Business Case
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| Caribbean PPP Toolkit
iv.
Monitor and manage
Once a project has been approved, and the PPP contract executed, the project will be implemented. Throughout the lifetime of a PPP contract, the government must monitor its exposure to its fiscal commitments (both explicit and contingent), and be prepared to take early action, on emerging problems.
Effective monitoring will require maintaining up-to-date information on the complete range of government’s fiscal commitments under PPP contracts. This allows the government to disclose its exposures to the public, improving transparency of its commitments to its ongoing projects.
By monitoring its fiscal commitments, the government will also be able to identify emerging problems, and situations where the need for a payment is increasingly likely. The government can then consider how to intervene to manage the underlying risk factors and reduce the likelihood of needing to make interventions.
Some governments have created specialised systems and teams to monitor and manage fiscal commitments. For example, Chile has a unit within the Ministry of Finance that is responsible for monitoring and managing contingent liabilities from PPP contracts. The creation of a unit was justified in Chile because the Chilean Government has a large number of contracts. In addition Jamaica has a PPP unit within the Ministry of Finance, which is responsible for monitoring the government’s fiscal commitments under its PPP projects.
b.
Modelling Fiscal Liabilities
Using the information from the Fiscal Liability Register, the expected fiscal impact during the PPP contract can be modelled, to assess its affordability to the government. The outcome of this modelling exercise is a projection of the impact of the PPP project on government liabilities, non-financial assets, net lending/borrowing and the resulting cash balance to government. The project impacts can then be compared to national forecasts of the same fiscal variables to evaluate the fiscal affordability of the project. This assessment must be done not only for the PPP project under consideration, but for all existing PPP projects (or the fiscal impact of existing PPP projects must be included in the forecasts of the national fiscal variables).
Figure 4.26 shows sample outputs of a forecast of the fiscal liabilities of a hypothetical PPP project, produced by the PPP Fiscal Risk Assessment Model (PFRAM) developed by IMF and the World Bank. This fiscal spreadsheet tool is freely available for Caribbean governments to use by their PPP contract monitoring teams.