IMF: Stop Concessions and PPPs

The Rama government must halt concessions and suspend the “1 Billion Euro” public–private partnership project. The request was made publicly by Permanent IMF Representative in Tirana, Jens Reinke.

In an interview in Top Channel, Reinke stressed that concessions are being given with no financial analysis or transparency:

We have asked the government to take a little break, refrain from signing new contracts until the framework can be put in place. […] Each concession, including some recent major ones, come out of a not very formal process.

As the IMF has repeatedly stressed in its reports, Renke clarified that the Rama government isn’t counting the large amounts spent on concessions and PPPs as part of the public debt:

PPPs bring fundamental fiscal risks. One of the main PPP motivations seems to be the postponement of payment. In other words, the investment is funded privately now, and the government pays later. Economically speaking, this is a loan. Therefore, the entire investment, or part of it should be thought of as public debt.

The IMF representative clarified that no government can accept any and all unsolicited PPP proposals from private companies, as the Rama government has done in the last years:

The government’s investment plan must be consistent and well-thought out. It should keep in mind the net profits coming from different investments in infrastructure. The above cannot happen when the government merely approves unsolicited proposals private companies, but only when it works out a strategy and starts putting out public tenders for projects that are then chosen because they have the largest advantages.

In addition to the IMF, the World Bank has also opposed the government’s “1 Billion Euro” PPP plan, as these contracts are not being based off feasibility studies and are being used by the government, at best, only to obscure the true degree the public debt has reached.

The “1 Billion Euro” plan was launched by Prime Minister Edi Rama in February 2017 before the parliamentary elections. Back then, the IMF already indicated it was taken by surprise. Reinke had issued several warnings to the government and has expressed worries about the government’s economic policies.

Prime Minister Rama, however, has ignored the IMF and has implemented the “1 Billion Euro” plan through projects such as the Rruga e Arbrit and plans for several new highways. In 2018, the collective costs of all of Rama’s concessions has already reached €70 million.