The National Credit Guarantee Scheme is unlawful according to the Opposition Party. In a recent letter addressed to the Prime Minister, the Opposition Party questioned the legality of the Government Guarantee of loans to private entities through the National Credit Guarantee Scheme. The scheme was launched on October 5th 2020, to enhance access to financing. The National Credit Guarantee Scheme is an intervention under which the Government guarantees a portion of the loans availed for establishing a viable business entity.
According to the Opposition Leader, despite the National Credit Guarantee Scheme being unlawful, it may also lead to a huge loss of public money if the private beneficiary fails to pay back the debt. He says that because the fund for the mortgage will be derived from the Government’s Consolidated Funds or the taxpayers’ money.
“The most important point that we need to note is that the government does not have the authority to mortgage public money from the consolidated fund as a guarantee for private loans. This is as per the Constitution and the Public Finance Act. What government can do, what the law allows, is that the government can be a guarantor for loans to the budgetary bodies, state-owned enterprises and public organisations but strictly prohibited to stand as a guarantor for private loans,” said Dorji Wangdi, the Opposition Leader.
He also added, although the scheme was a commendable effort by the government to revive the economy yet they committed a serious legal lapse while implementing the scheme. The Opposition recommended the government to discontinue placing the Public Consolidated Fund as a guarantee to private loans and come up with alternate solutions to ease the access to finance for the private sector.
BBS tried to contact the Prime Minister’s Office for comments.
Yeshi Dorji
