IMF advises government to stop “1 billion EUR” PPP agreements

06/03/2018 20:58

The International Monetary Fund asked the Albanian government to suspend the PPP agreements of the “1 billion EUR” program.

The Head of the IMF office in Tirana, Jens Reinke, made this strong request in an interview for Top Channel.

“We have declared that the institutional framework for managing the PPP agreements is not suitable. Certainly, building adequate capacities and institutions requires time, and that’s why we advised the government to take a small break and cancel all new PPP agreements”, he said.

According to the IMF, all PPP concessions are given without any clear survey regarding the cost that will be paid by citizens, or about the profit they bring.

“There should be a consistent list of the priority projects that are given for PPP concessions, but there is no such list. Every concession comes from a process that is not very formal. Secondly, there should be a strong unit at the Ministry of Finances to study cost-profit survey for every project. This unit should have the power to cancel not profitable projects. The government has made some progress. There is a better unit at the Ministry of Finances and a unit for the fiscal risk, but coordination between them is not good. They don’t play a good enough role to plan and prioritize investment projects”, Reinke adds.

The IMF says the government should stop accepting PPP agreement that is proposed by private companies.

“The government’s program should be consistent and well-thought. It should keep in mind the total profits in the infrastructure network, which come from different investments. This cannot happen when the government only approves the unsolicited propositions coming from private operators. Only when it identifies the strategy and starts public bids for projects that were chosen because they have bigger profits”, the IMF head in Albania advises.

IMF has other reasons to be concerned about the PPP concessions. The main one is that they have increased the debt.

“The PPP agreements bring fiscal risks. One of the main motivations is the postponement of payments. The investment is realized now with funds from private operators, and the government pays later. Economically, this is the same thing as a loan. The entire investment or part of it should be registered as a public debt”, the IMF declared.

Top Channel