ASSESS
PPP
FISCAL RISK
ASSESSMENT
ACCOUNT
MODEL (PFRAM)
MANAGE
CONTACT US
For more information about the IMF’s
work on public investment, visit the
link below and download the PFRAM
tool at [Link]/publicinvestment
For inquiries, please contact
IMFpubinv@[Link]
REPORT
THE PPP FISCAL RISK
ASSESSMENT MODEL (PFRAM)
The PFRAM, developed by the IMF and the World Bank, is
an analytical tool to assess the potential fiscal costs and risks
arising from PPP projects. In many countries, investment projects
have been procured as Public Private Partnerships (PPPs) not
for efficiency reasons, but to circumvent budget constraints and
postpone recording the fiscal costs of providing infrastructure
services. Hence, some governments procured projects that either
could not be funded within their budgetary envelope, or that
exposed public finances to excessive fiscal risks. As an analytical
tool, PFRAM helps country authorities quantify the macro-fiscal
implications of PPP projects, understand the risks assumed by
government and identify potential mitigations measures. Since
launched in April 2016, PFRAM has been used not only in the
context of IMF and World Bank technical assistance, but also by
country authorities—mainly PPP units in ministries of finance—to
better understand the long-term fiscal implications of PPP projects.
Building on lessons from two years of use, the new version of
PFRAM allows for the analysis of a portfolio of projects.
In practice, assessing a PPP project involves both gathering
specific project information and making judgments about the
government’s role at key stages of the project cycle. PFRAM
provides a structured process for gathering information for a
portfolio of PPP projects in a simple, user-friendly, Excel-based
platform, following a five-step decision-tree:
• Who initiates the project? The impact of main fiscal
indicators (i.e., deficit and debt) varies depending on the
public entity ultimately responsible for the project (e.g.
central, local governments, public corporations, etc.).
• Who controls the asset? Simple standardized questions
assist the user in making an informed decision about
the government’s ability to control the PPP-related
asset—either through ownership, beneficial entitlement,
or otherwise.
PPP FISCAL RISK ASSESSMENT MODEL PFRAM 1
• Who ultimately pays for the asset? The funding
structure of the project is what determines its implication
on main fiscal aggregates. PFRAM allows for three
funding alternatives: (a) the government pays for the
asset using public funds; (b) the government allows the
private sector to collect fees directly from users of the
asset
(e.g., tolls); and (c) a combination of the two.
• Does the government provide additional support to
the private partner? Governments can not only fund
PPP projects directly but they can also support to the
private partner in a variety of ways, including providing
guarantees, equity injections, or tax amnesties.
• What does the PPP contract risk allocation tell us
about macro-fiscal risks? Although risk allocation is key
for structuring a PPP contract, understanding its macro-
fiscal implications and the potential need for government
actions related to a PPP contract can be, in practice,
a challenging task. The PFRAM assists the analyst in
identifying main fiscal risks arising from a PPP contract
and provides a framework for evaluating risk likelihood
and fiscal impact, as well as assessing the need for risk
mitigation measures and/or government actions.
PFRAM generates standardized outcomes for a portfolio of
PPP projects or a single project based on project-specific and
macroeconomic data (Figures 1–5). The latter include:
(i) project cash flows; (ii) fiscal tables/charts on a cash and
accrual basis; (iii) debt sustainability analysis with and
without the PPP projects; (iv) sensitivity analysis of main fiscal
aggregates to changes in macroeconomic and project-specific
parameters (e.g., contract termination); and (v) a summary risk
matrix of each project.
PFRAM has been pilot-tested by the IMF and the World Bank.
The new version (PFRAM version 2.0) will be released in 2019.
2 PPP FISCAL RISK ASSESSMENT MODEL PFRAM
PFRAM MAIN OUTPUTS
Figure 1 Government Liabilities and Non-financial
Assets of PPP Project
Government Liabilities (% of GDP)
16%
12%
8%
4%
0%
2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033' 2035' 2037' 2039' 2041'
Non-financial Assets (% of GDP)
16%
12%
8%
4%
0%
2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041
PPP FISCAL RISK ASSESSMENT MODEL PFRAM 3
Figure 2 Government Overall Balance on Accrual
and Cash Bases with and without PPP Project
Overall Balance—Accrual (% of GDP)
-1
-3
-5
-7
-9
-11
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Net lending borrowing
Net lending borrowing including PPP Portfolio
Overall Balance—Cash (% of GDP)
-1
-3
-5
-7
-9
-11
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Cash balance
Cash balance including PPP
4 PPP FISCAL RISK ASSESSMENT MODEL PFRAM
Figure 3 Government Gross Debt
with and without PPP Project
65
60
55
50
45
40
35
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Gross debt PPP Debt
Figure 4 Sensitivity Analysis: Impact on Contract Termination
on Overall Cash Balance (% of GDP)
DP)
-1
-3
-5
-7
-9
-11
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Cash balance including PPP
Cash balance including PPP Contract Termination
PPP FISCAL RISK ASSESSMENT MODEL PFRAM 5
Figure 5 Project Fiscal Risk Matrix
IDENTIFICATION FISCAL
OF RISKS LIKELIHOOD IMPACT
1 Governance risks Medium Low
2 Construction risks Medium Medium
3 Demand risks Low Medium
Operational
4 Low Medium
and performance risks
5 Financial risks Medium Medium
6 Force majeure Low High
Material adverse
7 Low High
government actions
8 Change in law Low Medium
Rebalancing of financial
9 Low Medium
equilibrium
10 Renegotiation Medium Medium
11 Contract termination Low High
6 PPP FISCAL RISK ASSESSMENT MODEL PFRAM
RISK RATING MITIGATION PRIORITY ACTIONS
Likelihood*Impact STRATEGY Rating*Mitigation
Low NO Medium priority
Medium YES Medium priority
Low YES Low priority
Low YES Low priority
Medium YES Medium priority
Medium YES Medium priority
Medium YES Medium priority
Low YES Low priority
Low YES Low priority
Medium YES Medium priority
Medium NO High priority
PPP FISCAL RISK ASSESSMENT MODEL PFRAM 7
CAPACITY DEVELOPMENT
ACTIVITIES
Since its introduction in 2016, the PFRAM has been used
extensively in IMF and World Bank capacity development
activities including:
• Direct support to country authorities in assessing the
impact of their PPP portfolio on the fiscal position;
• Regional workshops to train country authorities—
including from ministries of finance, line ministries and
public corporations—in the use of PFRAM for analytical
purposes. Regional workshops have been delivered in the
Caribbean, Central Europe, Middle East, and Africa.
8 PPP FISCAL RISK ASSESSMENT MODEL PFRAM
ASSESS
PPP
FISCAL RISK
ASSESSMENT
ACCOUNT
MODEL (PFRAM)
MANAGE
CONTACT US
For more information about the IMF’s
work on public investment, visit the
link below and download the PFRAM
tool at [Link]/publicinvestment
For inquiries, please contact
IMFpubinv@[Link]
REPORT