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From 31 May to 9 June, a DMFAS workshop on Public-Private Partnerships (PPPs) was organized with Côte d’Ivoire in Geneva to discuss the challenges faced by the country in monitoring PPPs and their impact on debt.
Debt Management offices (DMOs) are responsible for managing and monitoring many kinds of external and domestic debt instruments. Recently, there has been a growing demand for DMOs to monitor PPPs given their potential impact on debt.
What are PPPs?
The Public Sector Debt Statistics Guide for Compilers and Users defines PPPs as “long-term contracts between two units, whereby one unit acquires or builds an asset, operates it, for a period, and hands the asset over to the second unit”.
PPPs are diverse and complex, but the key word is “long-term contract” where private investors and suppliers provide a needed public good in exchange for earnings and gain a comparative advantage in a specific economic sector such as transportation, energy, water and sewage. For developing countries in need of large infrastructure projects with modest budgets, PPPs offer opportunities to leverage financing as investors can provide the initial financing (equity) and further raise the complementary capital in the financial market (project debt). The PPP also brings the technology and/or the equipment, as well as an efficient mechanism to make it all work (asset life-cycle management).
However, PPPs also involve risks and costs that need to be analyzed and closely monitored by the government as certain PPPs can impact the nation’s debt sustainability and, hence, must be accounted for in the country’s debt position. This explains why some debt offices are also now mandated to be part of the PPP selection and monitoring process.
Collaborating with Côte d’Ivoire in the area of PPPs
Since 2017, the DMO of the Ministry of Finance (MoF) of Côte d’Ivoire has been involved in selecting and monitoring PPPs.
To respond to this new responsibility, in 2019, the MoF partnered with UNCTAD’s DMFAS Programme to identify and manage debt elements generated by PPPs using DMFAS tools.
From 31 May to 9 June, a workshop on PPPs was organized with Côte d’Ivoire in Geneva to discuss the current situation and challenges. The Ivoirian delegation included experts from the debt office as well as a high official from CNP-PPP, Côte d’Ivoire ‘s PPP Unit. The workshop was moderated by Hugo Gosmann, UNCTAD’s consultant, and DMFAS experts Roula Katergi and Ricardo Murillo. Andreas Bergmann, from the Zurich School of Management and Law, who participated thanks to the support of the Swiss State Secretariat for Economic Affairs, also brought valuable insights on how to apply the International Public Sector Accounting Standards (IPSAS) in particular IPSAS-32 .
Workshop outcomes
The workshop provided DMFAS with detailed information on DMOs’ needs in relation to PPPs with a view to developing the requirements for a new module in DMFAS 7. For example, the development of a fact sheet per PPP contract that has a recognized debt impact according to international accounting standards (IPSAS-32) as well as the need to report on PPPs. Moreover, the scope of a training module to strengthen debt offices’ capacity to record and report on PPPs and their debt implications was defined.
The workshop also examined P-FRAM 2, the IMF and World Bank’s PPP fiscal risk assessment model and the possibility to export data from P-FRAM 2 to DMFAS 7. A key recommendation of the workshop is to build on P-FRAM 2 and supplement it by including additional information and new reports on PPPs in DMFAS 7 to improve fiscal transparency. DMFAS 7 will thus complement existing tools.
Other in-house or third-party packages can also provide useful information to debt managers during the whole PPP cycle, such as SOURCE, which was presented at the workshop.
The DMFAS Programme wishes to thank the Ministry of Finance of Côte d’Ivoire for this fruitful cooperation.
