Publication: Managing the Fiscal Implications of Public-Private Partnerships in a Sustainable and Resilient Manner: A Compendium of Good Practices and Lessons Learned from the COVID-19 Pandemic
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2023-03-22
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2023-03-22
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Public-private partnerships (PPPs) can sometimes be perceived as a means for delivering infrastructure for free. A more nuanced but still inexact view is that they are a mechanism to overcome fiscal constraints. Some argue, perhaps rightly, that often governments enter PPP contracts without fully understanding their fiscal implications. These misconceptions lead to several challenges. There is evidence that fiscal sustainability is often overlooked or ignored by countries with PPP programs, with long-term fiscal implications the governments did not understand or manage well. Governments also struggle with perceptions that they are not fully transparent about the real, ultimate costs of PPP projects. This report aims to illustrate how to improve fiscal risk management and treatment of fiscal commitments and contingent liabilities (FCCL) arising from PPP projects, to build better Infrastructure post-COVID-19. It intends to be a resource for World Bank client countries, including low income and fragile economies, to design their fiscal PPP management frameworks in a viable way that helps them develop their PPP programs while maintaining medium-to-long-term fiscal sustainability and resilience. With that in mind, Volume I highlights and contextualizes the main findings from a set of case studies that assessed the PPP fiscal risk management framework in select countries, and synthesizes the observable and qualitative results in managing the impact of crises, in particular the COVID-19 pandemic. Based on that, it also explores how this crisis has affected PPP projects and overall PPP programs, and suggests improvements to FCCL management frameworks in order to strengthen the capacity of countries to continue with their PPP programs in a sustainable fiscal manner. Volume II contains the detailed case studies on which Volume I is based.
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“World Bank. 2023. Managing the Fiscal Implications of Public-Private Partnerships in a Sustainable and Resilient Manner: A Compendium of Good Practices and Lessons Learned from the COVID-19 Pandemic. © World Bank. http://hdl.handle.net/10986/39578 License: CC BY-NC 3.0 IGO.”
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Publication How Do Countries Measure, Manage, and Monitor Fiscal Risks Generated by Public-Private Partnerships? Chile, Peru, South Africa, Turkey(World Bank Group, Washington, DC, 2014-09)The topic of managing fiscal risks arising from public-private partnerships is receiving increased attention as more governments turn toward this type of financing for large infrastructure projects. Governments can manage balance sheet exposure to public-private partnerships by quantifying and capturing direct obligations and provisions for potential calls on government guarantees associated with public-private partnership projects in the preparation of the medium term fiscal framework and annual budget. This working paper examines how four countries with active public-private partnership projects manage the costs and risks of financial obligations generated by these investments throughout the lifetime of the contracts. The paper seeks to complement the existing literature with a practitioner's point of view while exploring if and how these countries monitor and evaluate the fiscal risks generated by the portfolio of public-private partnerships (as well as individual projects). The countries covered are Chile, Peru, South Africa, and Turkey, all of which have experience implementing public-private partnership projects. The research finds that countries have tailored fiscal risk management and monitoring frameworks to fit their circumstances and respective budgeting, accounting, and reporting practices. All four countries assess the overall or partial credit exposure to monitor and manage their fiscal commitments from public-private partnerships in a consolidated way. All countries have developed evaluation models to help assess fiscal risks and assess project and portfolio level credit exposure. 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As noted in the policy, the government's contribution to a PPP may include remuneration to the private party from government budgets, which may be fixed or partially fixed, periodic payments (annuities) and contingent. This report proposes an operational framework for managing fiscal obligations arising from PPPs in Ghana. This framework aims to ensure that PPP FCs are consistently identified and assessed during PPP project preparation, and that these assessments are fed into project approval. The report outlines roles and responsibilities, concepts, and processes for managing PPP FCs, drawing on international standards and practices, bearing in mind existing institutions and capacities in Ghana. The report also suggests legislative additions and capacity building needed to establish this framework in practice. This report focuses primarily on managing long-term FCs to PPPs, including regular payments or contingent liabilities (CL) that typically last throughout a project's lifetime. 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Sector-specific strategies for highways have been documented in a recent World Bank study.Publication Financing the Boom in Public-Private Partnerships in Indian Infrastructure : Trends and Policy Implications(World Bank, Washington, DC, 2008-12)India has seen rapid growth in recent years in its program of infrastructure public-private partnerships (PPPs). Despite the surge in demand for finance, local financial markets coped well over the period to 2007 and even offered better terms as they became more used to the PPP model. But areas of possible concern have developed. Gearing has increased significantly, and financing terms mean that PPPs are more exposed to interest rate volatility causes for concern in a period of rising rates and reduced liquidity. Further growth in PPPs will likely require a broadening of the sources of financing once the present financial market turmoil has lessened. Addressing these concerns will call for policy reforms to capital markets and concession frameworks.Publication Implementing a Framework for Managing Fiscal Commitments from Public Private Partnerships(World Bank, Washington, DC, 2014)This note presents practical guidance on how to implement a framework for managing fiscal commitments from Public-Private Partnerships (PPPs). It draws on specific regional operational experience and on World Bank Institute (WBI)'s wider thematic engagement with different partners worldwide. The note provides practical advice on how to: consistently identify and assess fiscal commitments arising from PPPs during project preparation and implementation; incorporate these into the project approval process, including budgeting for these appropriately; and strengthen the monitoring and reporting of fiscal commitments over the lifetime of the project. It explains the fiscal commitments that can arise from PPP projects; why governments may find it difficult to assess and manage these fiscal commitments and incorporate them into project selection; and the key components of an institutional framework to manage fiscal commitments at both the development and implementation stages of a project, including the roles, responsibilities, and processes for managing PPP fiscal commitments.
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