Is the devil off-balance sheet? Contingent liabilities and PPPs’ fiscal risks[Le diable est-il dans l’annexe ? Les risques budgétaires des PPP saisis par le traitement des passifs éventuels]

Several parliamentary and superior audit court reports have criticized the use of global public contracts on the basis of their potential consequences in terms of fiscal risks. Our contribution aims at stressing the importance of one of risk inducers, the guarantees granted to the private contractor in PPPs such as a minimum revenue clause or a guarantee on the debt reimbursement. However, these guarantees may be useful as they facilitate the financial closing of deals and as they sustain their affordability for the public partner. However they raise concerns both in terms of contractual incentives and recognition and assessment in public accounts. Whereas public accounts have to present a true, consistent, and fair view of the government financial situation, the accounting treatments may not reveal the fiscal risks induced by these guarantees, as they are considered as contingent liabilities. Our purpose is to discuss in economic terms these guarantee schemes, to point out their fiscal and accounting treatment, to highlight their potential risks, and to put into relief international best practices in terms of contingent liabilities recognition, assessment, and management.