Minister of Infrastructure: PPPs Are Not Fiscally Risky

The Albanian government has chosen an obviously successful and financially, risk-allocation wise, controllable form of investment, that of including private partnerships in investments regarding the construction of Albania’s infrastructural networks.

Minister of Infrastructure and Energy Damian Gjiknuri spoke the above yesterday, to warn citizens that other roads, besides the Rruga e Kombit highway, will introduce highway tolls, as a result of public-private partnerships, and that, in the following years, infrastructural investment will rely heavily on PPPs.

Furthermore, Gjiknuri declared that public-private partnerships are the most successful and financially manageable form of investment.

His, and the Rama government’s, stance on PPPs is something that the International Monetary Fund and World Bank have been pushing against, for some time now.

The IMF has constantly advised the Rama government to reduce the number of PPP contracts, as they are not being properly and transparently assessed, to the detriment of the taxpayers:

Each concession, including some recent major ones, come out of a not very formal process. […] 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.

Therefore, per the IMF, Gjiknuri’s claims that PPPs are easily controllable are demonstrably false, especially in Albania’s case, where few PPPs are actually based on any credible feasibility studies and tender procedures tend to be opaque.

PPPs constitute a burden on public wealth, though their public expenses tend to be hidden by contability tricks.

The World Bank has also advised the Rama government to enforce PPP control on both existing contracts and potential new ones.

According to the World Bank, unsolicited PPP offers from private companies should be avoided, and PPPs should be limited to feasible projects that have undergone the legal procedures and meet European standards.