Management of Fiscal and Financial Risks Generated by PPPs: Conceptual Issues and Country Experiences

Abstract

This paper discusses the main issues concerning sovereign fiscal and financial risks from public–private partnerships (PPPs) with a focus on contingent liabilities (CLs). It is based on the presentations and discussions that took place during the XI Annual Meeting of the Group of Latin American and the Caribbean Debt Management Specialists (LAC Debt Group), held in Barbados in August 2015. The main issues discussed include PPP risks assessment, institutional framework for PPP risk management, and accounting and reporting of CLs generated by PPPs. Six country cases (Chile, Colombia, Costa Rica, Honduras, Suriname, and Turkey) are presented to illustrate experiences with different degrees of development regarding the management of risks and CLs related to PPPs. The document concludes that PPP risk management should encompass the whole lifecycle of a PPP project, risks need to be identified and CLs must be estimated and monitored, and the institutional capacity of governments to evaluate and manage PPP risks plays a central role in the successful development of PPP contracts. Although institutional capacities in this regard have improved in recent years, estimations of CLs involved in PPPs are not regularly performed, and there is still room for improvement on the assessment, measurement, registration, budgeting, and reporting of risks and CLs related to PPPs.