A government move gets underway for revising the fee structure for state guarantees against both foreign and domestic loans to introduce a risk-based pricing mechanism to reduce fiscal exposure and strengthen financial discipline in borrowing institutions.
Officials say the move is intended to better reflect credit risk while safeguarding public finances from mounting contingent liabilities.
The decision was made at the 55th meeting of the Cabinet Committee on Debt Management (CDMC), amid concerns over a rapid buildup of government-underwritten loans.
As of the end of September 2025, outstanding state guarantees exceeded Tk 1.11 trillion, underscoring the need for a more structured and sustainable framework.
Of this amount, Tk 660.36 billion was issued against foreign-currency loans and Tk 453.65 billion covered local-currency loans, according to a government document.
While policymakers broadly agree on the principle of rationalising guarantee fees, discussions are ongoing as to how to balance fiscal prudence with the need to keep borrowing affordable for sectors socially and economically sensitive.
Officials say under the State Guarantee Guidelines 2018, new loan agreements require an assessment of the justification for government guarantees and their potential fiscal impact.
At a recent CDMC meeting, two types of guarantee fees were proposed. A one-time base fee of 0.25 per cent would apply to all institutions, with an additional premium based on the borrower's creditworthiness rating.
Institutions with strong credit ratings would pay an extra 0.25 per cent, those with medium ratings 0.5 per cent, and low-rated entities up to 1.0 per cent.
The committee also recommends creating a dedicated fund from collected guarantee fees to strengthen risk management and provide fiscal safeguards in the event of loan defaults.
Such a fund would help the government manage potential liabilities arising from guaranteed loans.
Subsequently, an inter-ministerial meeting was held on October 27, 2025, involving representatives from key ministries, including finance, commerce, power, energy, transport, agriculture, textiles, and telecommunications.
While most participants agreed in principle that guarantee fees should be rational and risk-based, several raised concerns that higher fees could increase borrowing costs, particularly in critical sectors such as agriculture and food, with possible negative social impacts.
The committee notes that, "rather than relying solely on credit ratings, institutional financial capacity and overall risk exposure should also be taken into account when determining guarantee fees".
Also recommended that, at this stage, guarantee fees be applied as a one-time charge at a standard rate of 0.25 per cent of the guaranteed amount, without annual charges or additional risk premiums.
An official says "The relevant ministry would need approval from the appropriate authorities before implementing any revised guarantee-fee framework, with the aim of balancing fiscal discipline with sectoral growth and social considerations."
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