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Table of Contents
Front Cover
Contents
Foreword
Acknowledgments
About the Authors
Main Messages
Abbreviations
Overview: Key Findings and Policy Recommendations
What are the main sources of fiscal risks from infrastructure?
Off-budget modalities drain public finances more often and on a larger scale than usually assumed
Inefficiencies in public provision lead to fiscal surprises in the near, medium, and long term
When it rains, it pours: Fiscal risks from infrastructure during bad times
Implementing a reform agenda can create sustainable fiscal space for infrastructure
Notes
References
Chapter 1: A Conceptual Framework for Assessing Fiscal Risks from Infrastructure
Main Messages
Introduction
Fiscal Risks from Infrastructure
In Sum
References
Chapter 2: Fiscal Risks Associated with Direct Public Provision of Infrastructure
Main Messages
Introduction
Near-Term Risk of OVERSPENDING on Infrastructure Projects
Medium-Term Risk of Unanticipated Capital Expenditure on Infrastructure
Long-Term Risks of Economic Underperformance from the Squeezing of Public Spending on Infrastructure
In Sum
Note
References
Chapter 3: Fiscal Risks and Costs of State-Owned Enterprises
Main Messages
Introduction
Size, Performance, and Cost Structure as Sources of Fiscal Risk in SOEs
Performance of SOEs versus Performance of Similar Private Firms
SOEs and Fiscal Risk: Slow Drip or Tail Risk?
Predicting Fiscal Risks
Capacity of SOEs to Deal with Shocks
In Sum
Notes
References
Chapter 4: Fiscal Risks and Costs of Public-Private Partnerships
Main Messages
Introduction
Guarantees
Renegotiation of PPPs
Early Termination of PPPs
Frameworks for Managing Fiscal Risks from PPPs
In Sum
Notes
References.
Chapter 5: A Reform Agenda to Create Sustainable Fiscal Space for Infrastructure
Main Messages
Introduction
Integrated Management of Fiscal Resources and Risks
Efficient Direct Public Provision of Infrastructure
Effective Fiscal and Corporate Governance of SOEs
A Robust PPP Framework
In Sum
Notes
References
Appendix A: Main Data Sources Used in the Report
Appendix B: The World Bank Infrastructure SOEs Database
Appendix C: Methodology Used to Compare the Performance of SOEs and Similar Private Firms
Appendix D: Big Bang versus Frequent Small-Drip Events
Appendix E: Methodology Used to Compare SOEs That Suffered a Negative Shock as a Result of the Decline in Oil and Gas Prices with a Control Group of SOEs
Appendix F: Methodology for Estimating Fiscal Risks from Early Termination
Boxes
Box O.1 Sectoral features affecting the size and profile of fiscal risks from SOEs
Box O.2 Sectoral features affecting the size and profile of fiscal risks from PPPs
Box 2.1 Using data envelopment analysis to assess the efficiency of spending
Box 3.1 Sensitivity of profitability of infrastructure SOEs in Indonesia and Kenya to changes in fuel costs and demand
Box 3.2 A taxonomy of fiscal injections to SOEs
Box 3.3 Predicting fiscal injections to SOEs
Box 4.1 Termination clauses of PPPs favorable to the private party
Box 4.2 Countries included in the analysis
Box 5.1 Calculating the costs of quasi-fiscal operations
Box 5.2 What is the PFRAM?
Figures
Figure O.1 Share of capital spending on infrastructure in developing countries, by modality, 2009-18
Figure O.2 Sources of fiscal costs and risks associated with provision of infrastructure
Figure O.3 Distribution of fiscal injections to infrastructure SOEs.
Figure O.4 Average annual fiscal injections to infrastructure SOEs, 2008-19, by country
Figure BO.1.1 Fiscal injections to infrastructure SOEs by sector, 2009-18
Figure BO.1.2 Size distribution of fiscal injections in the transport and power sectors
Figure BO.1.3 Return on average assets of infrastructure SOEs, with and without adjustment for operations subsidies, by sector
Figure O.5 Costs of renegotiation of PPPs in Chile and Peru
Figure O.6 Number of early terminations of PPPs in developing countries, 1990-2020
Figure O.7 Fiscal risks from early termination of PPPs in selected countries
Figure BO.2.1 Fiscal risks from early termination of electricity and transport PPPs
Figure O.8 Share of capital spending in the power and transport sectors, by modality, 2009-18
Figure O.9 Increase in fiscal risks from early termination of PPPs associated with a profound macro-financial shock
Figure O.10 Building blocks of a reform agenda to mitigate fiscal risks from infrastructure
Figure 1.1 Sources of fiscal costs and risks associated with the provision of infrastructure
Figure 2.1 Fiscal risks associated with direct public provision of infrastructure
Figure 2.2 Budget execution rates for public investment in infrastructure, 2010-18
Figure 2.3 Productivity and technological and efficiency change in road expenditure
Figure 2.4 Distribution of governance scores for quality of public investment management of infrastructure projects across 33 developing countries
Figure 2.5 Capital bias in public expenditure on roads, 2006-18
Figure 2.6 Historic infrastructure spending and projected infrastructure investment financing gap, by region
Figure 2.7 Government budgetary expenditure on infrastructure, by country income level and sector, 2010-20.
