Managing PPPs for Budget Sustainability: The Case of PPPs in Portugal, from Problems to Solutions



Managing PPPs for Budget Sustainability: The Case of PPPs in Portugal, from Problems to Solutions

Authors

M Abrantes de Sousa, PPP Lusofonia, PT

Description

The case study of the PPP program experience in Portugal focuses on the issue of budget sustainability. Though PPPs have clearly contributed to Portugal's budget and external debt problems, lessons can be learned about this can be avoided.

Abstract

Managing PPPs for Budget Sustainability: Lessons from the Portuguese Experience
The work consists of a case study of the PPP program experience in Portugal, focusing on the issue of budget sustainability.

Portugal is one of the countries that has relied the most on concession and PPP contracts to meet its public investment needs, even as the project finance market retracted in the financial crisis. As a result, the public sector has assumed considerable project risks in the form of availability payments, either at project onset, or upon contract renegotiations.

In fact, PPPs, which were once seen as part of the solution to Portugal's investment needs, are now clearly contributing to the budget sustainability and public debt problems which plague Portugal.

The key areas of analysis include:
1. The recourse to PPPs in the context of a severe Government budget constraint and limited public investment funding capacity: PPPs, Budget Framework Law and the Maastricht criteria
2. Individual PPP projects , selection, priorities and the overall PPP and public investment programme
3. The legal and organizational framework for managing the PPP contracts and budgeting for PPP liabilities and fiscal risks
4. Managing the PPP program in the financial crisis, public tenders, financing and renegotiations
5. Resolving the fiscal risks related to PPP contracts in the future in order to help resolve Portugal external debt problem.
The Portugal PPP case study details the impact of PPPs on Portugal's debt crisis, and draws lessons and recommendations for managing individual PPP contracts and overall PPP programs in a manner consistent with reducing fiscal risks and improving budget sustainability.

Publisher

Association for European Transport