SGs entail a fiscal risk which should be managed. In particular, sub-sovereign government entities or agencies will often be willing to grant SGs or make use of central government SGs whilst underestimating the potential cost of SGs for central government.
Guidance: A proper decision-making framework for granting SGs should be adopted. Information on SGs should be centralised. The ministries of finance should play an active role in developing and reviewing SG proposals. As the issues involved in evaluating, designing and valuing guarantees are complex, it will often be necessary to appoint financial and legal advisers. Governments should also consider limiting their exposure by setting quantitative ceilings for SG programmes and caps for specific SG instruments. This can be achieved, for instance, by using a fund to manage liabilities arising from SGs.