PPPs and Fiscal Risks: Should Governments Worry?

Public-private partnerships (PPPs) offer new opportunities to develop public infrastructure, but also bring in substantial fiscal risks. By involving management and innovation from the private sector, PPPs offer the promise of greater efficiency, better quality, and lower-cost services than traditional public procurement. However, PPPs also involve new and significant fiscal risks and can be used to bypass spending controls and move public investment off budget and debt off the government balance sheet. In fact, whether or not PPPs have achieved their efficiency objectives in practice remains an open question, although there is mounting evidence of fiscal risks associated with PPPs. Therefore, governments need to be proactive in managing these fiscal risks.