IMF Warns against Public–Private Partnerships Permanent IMF representative to Albania Jens Reinke.

At the conclusion of its recent official mission, the International Monetary Fund (IMF) has published several “preliminary findings” in concluding statement online.

One of the most disconcerting findings is the strong criticism of the IMF of the government’s plan to expand the usage of public–private partnerships through what Prime Minister Edi Rama has called the “1 Billion Euro Plan.” The main criticism of the IMF is that the payments made by the state to private partners, such as the Municipality of Tirana paying back the schools built and owned by private companies, are not reflected properly on the fiscal balance sheet:

 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. Contrary to current practice, the impact of PPPs on the fiscal accounts and public debt should be reflected transparently and in line with international norms.

In February, the IMF had already denied to have been consulted in the context of Prime Minister Rama’s dangerous investment plans, when Jens Reinke, the permanent representative of the International Monetary Fund in Albania, stated:

It is important to consider that PPPs are not always the most efficient way from the perspective of costs to finance public investments. The financing of projects through PPPs never should be done if the only reason is to keep the costs outside the balance.

Projects that are implemented as PPP have to pass through all the evaluations and prioritizations, just like all the other public investments that are done.

Besides that, the government needs to evaluate the fiscal costs and risks that follow from the subsidies or guarantees that accompany PPPs.

The long-term financial risks of the government have to be transparent in the fiscal data and have to managed in a careful way.

But this was far from the only point of criticism of the IMF. The IMF also warned the government against “granting any new tax exemptions or preferential tax treatments, or lowering tax rates,” while the Rama government in fact recently announced a program to grant foreign investments in tourism a tax-free regime for 10 years.

Moreover, the IMF is critical of Rama’s plan to merge the taxation and customs offices: “The announced merger of the tax and customs administrations should be revisited, given the high risks of undermining revenue collection and the ongoing tax administration reforms.”