The IMF and PPPs: A master class in double-speak


While the IMF cautions against the fiscal risks of public-private partnerships (PPPs), the institution is simultaneously backing them at a country programme level and advocates austerity measures that push governments towards expanding PPPs through constrained budgets.

The fiscal risks of PPPs

As far back as 2004, the IMF’s Fiscal Affairs Department (FAD) published a paper stressing that “one particular concern is that PPPs can be used mainly to bypass spending controls, and to move public investment off budget and debt off the government balance sheet, while the government still bears most of the risk involved and faces potentially large fiscal costs.”

Concerns over the fiscal risks of PPPs have also underpinned the work of the IMF to quantify the macro-fiscal impact of PPP projects. It has, for example, designed tools such as the Public Investment Management Assessment (PIMA), and the PPP Fiscal Risk Assessment Model (P-FRAM). However, it is not clear how these tools influence programme design at the IMF.

 More recently, in October 2018, the IMF published a note on controlling the fiscal costs of PPPs, which aimed at offering advice to policy makers. Building on a growing body of literature including its own economists, as well as academics and civil society organisations, the note raises concerns over the costs, risks and lack of proven efficiency gains of PPPs. It notes that, “while in the short term, PPPs may appear cheaper than traditional public investment, over time they can turn out to be more expensive and undermine fiscal sustainability.” The same note states that “the fiscal risks of PPPs are sizeable” as the average fiscal cost of PPP-related contingent liabilities that materialised during 1990-2014 was about 1.2 per cent of national GDP of countries where PPPs had been contracted, and according to the authors, “with the increasing use of PPPs by countries, the size of associated risks is likely to grow, too.”

The note also raises a red flag when it comes to the inflexibility of PPP contracts: “While spending on traditional public investments can be scaled back if needed, spending on PPPs cannot. PPPs thus make it harder for governments to absorb fiscal shocks, in much the same way that government debt does.”


 First published on The Bretton Woods Project as part of the Bretton Woods Project Observer. Read the full article here.