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.