Alternative Utilizations of Government Guarantees

Abstract

The potential catalytic role of sovereign guarantees as a public finance management (PFM) instrument of government to assess sovereign credit rating outcomes is explored. The New Institutional Economics (NIE) framework offers alternative considerations in this regard. The use of government guarantees to improve societal outcomes linked to public infrastructure investments, and state-owned enterprises' (SOEs) corporate governance performance, has enormous potential to advance Africa's growth and development agenda. Ineffective public administrative reforms between 1960 and 1980 heightened public disillusionment with government service delivery performance. The introduction of private sector risk management techniques into PFM practices as part of the ‘Washington Consensus' reform agenda may have contributed to present-day inadequacies in sovereign guarantee management practices (SGMP). This weakness can be mitigated by utilizing and managing sovereign guarantees to SOEs within an active sovereign asset and liability management (SALM) framework, thereby supporting sovereign credit rating outcomes in Africa.