1. Budgeting and Fiscal Reporting for Public-Private Partnerships
Timothy Irwin
International Transport Forum, Paris
September 27, 2012
This presentation represents the views of the author and should not be attributed to the IMF, its Executive Board, or its management.

2. Outline of the presentation
PPPs and fiscal management
Improving fiscal information
Changing rules that guide fiscal decisions

3. PPPs that pose a problem for fiscal management
As we use the term, PPPs are long-term contracts in which a firm agrees to provide a service of public interest using an asset it constructs in return for fees from users or government

4. Stylized cash flows of PPPs and public finance

5. PPPs and fiscal management
PPPs have possible advantages, e.g., a single contractor may be better than government at jointly managing construction and operations to minimize lifetime costs
Governments should use a PPP when, holding quality constant, the PPP is expected to be affordable and cheaper in net present values than publicly financed investment
But if governments focus on common measures of the deficit in the next few years, a PPP may seem attractive even if it costs more or is not affordable
How can fiscal information and the rules guiding decisions be changed to address this problem?

6. Options for improving fiscal information
Adopting state-of-the-art accounting and statistical standards (e.g., IPSAS 32 or similar standards and SNA 2008 and Public Sector Debt Guide)
Presenting supplementary data on public finances that counts PPP companies as part of the public sector
Publishing forecasts of expected future spending on PPPs and incorporate those projections in existing medium- and long-term fiscal forecasts, debt-sustainability analysis, and the like
Describing fiscal risks of PPPs in statements of fiscal risk
Publishing PPP contracts

7. Options for changing rules guiding fiscal decisions
Budgeting that treats construction of the PPP asset as public spending—and thus requires standard budgetary approval
Budgeting that ensures authorization by parliament of expenditure commitments over the term of the contracts
Budgeting that requires all PPPs first to be approved in medium-term expenditure plans as publicly financed projects
Changing accounting underlying fiscal rules so that typical PPPs as creating government assets and liabilities
Setting limits on total commitments made in PPP contracts