This refers to a reduction in the required rate of return on equity or a lowering of the effective cost of borrowing for the private operator. Governments can subsidize the cost of debt to a utility by lending it money at concessional rates (i.e., below its own debt servicing costs). Subsequent write-offs of these loans by government may represent a further subsidy to a utility although this is likely to cause significant problems later when further borrowing may be required. Governments may also subsidize the cost of debt to the utility by providing guarantees or by taking responsibility for exchange rate risk, which can be a significant cost to utilities in developing countries.