Journal Article

Managing Government Exposure to Private Infrastructure Risks

Timothy Irwin, Michael Klein, Guillermo E. Perry and Mateen Thobani

in The World Bank Research Observer

Published on behalf of World Bank

Volume 14, issue 2, pages 229-245
Published in print August 1999 | ISSN: 0257-3032
Published online August 1999 | e-ISSN: 1564-6971 | DOI: http://dx.doi.org/10.1093/wbro/14.2.229
Managing Government Exposure to Private Infrastructure Risks

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The privatization of infrastructure should lead to the development of new infrastructure, improvements in the operation of existing infrastructure, and a reduction in budgetary subsidies. Whether countries reap the full benefits of privatization, however, depends on how risks are allocated. If, as is often the case in developing countries, governments assume risks that should be borne by investors, they may reduce incentives for efficiency and incur significant liabilities. To solve these problems, governments need to improve their policies and restrict their risk bearing to certain political and regulatory risks over which they have direct control. When a government provides guarantees, it should attempt to measure their cost and improve the way they are handled in the accounts and budgets. Measurement and budgeting are critical to improving decisions about the provision of guarantees, to improving project selection and contract design, and to protecting governments from unknowingly entering into commitments that might jeopardize future budgets.

Journal Article.  0 words. 

Subjects: Development Planning and Policy

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