ISLAMABAD: The outstanding stock of guarantees in the country remained at Rs3.460 trillion at the end of March 2023, with local guarantees amounting to Rs1.579 trillion and foreign guarantees up to Rs1.881 trillion, as stated in the Economic Survey 2022-23. However, during Jul-Mar FY23, the government issued fresh or rollover guarantees aggregating to Rs171 billion, which is 0.2 per cent of GDP. The guarantees issued against commodity operations are not included in the stipulated limit of 2 per cent of GDP as the loans are secured against the underlying commodity and are essentially self-liquidating. These guarantees are issued against commodity financing operations undertaken by the Trading Corporation of Pakistan (TCP), Pakistan Agriculture Storage & Services Corporation (PASSCO) and provincial governments. The outstanding stock of commodity operations remained at Rs1,112 billion at end-March 2023. The contingent liabilities of Pakistan are primarily guarantees issued on behalf of Public Sector Enterprises (PSEs). A sovereign guarantee is normally extended to improve the financial viability of projects or activities undertaken by 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 to fulfil the demand where the sovereign guarantee is a precondition for concessional loans from bilateral/multilateral agencies to sub-sovereign borrowers. The Fiscal Responsibility and Debt Limitation (Amendment) Act, 2005 under sub-section 3, clause (d) imposes two ceilings related to government guarantees which include (i) a flowing ceiling that is 2 per cent of GDP on the issuance of government guarantees, with the renewal of existing guarantees being considered as issuing new guarantees and (ii) the stock ceiling that 10 per cent of GDP on the total stock of outstanding government guarantees.