Figure 2.8 GDP per capita and total infrastructure expenditure per capita in low- and middle-income countries, 2006-20
F igure 3.1 Shares of spending by infrastructure SOEs, 2009-18
Figure 3.2 Fiscal risks from infrastructure SOEs
Figure 3.3 Average operating expenses of infrastructure SOEs in selected countries
Figure 3.4 Assets of infrastructure SOEs in selected countries
Figure 3.5 Return on average assets of infrastructure SOEs, with and without adjustment for operations subsidies, by sector
Figure 3.6 Percent of infrastructure SOEs generating losses before receiving subsidies, by sector, 2009-18
Figure 3.7 Costs of infrastructure SOEs, by type of cost and sector
Figure 3.8 Employment costs as a share of revenues by fully owned and partially privatized infrastructure SOEs, by sector
Figure 3.9 Adjusted net income as percent of GDP in the power and railway sectors, by country
Figure 3.10 Comparison of size and performance of infrastructure SOEs and similar private firms using matching techniques
Figure 3.11 Average fiscal injections to infrastructure SOEs, by sector
Figure 3.12 Fiscal injections to infrastructure SOEs, at the sectoral and country level
Figure 3.13 Average fiscal injections to infrastructure SOEs in 2009-18, by country and type of support
Figure 3.14 Average fiscal injections to infrastructure SOEs in 2009-18, by sector
Figure 3.15 Predicted fiscal injections to infrastructure SOEs based on estimated Z″ scores
Figure 3.16 Impact of a negative macroeconomic shock on infrastructure SOEs
Figure 4.1 Total investment in PPPs in the developing world, 1990-2021
Figure 4.2 Share of capital spending through PPPs, 2009-18
Figure 4.3 Fiscal risks from PPPs
Figure 4.4 Actual and expected payments for minimum revenue guarantees in Chile, as percent of GDP, 2003-21.
Figure 4.5 Fiscal costs of minimum revenue guarantees of road PPPs as percent of GDP in Türkiye, 2017-21
Figure 4.6 Costs of renegotiation of PPPs in Chile, 1997-2020
Figure 4.7 Annual fiscal costs of renegotiation of PPPs in Peru, 2006-20
Figure 4.8 Number of renegotiated fixed- and variable-term contracts in Chile during construction and costs of renegotiations, before and after the 2010 reform
Figure 4.9 Renegotiation costs in Chile during first six years of operation, before and after the 2010 reform, by sector
Figure 4.10 Number of early terminations of PPPs in developing countries, 1990-2020
Figure 4.11 Impact of sector, type, and size of project on probability of early termination of PPPs
Figure 4.12 Impact of contract features on probability of early termination of PPPs
Figure 4.13 Impact of country-level characteristics and shocks on probability of early termination of PPPs
Figure B4.2.1 Size of PPP portfolios as a percent of GDP in selected developing countries, as of the end of 2021
Figure 4.14 Fiscal risks from early termination of PPPs as a percent of GDP in selected countries
Figure 4.15 Cumulative low, medium, and high fiscal risks from early termination of PPP portfolio as a percent of GDP in selected countries, 2022-26
Figure 4.16 Fiscal risks from early termination of PPP portfolio as a percent of government revenue in selected countries
Figure 4.17 Increase in fiscal risks from early termination of PPP portfolio associated with a profound macro-financial shock
Figure 4.18 Percent of countries with systems for budgeting, reporting, and accounting for PPP liabilities
Figure 4.19 Percent of countries requiring approval by ministry of finance or other third-party government entity over the PPP project lifecycle.
Figure 4.20 Percent of countries requiring assessment of selected aspect of PPP projects during planning and using established methodology for assessment.
