STANDARDIZED GUARANTEES ASSESSMENT TOOL (SGAT)

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The SGAT helps countries assess the fiscal costs and fiscal risks associated with government standardized guarantee schemes using a cash-flow based portfolio approach.
The SGAT focuses on loans to businesses; it is not tailored to assess risks from mortgages, student loans, or insurance schemes.
The tool accommodates multiple schemes or sub-schemes, and is flexible to accommodate various scheme features (e.g., risk coverage, loss sharing, pricing, collateralization, guarantee trigger).

Quantifies the fiscal costs and risks from standardized guarantees or loan schemes using baseline and stress scenarios.
Uses cash-flow based portfolio analysis modelling aggregate borrowers' behavior rather than relying on a more burdensome underlying risk assessment of individual borrowers, institutional or funding structures.
Allows comparison of alternative design options or individual sub-portfolios.

Governments have implemented or supported standardized credit guarantee schemes to correct market failures and facilitate access to finance for SMEs; many governments created new or scaled up existing guarantee schemes in response to the COVID-19 pandemic.
Standardized guarantee schemes create fiscal risks; defaults of borrowers lead to fiscal costs over time even when schemes are initially recorded below-the-line and do not immediately affect government deficit or debt levels.
Assessing fiscal costs and risks before implementation helps governments compare costs and benefits of alternative policy options, design more effective schemes, and provision for losses in fiscal plans.
International accounting and statistical standards require the expected cost of such schemes to be recognized as government debt.

Supports ex-ante decision-making by estimating the fiscal impact of guarantee schemes and comparing fiscal costs across different scheme structures or alternative policy options.
Informs the amount that should be provided in the budget to cover expected calls under the scheme, as well as potential contingencies for unexpected calls.
Facilitates risk management and monitoring by producing metrics for quantifying risks, stress-testing, risk mitigation and provisioning.
Supports fiscal risk disclosure through quantification of fiscal risk and output, tables and charts that can be incorporated into various reports (e.g., fiscal risk statements).
Provides a basis for accounting and reporting of expected costs, which should be provisioned as a debt liability in the government balance sheets.
Supports macro-fiscal analysis by enabling inclusion of fiscal costs and risks in baseline and shock scenarios for debt sustainability analysis, cash and debt management, and other macro-fiscal tools.

The SGAT is complementary to the Discrete Guarantee and Loan Assessment Tool (DGAT): the SGAT focuses on guarantee and loan schemes while the DGAT focuses on discrete guarantees and loans.
Outputs from the SGAT can be used to account for the contribution of guarantee schemes to debt liabilities in the Public Sector Balance Sheet in accordance with the Government Finance Statistics Manual 2014.
SGAT outputs can feed into baseline or shock scenarios in the Fiscal Stress Test, Debt Sustainability Analysis for Low-Income as well as Market-Access Countries, the Medium-Term Debt Management Strategy Analytical Tool, and the tool to calibrate fiscal rules.
SGAT outputs can also support the assessment of fiscal risks from guarantees in the Fiscal Risk Assessment Tool and the assessment of fiscal transparency related to guarantees according to Pillar III of the Fiscal Transparency Code.