PPP Fiscal Risk Assessment
Model 2.0
Infrastructure Finance, PPPs and Guarantees
2
PFRAM: Initial idea
Released in April 2016
3
PFRAM 2.0: Current functionalities
Fiscal impacts Fiscal risk assessment
• Accounting • Risk matrix
• Financial • Guidance in how to
government assess likelihood
statements • Guidance in how to
• Sensitivity analysis assess impact
• Contingent • Guidance on fiscal
liabilities risk migration
• Government cash maesure
flows
4
PFRAM 2.0:PPP
What
FiscalisRisk
new?
Assessment Model 2.0 (PFRAM 2.0)
A redesigned and simplified interphase based on user forms
The ability to work simultaneously with up to 30 PPPs and integrate individual data and
results
More flexibility at a project level, considering multiple assets, diversity of revenues,
payments from the government during the construction stage, and additional investments
over the time, etc.
An expanded risk matrix, based on dynamic menus with a detailed guidance to identify and
assess the fiscal risk
Enhanced sensitivity analyses and estimation of early termination payment
Analysis of some macro-fiscal data and the expenses involved in PPPs to provide indicative
information about fiscal affordability
5
PFRAM 2.0: Main Outcomes
Government statements:
• Income statement
• Balance sheet (accrual)
• Statement of sources and uses of
cash
PFRAM 2.0: IPSAS 32
Liabilities and assets on
government balance
Transfer of
Government
the assets to
controls
the
services
government
7
PFRAM 2.0: Fiscal risk matrix
Main risk category Number of risk sub-categories
Governance risk 3 detailed risk
Construction risk 19 detailed risk
Demand risk 10 detailed risk
Operation & performance risk 7 detailed risk
Financial risk 4 detailed risk
Force majeure risk No detailed risk
Material adverse government actions (MAGA) No detailed risk
Change in law No detailed risk
Rebalancing of financial equilibrium 3 detailed risk
Renegotiation risk No detailed risk
Contract termination risk 2 detailed risk
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PFRAM 2.0: Fiscal risk matrix
Risk rating = likelihood x fiscal impact
High Medium High Critical
Fiscal
Medium Low Medium High
impact
Low Irrelevant Low Medium
Low Medium High
Likelihood
Priority actions = risk rating x mitigation measures
No No action Medium priority High priority High priority Critical
Mitigation
Measures
Yes No action Low priority Medium priority Medium priority High priority
Irrelevant Low Medium High Critical
Risk rating 9
PFRAM 2.0: Fiscal risk matrix
Inputs
Outcome
PFRAM Risk Matrix
PFRAM inputs: Macroeconomics variables
• Nominal GDP in national currency (billion)
• Real GDP in national currency (billion)
• GDP deflator (units)
• NER /Relevant FX
• Primary Net Lending/Borrowing - Primary Balance (billion)
• Net Lending/Borrowing - Overall Balance (billion)
• Cash balance (billion)
• Government gross debt projections, DSA (billion)
• Government Revenue (billion)
PFRAM inputs : Projects inputs
FINANCING:
It is expected that the private partner brings in the financing of the project. Three options for the
private party to get financing:
1. Debt
2. Equity
3. Government support (Guarantees, Subsidies, Equity injections, Tax amnesties, Others)
FIXED ASSET PARAMETERS:
• Construction period
• Useful life
• Total construction cost
• Land cost paid by the private partner
PFRAM inputs – SPV’s Financial Statement
REVENUES CALCULATION (Two options)
Enter the revenues manually. E.g. Transferred from an updated financial model
Calculate through the FCCL report with the following assumptions:
Initial Price
• Indexed to inflation,
• NER
• or/and Other adjustment factor
Initial Demand
• Indexed to GDP
• Or/and Other adjustment factor
COST CALCULATION
• Operation and Maintenance Costs
• User fees for government
• Royalties
• Other payments to government
• Or/and Other costs
PFRAM inputs – Govt’s additional support
DEBT GUARANTEES
• Percentage of private debt guaranteed by government
MINIMUM REVENUE GUARANTEES (MRG)
• Guaranteed price/tariff
• Demand guaranteed
OTHER GOVERNMENT PAYMENT
• Lump sum
• Subsidy
• Other
PFRAM outputs – Tool to be used
Public Fiscal Risk Assessment Model, PFRAM, developed by the IMF and the World Bank
Looks at a
project from
the private
partner’s
perspective
Assesses
Simulates projects at any
contract stage in the
termination project life
cycle
PFRAM
2.0
Estimate the
Supports marginal fiscal
sensitivity impact of a
analysis project or
portfolio level
Generates a
fiscal risk
matrix on a PPP
project
FCCL Framework: FCCL Report
DATA
COLLECTED
INTERFACE
PFRAM 2.0
CL model
(Portfolio)
FCCL report
FCCL Report
Fiscal Commitments and Contingent Liabilities
Tool components
The information entered in this section
provides the macro fiscal framework for
the entire portfolio.
Macroeconomic
context
The options in this section allow for
creation, editing and deletion of projects.
These will be the main inputs to the
report. Most of the data should come from
contracting authorities.
Project data
This section is linked to the inputs from
project data section from which the report
will be derived.
Print report
PFRAM 2.0: Some lessons learned
1. There are some common features to consider when designing FCCL framework for a country, but customization is
always required considering the institutional arrangements, regulations, capacity levels and practices.
2. A proper capacity building program on PFRAM is a medium-term task, it requires a proper assessment of the PPP
ecosystem, a customization of the tools and frameworks, and a follow-up after the trainings, manuals and tools
are delivered.
3. PFRAM must be integrated into the project life cycle for PPPs and fiscal authorities need to work closely with
other government authorities (planning, line ministries, subnational and SOEs) to implement robust FCCL
frameworks.
4. Based on experiences from previous crisis, COVID-19 has enhanced demand for PFRAM 2.0 and the need to put
robust FCCL frameworks in place. Key contractual issues that affect PPP contracts like force majeure, material
adverse government actions, demand fluctuations and/ or abnormal local currency depreciation are all assessed
in PFRAM as a fiscal risk and must be assessed, even if the risk is allocated at the private sector.
PPP Fiscal Risk Assessment Model
2.0
Infrastructure Finance, PPPs and Guarantees