Mastering the Risky Business of Public-Private Partnerships in Infrastructure

Author: Ms. Manal Fouad, Chishiro Matsumoto, Rui Monteiro, Isabel Rial, and Ozlem Aydin Sakrak

Investment in infrastructure can be a driving force in the economic recovery from the COVID-19 pandemic.

Volume/Issue: Volume 2021 Issue 010

Publication date: May 2021

ISBN: 9781513576565

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Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Public Finance , Economics / General , International - Economics , fiscal risks , infrastructure governance , public investment , public-private partnerships , PPP contract , recognition criteria , PPP procurement , PPP project , PPPS liability , Public investment and public-private partnerships (PPP) , Infrastructure , Risks of public-private partnership , Public investment spending , Africa

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Summary

Investment in infrastructure can be a driving force of the economic recovery in the aftermath of the COVID-19 pandemic in the context of shrinking fiscal space. Public-private partnerships (PPP) bring a promise of efficiency when carefully designed and managed, to avoid creating unnecessary fiscal risks. But fiscal illusions prevent an understanding the sources of fiscal risks, which arise in all infrastructure projects, and that in PPPs present specific characteristics that need to be addressed. PPP contracts are also affected by implicit fiscal risks when they are poorly designed, particularly when a government signs a PPP contract for a project with no financial sustainability. This paper reviews the advantages and inconveniences of PPPs, discusses the fiscal illusions affecting them, identifies a diversity of fiscal risks, and presents the essentials of PPP fiscal risk management.