Risks from PPP, Albania is the third in the world for fiscal risk arising from the termination of concession contracts

Albania ranks third in the world after Brazil and Peru for fiscal risks, which stem from the termination of concession contracts with Public-Private Partnerships (PPP), analyzes a recent study by the World Bank "Mitigation of risks from accounts outside of fiscal indicators". The bank notes that of the countries under study, the fiscal risks from the early termination of active PPPs are the highest in Brazil, Peru and Albania with reference to 2020. Fiscal risks from the PPP portfolio are calculated from 0.87-2.78 percent of GDP in Brazil, 0.44-1.19 percent in Peru and 0.44-1.17 percent in Albania (see bottom chart). The World Bank advises that these figures represent the amount, as a percentage of GDP in 2020, governments must set aside today as an emergency fund to cover the maximum expected loss throughout the contract period. Premature terminations of PPPs are rarer than renegotiations, but their fiscal costs tend to be greater. In Mexico, the cancellation of toll roads created a significant cost to the treasury and contributed to the increase in debt by 1.6 percent of GDP in 1997. So much so that the government in India paid $2.4 billion for the canceled Dabhol power project in in 2001. The World Bank assessed the risk of PPP concession contracts through three scenarios, low, medium and high. In the low scenario, the government covers 79.3 percent of the PPP debt in case of early termination. In this case, the government does not cover the loss of private capital, but only its own capital in the PPP. In the middle scenario, the government covers all the debt and private equity, thus guaranteeing the total financing of the project. The value is equal to the amount of investment accumulated in PPP. In the high-risk scenario, the government compensates the private sector for 150 percent of the capital it invested in the project, in line with contract terms used in some countries, such as India.