Budgeting for loans and guarantees: The United States Federal Credit Reform Act

Providing support through the provision of credit is one of many tools that governments can employ to accomplish public policy goals. When properly targeted, government credit programmes can provide many benefits including addressing particular gaps where private lenders may not be serving a market well, assisting in improving resource allocation across an economy, or providing a means to convey a subsidy to further a specific public policy objective. This paper does not aim to discuss the policy rationale or programmatic outcomes of government decisions to extend credit. Instead, it focuses on the methods used to budget and account for the risks and uncertain budgetary claims resulting from the provision of credit. It examines the United States experience with the US Federal Credit Reform Act (FCRA), highlighting an alternative to cash budgeting and accounting for government loan and guarantee programmes. It briefly addresses issues countries may be experiencing with cash budgeting and credit programmes that do not recognise cost/create uncertain future budgetary claims. This includes new credit programmes implemented in response to the COVID-19 pandemic. Finally, this analysis presents challenges and lessons learned within the US approach.