligations or interest obligations as per terms of loan agreement and covenants and conditions met. It should also include details of CPSEs or entities due guarantee fee paid on time to the government.

Background

The earlier circular issued by Finance Ministry has held that Fiscal Responsibility and Budget Management (FRBM) Rules stipulates that government cannot guarantee more than 0.5% of the GDP of the respective financial year to CPSE/entities. The guarantees already approved by Budget Division of Department of Economic Affairs, Finance Ministry but not executed till March 31, 2019, also are needed to be revalidated and such proposals may also be included on total guarantee requirement of 2019-20. Ministries and departments are requested that prioritised guarantee requirement for 2019-20 may be worked out to include only such proposals where the loan agreement can be signed and guarantee agreement can be executed during the year.