Public-Private Partnerships: Implications for Public Finances

Abstract

Cangiano, Hemming and Ter-Minassian evaluate the implications for public finances of public-private partnerships (PPPs). An increasing number of countries have introduced schemes where the private sector supplies infrastructure assets and services. While these schemes can increase the supply of infrastructure and reduce costs, government guarantees can be a source of fiscal risks. The paper examines the main features of PPP schemes, the underlying economic rationale, and the conditions that can make the recourse to PPPs efficient. The authors also examine the institutional features of PPPs: the legal framework, risk transfer, fiscal accounting and reporting. The paper concludes by pointing to the need to assess carefully the budgetary risks associated with PPPs, to ensure appropriate accounting and reporting standards, and to strengthen disclosure requirements concerning the underlying risks and contingent liabilities.