IMF warns Albanian government: PPPs contain fiscal risks!

IMF warns Albanian government: PPPs contain fiscal risks!

The application of public-private partnerships, PPPs, could cause damages to the country’s economy. This is the appeal issued by the International Monetary Fund for the Albanian government.

“Directors recommended containing fiscal risks, including those stemming from public‑private partnerships (PPPs). They highlighted the need to consolidate and strengthen the decision‑making processes in public investment management and underscored the importance of ensuring value for money for PPP projects through competitive bidding. Directors also called for determined measures to halt the persistent build‑up of government arrears, as these hurt private economic activity and undermine trust in the public sector”, the IMF said.

Meanwhile, according to IMF, “the increasing reliance on PPPs for infrastructure projects has resulted in rising contingent liabilities. Domestic risks also include the impact of drought on electricity generation, creating risks to the budget.”

The International Monetary Fund has issued a clear warning for the Albanian government about the high level of public debt, by saying that “on the domestic side, public debt is high, while low domestic savings and the absence of large institutional investors amplify dependence on foreign sources of financing. The increasing reliance on PPPs for infrastructure projects has resulted in rising contingent liabilities.”

Although the government has decided to stop PPPs through unsolicited bidding in infrastructure starting from July 1st, 2019, the Albanian government seems determined to continue them. Former Finance minister declared two days ago in Parliament that “we will continue to make public investments through concession agreements and PPPs”

RETROSPECTIVE

The appeals that IMF has issued so far about PPPs in Albania

November 2018

The rapid increase in Public-Private Partnerships (PPPs) has raised fiscal risks, calling for additional improvements in the public investment framework”

May 2018

“The impact of PPPs on the fiscal medium-term budget framework and debt sustainability should be carefully assessed”

October 2017

“The authorities’ ambitious agenda for public investment through PPPs poses substantial fiscal risks. It is of paramount importance to strengthen the implementation of the PPP framework and start making use of the Ministry of Finance’s recently expanded legal powers to assess and monitor PPP projects”