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"Risk for the economy", IMF: PPP contracts in Albania are politicized, monitoring is lacking

2023-03-15 07:48:12Biznes SHKRUAR NGA REDAKSIA VOX
"Risk for the economy", IMF: PPP contracts in Albania are politicized,
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Public-Private Partnerships (PPPs) are increasingly becoming an important tool for some Western Balkan countries to reduce their infrastructure gaps, but the lack of legislation and its weak implementation could turn these projects into a risk for fiscal stability, evidences a recent study "The future of PPP contracts in the Western Balkans" by the International Monetary Fund.

The comparative study points out that Albania has made progress in the legal framework of PPP contracts in relation to other countries in the Region and also has a ceiling for their annual financing, but the process is politicized.

"PPP legislation in Albania, Bosnia, Kosovo and Montenegro explicitly requires the approval of the Minister of Finance for PPP projects both before the start of procurement and before signing the contract. In Albania, however, PPP decisions remain highly politicized in practice," the study states.

Practices have shown that there are economic benefits when PPP projects are well conceived and implemented, but they also carry the potential for large fiscal risks and cost overruns if not well managed.

PPP programs are considered successful when the legislation covers and is implemented in all phases of the contract from the idea to its conclusion, but the Western Balkan countries encountered major gaps in their management.

The public units of PPPs established in the countries of the Western Balkans differ in the roles they play. In Albania, Bosnia, Kosovo and Serbia, PPP units assist authorities in the preparation and evaluation of PPP projects through technical support.

In Albania, the PPP unit is subordinate to the Ministry of Finance, but is not officially mandated with fiscal management functions. In North Macedonia, PPP units seem to have advisory roles.

In Montenegro, an agency has been tasked to support the promotion of PPPs (the Montenegrin Investment Agency) with a role in project preparation, but not in procurement.

In Turkey, there is no central unit for PPPs, but the Budget Department provides technical support (project analysis and evaluation) within the overall public investment program that includes PPPs.

PPP units in Kosovo and Serbia perform both functions, promotion and fiscal management.

The IMF points out that in some countries, the legal framework of PPPs remains fragmented, while most countries need to create integrated public investment planning processes to identify priority projects.

The governing framework for PPPs should be led by the Minister of Finance, with a key and active role for approving PPP projects, assessing their costs and fiscal risks, advises the IMF. 


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