Irwin, Timothy2013-08-162013-08-162003-080-8213-5556-2https://hdl.handle.net/10986/15117When governments seek private investment in infrastructure projects, they usually find themselves asked to provide grants, guarantees, or other forms of fiscal support. Often they prefer to provide support in ways that limit immediate cash expenditure but sometimes generate large costs later. Seeking to provide support without any immediate spending of cash, for example, governments often agree to shoulder project risks and sometimes encounter fiscal problems later. For example, in the 1970s and 1980s in Spain, the government was obliged to pay $2.7 billion when the exchange-rate guarantees it had given private toll roads were called (Gomez-Ibanez 1993). More recently, the Indonesian government agreed to pay $260 million as a result of its agreements, through the electricity company it owns, to bear demand and foreign-exchange risks in private power projects. Yet even when governments have chosen to provide cash subsidies they have not always achieved their apparent goals: for example, over 80 percent of the Honduran government's "lifeline" electricity subsidies go to customers who aren't poor (Wodon et al. 2003). In still other cases, governments' decisions not to provide support may have caused problems.en-USCC BY 3.0 IGOGUARANTEESSUBSIDIESFISCAL SUSTAINABILITYFINANCING PROGRAMSPOLITICAL RISKSPOLITICAL CONSTRAINTSGRANTSCASH MANAGEMENTTAX BREAKSINFORMATION DISSEMINATIONFOREIGN EXCHANGESTATE OWNED ENTERPRISESTARIFFSPRIVATE OWNERSHIPREGULATORY FRAMEWORK ACCOUNTABILITYACCOUNTING PROCEDURESACCRUAL ACCOUNTINGADVERSE SELECTIONAIRPORTSBALANCE SHEETBANKSBARRIERS TO ENTRYBENEFIT ANALYSISCASH FLOWSCOMPETITIVE MARKETSCOST OF CAPITALCOST-BENEFIT ANALYSESDEBTDISCLOSUREDISCOUNT RATEELECTRICITYEXPECTED RETURNSEXPENDITURESEXTERNALITIESEXTERNALITYFINANCIAL MARKETSFISCAL PROBLEMSFISCAL TRANSPARENCYGOVERNMENT GUARANTEESINSURANCEINTEREST RATEINTEREST RATESLICENSESLIVING STANDARDSMARKET PRICESMARKET VALUEMATURITIESMORAL HAZARDNET ASSETSNET LOSSOPPORTUNITY COSTPOLICY ENVIRONMENTPOSITIVE EXTERNALITIESPRESENT VALUEPRICE INCREASESPRIVATE SECTORPRIVATIZATIONPROFITABILITYPROPERTY RIGHTSPUBLIC RESOURCESREVENUE GUARANTEESROADSTAXTAX RATESTAX REVENUETELECOMMUNICATIONSTRADEOFFSUTILITIESWorld Bank10.1596/0-8213-5556-2