Other Safeguards
In the case of PPP-related liabilities, strong involvement of the ministry of finance at
the decision-making stage of PPP projects is another safeguard to ensure that
government takes only necessary risks. This has typically involved requirements for
minister of finance approval prior to the final decision on a PPP project, if this decision is
taken by another institution, or the introduction of a “gateway” process, under which the
ministry of finance reviews fiscal affordability and value-for-money at different stages of
PPP project preparation, with authority to stop or suspend PPPs at various points in the
project cycle (e.g., inception, tender, contract (re)negotiation, and contract signature), as in
South Africa. This not only ensures that key project steps and decisions are systematically
communicated to the ministry of finance, but also enables the ministry to stop or request
modifications for a project proposal that is deemed too costly or risky.
IV. M
ANAGING
R
ETAINED
R
ISK FROM
C
ONTINGENT
L
IABILITIES
As not all risk can be eliminated or transferred, the risks that remain with the state
need to be efficiently managed. Exposure to these risks needs to be monitored
systematically and mechanisms need to be put in place to deal with the consequences of
realized risks, i.e., securing funding to cover losses that have occurred. In the case of high
probability/low impact events, these mechanisms include setting up contingency or calamity
funds or securing a flexible fiscal response through budgetary reserves to meet calls on
contingent liabilities. In the case of low probability/high impact events, these include
insurance, contingency credits (contracted ex ante), and emergency or reconstruction loans.
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