Contents
Foreword
Acknowledgments
About the Authors
Main Messages
Abbreviations
Overview: Key Findings and Policy Recommendations
What are the main sources of fiscal risks from infrastructure?
Off-budget modalities drain public finances more often and on a larger scale than usually assumed
Inefficiencies in public provision lead to fiscal surprises in the near, medium, and long term
When it rains, it pours: Fiscal risks from infrastructure during bad times
Implementing a reform agenda can create sustainable fiscal space for infrastructure
Notes
References
Chapter 1: A Conceptual Framework for Assessing Fiscal Risks from Infrastructure
Main Messages
Introduction
Fiscal Risks from Infrastructure
In Sum
References
Chapter 2: Fiscal Risks Associated with Direct Public Provision of Infrastructure
Main Messages
Introduction
Near-Term Risk of OVERSPENDING on Infrastructure Projects
Medium-Term Risk of Unanticipated Capital Expenditure on Infrastructure
Long-Term Risks of Economic Underperformance from the Squeezing of Public Spending on Infrastructure
In Sum
Note
References
Chapter 3: Fiscal Risks and Costs of State-Owned Enterprises
Main Messages
Introduction
Size, Performance, and Cost Structure as Sources of Fiscal Risk in SOEs
Performance of SOEs versus Performance of Similar Private Firms
SOEs and Fiscal Risk: Slow Drip or Tail Risk?
Predicting Fiscal Risks
Capacity of SOEs to Deal with Shocks
In Sum
Notes
References
Chapter 4: Fiscal Risks and Costs of Public-Private Partnerships
Main Messages
Introduction
Guarantees
Renegotiation of PPPs
Early Termination of PPPs
Frameworks for Managing Fiscal Risks from PPPs
In Sum
Notes
References.
Chapter 5: A Reform Agenda to Create Sustainable Fiscal Space for Infrastructure
Main Messages
Introduction
Integrated Management of Fiscal Resources and Risks
Efficient Direct Public Provision of Infrastructure
Effective Fiscal and Corporate Governance of SOEs
A Robust PPP Framework
In Sum
Notes
References
Appendix A: Main Data Sources Used in the Report
Appendix B: The World Bank Infrastructure SOEs Database
Appendix C: Methodology Used to Compare the Performance of SOEs and Similar Private Firms
Appendix D: Big Bang versus Frequent Small-Drip Events
Appendix E: Methodology Used to Compare SOEs That Suffered a Negative Shock as a Result of the Decline in Oil and Gas Prices with a Control Group of SOEs
Appendix F: Methodology for Estimating Fiscal Risks from Early Termination
Boxes
Box O.1 Sectoral features affecting the size and profile of fiscal risks from SOEs
Box O.2 Sectoral features affecting the size and profile of fiscal risks from PPPs
Box 2.1 Using data envelopment analysis to assess the efficiency of spending
Box 3.1 Sensitivity of profitability of infrastructure SOEs in Indonesia and Kenya to changes in fuel costs and demand
Box 3.2 A taxonomy of fiscal injections to SOEs
Box 3.3 Predicting fiscal injections to SOEs
Box 4.1 Termination clauses of PPPs favorable to the private party
Box 4.2 Countries included in the analysis
Box 5.1 Calculating the costs of quasi-fiscal operations
Box 5.2 What is the PFRAM?
Figures
Figure O.1 Share of capital spending on infrastructure in developing countries, by modality, 2009-18
Figure O.2 Sources of fiscal costs and risks associated with provision of infrastructure
Figure O.3 Distribution of fiscal injections to infrastructure SOEs.
Figure O.4 Average annual fiscal injections to infrastructure SOEs, 2008-19, by country
Figure BO.1.1 Fiscal injections to infrastructure SOEs by sector, 2009-18
Figure BO.1.2 Size distribution of fiscal injections in the transport and power sectors
Figure BO.1.3 Return on average assets of infrastructure SOEs, with and without adjustment for operations subsidies, by sector
Figure O.5 Costs of renegotiation of PPPs in Chile and Peru
Figure O.6 Number of early terminations of PPPs in developing countries, 1990-2020
Figure O.7 Fiscal risks from early termination of PPPs in selected countries
Figure BO.2.1 Fiscal risks from early termination of electricity and transport PPPs
Figure O.8 Share of capital spending in the power and transport sectors, by modality, 2009-18
Figure O.9 Increase in fiscal risks from early termination of PPPs associated with a profound macro-financial shock
Figure O.10 Building blocks of a reform agenda to mitigate fiscal risks from infrastructure
Figure 1.1 Sources of fiscal costs and risks associated with the provision of infrastructure
Figure 2.1 Fiscal risks associated with direct public provision of infrastructure
Figure 2.2 Budget execution rates for public investment in infrastructure, 2010-18
Figure 2.3 Productivity and technological and efficiency change in road expenditure
Figure 2.4 Distribution of governance scores for quality of public investment management of infrastructure projects across 33 developing countries
Figure 2.5 Capital bias in public expenditure on roads, 2006-18
Figure 2.6 Historic infrastructure spending and projected infrastructure investment financing gap, by region
Figure 2.7 Government budgetary expenditure on infrastructure, by country income level and sector, 2010-20.
