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

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

Stylized cash flows of PPPs and public finance

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?

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

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