The Government of Nepal aims to deliver NPR 0.8 trillion (US$6 billion) infrastructure investments through public-private partnerships (PPPs) as part of its Fifteenth Plan (2019/20 – 2023/24). While PPPs are vehicles to mobilize private sector financing, governments often must provide fiscal support to mitigate risks.
The need for robust fiscal management to manage the government’s PPP-related fiscal risks, or Fiscal Commitments and Contingent Liabilities (FCCLs), was the subject of a workshop on strengthening PPP-related fiscal risks organized on March 27 by the World Bank. The workshop was attended by representatives from the Ministry of Finance, Public Debt Management Office, National Planning Commission, Office of Investment Board Nepal, and Office of the Prime Minister and Council of Ministers.
“Mobilizing private sector financing will continue to be a key priority for the Government of Nepal, making it critical to account for and manage PPP-related fiscal risks,” said Harischandra Dhakal, Under Secretary, Ministry of Finance. “Such strategic workshops will be key to provide a platform to share knowledge and guide policy actions in the management of risks going forward.”
One of the main benefits of PPPs is that they can relieve some of the pressures on the government’s budget by providing an alternative source of financing for infrastructure. However, the nature and extent of government support needs to be carefully structured in terms of allocating risks to balance requirements from investors and lenders to ensure the commercial feasibility and bankability of the project, potential for efficiency gains, and affordability of the government support mechanisms required to implement the PPP project.
The workshop involved a presentation by Mark Giblett, Senior Infrastructure Finance Specialist at the World Bank on key elements of a robust FCCL framework. These include limiting the overall exposure from PPP-related FCCLs, specifying procedures for extension of fiscal support for PPPs, and clearly identifying the responsibilities of government authorities.
“The World Bank is committed to support the Government of Nepal in its endeavor to formulate a comprehensive framework to manage fiscal risks,” said Peter Mousley, Lead Private Sector Specialist at the World Bank. “At the heart of this are key reforms to help designate authority to quantify and manage FCCL related risks and having a ready pipeline of credible PPP projects to enable proactive management of FCCL exposures by the government.”