Figure 2.8 GDP per capita and total infrastructure expenditure per capita in low- and middle-income countries, 2006-20
F igure 3.1 Shares of spending by infrastructure SOEs, 2009-18
Figure 3.2 Fiscal risks from infrastructure SOEs
Figure 3.3 Average operating expenses of infrastructure SOEs in selected countries
Figure 3.4 Assets of infrastructure SOEs in selected countries
Figure 3.5 Return on average assets of infrastructure SOEs, with and without adjustment for operations subsidies, by sector
Figure 3.6 Percent of infrastructure SOEs generating losses before receiving subsidies, by sector, 2009-18
Figure 3.7 Costs of infrastructure SOEs, by type of cost and sector
Figure 3.8 Employment costs as a share of revenues by fully owned and partially privatized infrastructure SOEs, by sector
Figure 3.9 Adjusted net income as percent of GDP in the power and railway sectors, by country
Figure 3.10 Comparison of size and performance of infrastructure SOEs and similar private firms using matching techniques
Figure 3.11 Average fiscal injections to infrastructure SOEs, by sector
Figure 3.12 Fiscal injections to infrastructure SOEs, at the sectoral and country level
Figure 3.13 Average fiscal injections to infrastructure SOEs in 2009-18, by country and type of support
Figure 3.14 Average fiscal injections to infrastructure SOEs in 2009-18, by sector
Figure 3.15 Predicted fiscal injections to infrastructure SOEs based on estimated Z″ scores
Figure 3.16 Impact of a negative macroeconomic shock on infrastructure SOEs
Figure 4.1 Total investment in PPPs in the developing world, 1990-2021
Figure 4.2 Share of capital spending through PPPs, 2009-18
Figure 4.3 Fiscal risks from PPPs
Figure 4.4 Actual and expected payments for minimum revenue guarantees in Chile, as percent of GDP, 2003-21.
Figure 4.5 Fiscal costs of minimum revenue guarantees of road PPPs as percent of GDP in Türkiye, 2017-21
Figure 4.6 Costs of renegotiation of PPPs in Chile, 1997-2020
Figure 4.7 Annual fiscal costs of renegotiation of PPPs in Peru, 2006-20
Figure 4.8 Number of renegotiated fixed- and variable-term contracts in Chile during construction and costs of renegotiations, before and after the 2010 reform
Figure 4.9 Renegotiation costs in Chile during first six years of operation, before and after the 2010 reform, by sector
Figure 4.10 Number of early terminations of PPPs in developing countries, 1990-2020
Figure 4.11 Impact of sector, type, and size of project on probability of early termination of PPPs
Figure 4.12 Impact of contract features on probability of early termination of PPPs
Figure 4.13 Impact of country-level characteristics and shocks on probability of early termination of PPPs
Figure B4.2.1 Size of PPP portfolios as a percent of GDP in selected developing countries, as of the end of 2021
Figure 4.14 Fiscal risks from early termination of PPPs as a percent of GDP in selected countries
Figure 4.15 Cumulative low, medium, and high fiscal risks from early termination of PPP portfolio as a percent of GDP in selected countries, 2022-26
Figure 4.16 Fiscal risks from early termination of PPP portfolio as a percent of government revenue in selected countries
Figure 4.17 Increase in fiscal risks from early termination of PPP portfolio associated with a profound macro-financial shock
Figure 4.18 Percent of countries with systems for budgeting, reporting, and accounting for PPP liabilities
Figure 4.19 Percent of countries requiring approval by ministry of finance or other third-party government entity over the PPP project lifecycle.
Figure 4.20 Percent of countries requiring assessment of selected aspect of PPP projects during planning and using established methodology for assessment.