The Bangladeshi government is planning to decrease loan guarantees for state-owned enterprises (SOEs) in an effort to boost their capacity and reduce the external debt burden. Under the new measures, loan guarantees will only be provided for essential projects in the public interest. This strategic move aims to improve the efficiency of government enterprises, particularly those operating at a loss and heavily reliant on government assistance. By limiting access to loans without government guarantees, the government intends to incentivize these enterprises to enhance their profitability and financial strength.
The decision comes as loan guarantees for SOEs have seen a significant increase in recent years, raising concerns about escalating foreign debt. To mitigate risks associated with guarantees, the government plans to improve financial statements and de-risk 100 state-owned enterprises in alignment with the International Monetary Fund’s recommendations. The move also highlights the need for comprehensive initiatives to address mismanagement and inefficiency in these institutions.
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