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Appraising PPP Projects

411.2 The Output of the Fiscal Feasibility Analysis

The fiscal feasibility analysis provides two essential outputs.

  • First, it estimates the fiscal effect of the project in terms of direct and contingent exposures on the public budget. It also projects those effects from different perspectives, providing a comprehensive assessment of governmental liabilities. This is a central piece of information on its own for an informed green light decision at the end of the Appraisal Phase; and
  • Second, the exercise generates a thorough due diligence, attesting to the compliance of the project with the regulatory aspects specific to each jurisdiction that limit PPP expenditures.

The results of the affordability exercise can have a strong influence on several other feasibility assessments, specifically on the commercial feasibility as it can limit, in cases of government-pays PPPs, the amount of government payments considered. In this case, the contract structure, financial model, or the technical requirements might be revisited in order to redefine the project so that it is simultaneously commercially feasible and affordable.

Several countries have also introduced different regulations to assess the overall impact of PPP projects on long-term payment sustainability. These regulations typically define if and how PPPs should be considered in the total debt stock of a country. This issue will be discussed in the following section.

 

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