The government has planned to amend the sovereign guarantee guideline to strengthen the debt repayment capacity of state-owned enterprises against the backdrop of growing contingent liabilities, said Finance Division officials.
Sovereign guarantees against certain types of loans of the SOEs are treated as contingent liabilities since the government is liable for paying the debts if any SOE fails to repay the loans.
The cumulative outstanding sovereign guarantees or contingent liabilities will stand at Tk 1,19,082 crore at the end of the forthcoming financial year (2025-26), according to a document of the FY26 national budget proposed by finance adviser Salehuddin Ahmed on June 2.
The contingent liabilities will see about 62 per cent increase at the end of FY26 compared with those in FY22 when the amount was about Tk 73,835 crore.
The high growth of contingent liabilities has been attributed to the sovereign guarantees provided by the ousted Awami League government mainly to the power and aviation sectors which together account for over 50 per cent of the current contingent liabilities.
Under the sovereign guarantee guideline issued in 2014, the government has been providing guarantees and counter guarantees against non-concessional loans negotiated by the SOEs for providing goods and services as well as generating employment.
The guarantees against non-concessional loans that according to the existing provision of the country carry less than 25 per cent grant element have primarily been issued to the state-owned entities operating in the commercial aviation sector, power sector and public commodity sector, and the fertiliser production plants.
The contingent liabilities jumped to Tk 92,601.71 crore in FY23, Tk 98,591 crore in FY24 and Tk 1,17,094 crore in FY25.
The Finance Division has identified the contingent liabilities as one of the fiscal risks for the new financial year which will begin on July 1, although there has been no incident of sovereign loan default by the SOEs.
Besides the contingent liabilities, the SOEs have other liabilities, including loans from the domestic sources, said the Finance Division officials.
The division has calculated that the overall liabilities of the SOEs stood at Tk 6,33,403.11 crore in June 2024, accounting for 12.66 per cent of the country鈥檚 gross domestic product and representing an 8 per cent increase from Tk聽5,85,577 crore in June 2023.
鈥業t鈥檚 crucial for the government to monitor and manage its contingent liabilities effectively because their realisation can have a significant impact on public finances,鈥� according to the medium-term macroeconomic policy statement FY 2025鈥�26 to FY 2027鈥�28.
The SOEs鈥� liabilities can potentially increase government debts and budget deficits, said the policy paper.
Bangladesh prepares to graduate from the group of the least developed countries in November 2026 amid opportunities and challenges.
The interim government has already formulated the 鈥楽mooth Transition Strategy鈥� by articulating the post-graduation road map.
The medium-term macroeconomic policy statement said that shocks emanating from exchange rate volatility, loss of market access, interest rate hikes, substantial volume of contingent liabilities on account of the SOEs and natural disasters could potentially thwart the efforts to chart a smooth transition.
