Bangladesh's outstanding government guarantees extended for the upkeep of state-owned enterprises (SOEs) show a downturn, reflecting lower borrowing and partial repayment made by several entities.
According to official data up till December 2025, total outstanding sovereign guarantees amounted to Tk 1.07 trillion, down from Tk 1.15 trillion in June 2025 and Tk 1.16 trillion a year earlier.
Of the total liabilities, Tk 583.83 billion originated from external sources while Tk 485.90 billion came from domestic lenders, mainly commercial banks.
The guarantees were issued against loans negotiated by state-owned financial and non-financial enterprises to implement various public policy programmes and infrastructure projects.
External guarantees were largely funded by foreign financial institutions while domestic guarantees were linked to borrowings from local banks.
Officials say the reduction reflected both lower demand for guaranteed borrowing during the tenure of the interim government and repayment made by several public entities.
"Repayments by the concerned organisations helped reduce the liabilities," a finance official says.
Government typically provides guarantees and counter-guarantees to strategic entities operating in sectors such as power generation, mineral production and supply, fertiliser manufacturing, aviation and public trading operations.
Beneficiaries include corporations such as Biman Bangladesh Airlines and the Trading Corporation of Bangladesh (TCB).
Economists, however, warn that sovereign guarantees carry fiscal risks if borrowing entities fail to service their debts on time.
They say energy-related guarantees could rise by the end of June as Bangladesh faces fresh challenges in procuring crude oil and other fuels following the escalation of the Middle-East conflicts since February.
In cases where state-owned entities fail to repay loans on time, the liabilities are transferred to the government, potentially increasing fiscal pressure.
There have been several such instances in the past, including with Biman Bangladesh Airlines, where the government stepped in to repay liabilities on behalf of the national carrier after it had failed to service its debts.
The finance ministry publishes a list of active guarantees to improve transparency and monitor contingent liabilities that remain valid beyond the fiscal year.
The government extended guarantees for agricultural credit programmes, aircraft purchases by Biman, the financing of power plants, fertiliser imports by Bangladesh Chemical Industries Corporation or BCIC, procurement of essential commodities by the TCB, and fertiliser imports by Bangladesh Agricultural Development Corporation or BADC.
The government also provided guarantees in favour of Ansar-VDP Unnayan Bank and Probashi Kalyan Bank for loans taken from the central bank.
jasimharoon@yahoo.com
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