Islamabad During Jul-Mar FY 2021-22, the government issued fresh/rollover guarantees/Letter of Comforts (LoCs) aggregating to Rs.344 billion or 0.5 percent of GDP. The outstanding stock of guarantees was Rs. 2,700 billion at end-March 2022.
Guarantees issued against commodity operations are not included in the stipulated limit of 2 percent of GDP as the loans are secured against the underlying commodity and are essentially self-liquidating. These guarantees are issued against the commodity financing operations undertaken by Trading Corporation of Pakistan (TCP), Pakistan Agriculture Storage & Services Corporation (PASSCO), and Provincial Governments. The outstanding stock of commodity operations was Rs.845 billion at end-March 2022.
Contingent liabilities of Pakistan are primarily guarantees issued on behalf of Public Sector Enterprises (PSEs). The sovereign guarantee is normally extended to improve financial viability of projects or activities undertaken by the government entities with significant social and economic benefits. It allows public sector companies to borrow money at lower costs or on more favourable terms and in some cases allows to fulfil the requirement where sovereign guarantee is a precondition for concessional loans from bilateral/multilateral agencies to sub-sovereign borrowers.