Last Updated:
23 Feb 2020

Partial Credit Guarantees for SubNational Transactions

Author: Benjamin Darche, Joshua Gallo

A partial credit risk guarantee (PCG) provides comprehensive cover to sub-national governments' (SNGs) lenders in the event the SNG fails to make debt service payments on their debt, or when any default occurs, for any reason. A PCG provides direct or indirect debt service payment coverage for an SNG commercial bank loan or domestic bond issue. A PCG can also provide other improvements, or credit enhancements, to a debt obligation, such as extending and covering maturities beyond the term of bank loans or bonds normally available in the financial markets. This type of PCG helps an SNG match its debt maturity to the useful life of a project and lowers annual debt service payments. This allows the SNG to finance more of its infrastructure program.