External Debts, Re-Election Possibilities and the Infrastructure Development Via Public Private Partnership: Evidence from Low- and Middle-Income Countries

Abstract

Public private partnership in infrastructure development can be used as an ‘off the balance' tool to help governments hide real fiscal problems and facilitate the transfer of debt-repayments to their succeeding administrations. Using negative binomial regressions on a panel dataset of 40 low-and middle-income countries from 1992 to 2021, the paper finds that governments which high short-term external debts in stock and flows measurements are more motivated to participate in public private partnership. The results are robust through sensitive tests on different sampled dataset. These findings reaffirm the existence of fiscally opportunistic behaviors of public sectors in public private partnership in low-and middle-income countries. Results also indicate that governments which face re-election limitations have stronger motivations to implement infrastructure projects via public private partnership. These impacts are found to be stronger in less-developed economies and in Sub-Saharan African countries.