Public-Private Partnerships

August 03, 2013

PPPs on the Balance Sheet, Please!

Posted by Tim Irwin

Public-private partnerships create a practical problem for public financial management, because their fiscal costs are deferred. Instead of paying for a project during its construction, the government starts to pay only when construction is complete, which may be four or five years after any deal is signed. That means that the main tool of public financial management—budget scrutiny—can’t be used to ensure that PPPs are affordable and a better use of public money than the alternatives. For PPPs with long construction periods, even the analysis of medium-term spending plans doesn’t help.

So what can be done to ensure that the budgetary implications of PPPs are properly considered?

The World Bank Group has just published an Operational Note on managing fiscal commitments from PPPs that helps answer this question. It looks at how these fiscal commitments can be assessed and monitored, whether they are commitments to pay for the availability of a service or to protect a PPP company from certain risks. The Note gives examples of the tasks that can be carried out by different government agencies, such as budget departments, debt-management offices, and PPP units. And it considers the kinds of rules that can be put in legislation to help ensure that the right assessment and monitoring occurs.

However, the Operational Note does not take a position on whether or not PPPs should be put on the government’s balance sheet. Budgeting and Reporting for Public-Private Partnerships by Katja Funke, Isabel Rial, and me argues that they typically should be.

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July 03, 2013

A New PFM Reform Strategy for Cyprus

Posted by George Panteli[1]

The government of Cyprus recently launched a radical reform plan for modernizing the country’s public financial management (PFM) system. The reforms are crucial to the implementation of the economic and financial recovery program on which we are now engaged with the help of the European Union, the European Central Bank and the International Monetary Fund. It will enable Cyprus to bring its budget process into line with best practice in the EU region, and enforce the fiscal rules and financial discipline that are necessary to comply with our Treaty obligations. At the same time, it will create an opportunity for line ministries to enjoy a new-found flexibility in managing their staff and other resources and to focus efforts on improving the quality of education, health and other public services that in many cases lag behind out counterparts in Europe. The strategy encompasses both traditional aspects of the budget system and emerging topics such as project evaluation processes, the management of fiscal risks including public-private partnerships (PPPs) and the future development of a sovereign wealth fund.  

The reform plan is challenging and a realistic timeline is required since the plan will take several years to implement. What are the plan’s main components?  

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November 07, 2011

New IPSAS Likely to Make It Difficult to Hide PPP Liabilities

Posted by Abdul Khan

Public private partnerships (PPPs) can lead to efficiencies and improved value-for-money by bringing in private sector expertise in construction and operation of assets used to provide vital public services. However, the eagerness of governments to embrace these arrangements has not always been motivated by these noble considerations. Often governments have entered into PPPs as a device to keep expenditure and debt off the budget. Hiding behind a mountain of legal and contractual obfuscations, governments have pretended that they did not have any liability for the full cost of the assets—perhaps a highway or a hospital—being built under these arrangements. This allowed them to simply include the annual contractual cash payments in their budgets and ignore all the future streams of payments required under the contract or contingent on specific triggering events. Budgets and annual accounts faithfully depicted this fiscal fiction year after year.

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May 31, 2011

Conference on Fiscal Consolidation and Budget Institutions in South Asian Countries

Posted by Tej Prakash

The IMF’s Fiscal Affairs Department (FAD) and the Indian National Institute of Public Finance and Policy (NIPFP) recently hosted a joint conference on fiscal consolidation and strengthening of budget institutions in South Asian countries. The main “institutions” discussed were fiscal responsibility frameworks, fiscal councils, and medium term budget frameworks.

The conference took place in New Delhi from April 21-22, 2011. Apart from senior budget officials and policy makers from the central and state governments of India, representatives from Bangladesh, Sri Lanka, Nepal, Bhutan, Afghanistan and Maldives participated in the conference.

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