Irwin, Timothy Cressey

Fiscal Affairs Department, International Monetary Fund
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Fiscal Affairs Department, International Monetary Fund
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Last updated January 31, 2023
Tim Irwin worked at the World Bank from 1995 to 2008, on among other things the regulation of utilities and the link between public financial management and privately financed infrastructure projects.

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    Estimating the Fiscal Risks and Costs of Output-Based Payments : An Overview
    (World Bank, Washington, DC, 2005-07) Boyle, Glenn ; Irwin, Timothy
    Output-based payments are an important tool of government policy. Sometimes governments offer "output-based aid" to subsidize services sold to households. Because output-based payments are tied to the delivery of outputs, they have an obvious advantage over input-based payments. In agreeing to make such payments, however, governments assume a liability not unlike that created by taking on debt. Moreover, in some cases the payment amounts are subject to considerable uncertainty. As a result governments may benefit from estimating both the costs of these commitments, and the new fiscal risks they create-and comparing these costs and risks with those of alternative policies. Output-based payments come in many forms, as do the risks they present. However, measuring the risks and costs of output-based schemes is feasible but also, inevitably, mathematical. Quantifying risk necessarily involves some knowledge, and application of probability and statistics; estimating the cost of uncertain payments that occur at different points in time, requires asset pricing techniques from modern finance theory. Nevertheless, most of the important issues are conceptual, rather than technical.
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    Techniques for Estimating the Fiscal Costs and Risks of Long-Term Output-Based Payments
    (World Bank, Washington, DC, 2005-06) Boyle, Glenn ; Irwin, Timothy
    Long-term commitments to make output-based payments for infrastructure can encourage private investors to provide socially valuable services. Making good decisions about such commitments is difficult, however, unless the government understands the fiscal costs and risks of possible commitments. Considering voucher schemes, shadow tolls, availability payments, and access, connection, and consumption subsidies, this paper considers measures of the fiscal risks of such commitments, including the excess-payment probability and cash-flow-at-risk. Then it illustrates techniques, based on modern finance theory, for valuing payment commitments by taking account of the timing of payments and their risk characteristics. Although the paper is inevitably mathematical, it focuses on practical applications and shows how the techniques can be implemented in spreadsheets.