Vish Ashiagbor, the Country Senior Partner at PricewaterhouseCoopers (PwC) Ghana, emphasized the importance of sustainable financing in public-private partnership (PPP) projects to avoid the accumulation of unsustainable government debt.
He explained that well-structured PPPs should be primarily financed by the private sector, with project revenues covering costs, while any government support should be clearly defined and budgeted for.
Mr. Ashiagbor cautioned that poorly designed PPPs could result in financial strain, potentially requiring restructuring to preserve fiscal stability.
“In essence, the PPP project should not leave the government with debt that cannot sustain. So sustainable financing is one of the aspects of a PPP. So typically, if you put together a PPP project that is financed by the private sector, the debt would not be on government’s books.
Typically, the project company is the one that will assume the debt, and that debt is then paid for by proceeds. If it’s a user paying project, then proceeds that come in from the users,”
There are some instances where the project cannot be self financing and government has to put in some money. In that case, what has to happen is that the obligations on government have to be properly quantified. So that government knows that it has to put in, let’s say, a 100,000,000 per annum, no more than that,”
“And then it’s budgeted for year on year so that government can comfortably factor that into its projections and ensure that we don’t have debt accumulation arising from these projects. “
