## Public-Private Partnerships, Government Guarantees, and Fiscal Risk

## Source details

**Canonical URL:** [Public-Private Partnerships, Government Guarantees, and Fiscal Risk](https://www.imf.org/-/media/websites/imf/imported-publications/external/pubs/nft/2006/ppp/eng/_ppp.pdf)

## Other formats

- [Markdown version](/-/media/websites/imf/imported-publications/external/pubs/nft/2006/ppp/eng/_ppp.pdf.md)
- [Structured JSON version](/-/media/websites/imf/imported-publications/external/pubs/nft/2006/ppp/eng/_ppp.pdf.json)

---

### Introduction and Scope
- Defines public-private partnerships (PPPs) as arrangements where the private sector supplies infrastructure assets and infrastructure-based services traditionally provided by government.
- Main PPP uses cited: roads, bridges and tunnels, light rail networks, airports and air traffic control systems, prisons, water and sanitation plants, hospitals, schools, and public buildings.
- Identifies dual attractions:
  - For government: private financing can facilitate increased infrastructure investment without immediately adding to government borrowing and debt; user charges can be a source of revenue.
  - For private sector: opportunities for business expansion and potential efficiency gains from superior management and innovation.
- Notes historical context:
  - Privatization expanded from the early 1980s (United Kingdom example) through the 1980s and 1990s, particularly where competition was feasible.
  - By the late 1990s privatization momentum waned even as infrastructure concerns persisted; PPPs emerged as an alternative and complement.
- Warns of potential motivation to use PPPs to bypass expenditure controls, move public investment off budget, and move public debt off the government balance sheet.

### Chapter 1 — Public-Private Partnerships: Features, Economics, and Institutional Needs
- Content coverage:
  - A. Basic Features of PPPs
  - B. Country Experience
  - C. Economic Principles
  - D. Institutional Framework
  - E. Risk Transfer, Leasing, and Ownership
  - F. Fiscal Accounting and Reporting for PPFs
- Key analytical points:
  - PPPs offer benefits similar to privatization but face obstacles where large sunk costs, monopoly positions, or undervaluation of social infrastructure limit competition.
  - Success of PPPs depends critically on credible transfer of risks to the private sector and on an appropriate institutional framework.
  - Challenges in assessing risk transfer and implications of limited risk transfer are highlighted.
- Reporting and accounting:
  - Chapter 1 provides interim guidance on fiscal accounting and reporting for PPPs while an internationally accepted accounting and reporting standard for PPPs remains under development.
- Appendices augmenting Chapter 1:
  - Appendix 1: Country experiences with PPPs.
  - Appendix 2: The statistical reporting framework used to discuss fiscal accounting and reporting.
  - Appendix 3: Detailed discussion of accounting for risk transfer.

### Chapter 2 — Government Guarantees and Fiscal Risk
- Coverage:
  - A. Guarantees, Contingent Liabilities, and Government Obligations
  - B. The Public Policy Purpose and Design of Guarantees
  - C. Problems Associated with Guarantees
  - D. Fiscal Accounting and Reporting for Guarantees
  - E. Managing the Fiscal Risk Posed by Guarantees
- Key messages:
  - Guarantees are widely used to shield the private sector from risk and are commonly associated with PPPs.
  - Public disclosure of information about guarantees is a good fiscal transparency practice.
  - There is no single clear best practice for reflecting the financial impact of fiscal risk from guarantees in fiscal accounts; the chapter goes beyond accounting to discuss broader fiscal policy issues.
  - The chapter places guarantees and other contingent liabilities in the context of the government’s broader obligations, addresses design and public policy rationales, outlines problems associated with guarantees, and proposes approaches to managing fiscal risk.
- Appendices related to Chapter 2:
  - Appendix 4: Modeling and estimating the value of government guarantees in Chile.
  - Appendix 5: International accounting and reporting standards for contingent liabilities.

### Chapter 3 — PPPs, Guarantees, and Debt Sustainability
- Focus:
  - A. PPPs
  - B. Guarantees and Uncertainty
- Key analytical thrust:
  - Examines consequences of PPPs and guarantees for debt sustainability.
  - Focuses on appropriate approaches to debt sustainability analysis and on addressing uncertainty created by guarantees.

### Chapter 4 — Summary, Conclusions, and Policy Measures
- Summarizes measures to maximize benefits and minimize fiscal risks associated with PPPs.
- Highlights the need for:
  - Sound institutional frameworks for PPP approval and monitoring.
  - Robust design and disclosure of government guarantees.
  - Fiscal accounting and reporting practices that improve transparency about contingent liabilities and risk transfer.
- Concludes with specific themes:
  - Realizing the promise of PPPs requires proper policy frameworks, credible risk allocation, and transparency.
  - Managing fiscal risks from guarantees requires disclosure, valuation where feasible, and active risk-management frameworks.
  - Assessing debt sustainability must take into account PPP commitments and the uncertainty introduced by guarantees.

### Notable Publication and Production Details (as presented in the source)
- Staff team led by Richard Hemming; team members include Max Alier, Barry Anderson, Marco Cangiano, and Murray Petrie; Teresa Ter-Minassian closely involved.
- Discussed by the IMF Executive Board in April 2004 and May 2005.
- ISBN: 1-58906-493-3
- Price: $25.00

*Prepared by a staff team led by Richard Hemming, International Monetary Fund*

---


_Source: https://www.imf.org/-/media/websites/imf/imported-publications/external/pubs/nft/2006/ppp/eng/_ppp.pdf_