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DBCC estimates worst-case fiscal risk from PPPs at P311.8 billion by end of 2021

dbcc estimates worst case fiscal risk from ppps at p311 8 billion by end of 2021 816x445 - DBCC estimates worst-case fiscal risk from PPPs at P311.8 billion by end of 2021

THE government faces a worst-case scenario of P311.8 billion worth of contingent liabilities associated with 24 new Public-Private Partnerships (PPPs) entering critical stages of implementation.

The worst-case liability risk kicks in should the PPPs fail, triggering termination payments from the government, the Development Budget Coordination Committee (DBCC) said.

The DBCC issued the estimate in its 2021 financial risks statement.

The worst-case risk is P78 billion higher than the estimate made for 2019. The DBCC said the contingent liability risk rose due to the “addition of newly-awarded projects and the updating in the valuation of several existing projects as they advanced in the project implementation cycle.”

It said big-ticket projects such as Cavite-Laguna Expressway, MRT Line 7, Metro Manila Skyway (Stage 3), and the Clark International Airport Expansion Project have matured in construction and contributed significantly to the liabilities.

“For the same reason, the corresponding estimated flow of contingent liabilities in 2020 has increased to P33.1 billion from P22.8 billion last year,” it said.

“By the end of 2021, a net increase of 24 projects that have impact on the fiscal risk is expected” it added.

There are 25 PPP projects in the Investment Coordination Committee pipeline currently, which are expected to be awarded by the end of 2021 if they make it to the tender stage by February next year.

It said the government’s exposure to the Casecnan Multi-Purpose Irrigation and Power Project will end by November 2021.

“The national government has continued its management of contingent liabilities and fiscal risks arising from PPPs projects through constant monitoring and enhancing the valuation of contingent liability stock and flows.”

Fiscal risk from PPP contracts arises from project failure — in which a project does not generate sufficient revenue to pay off debt, forcing the government to step in.

Risk also stems from failure to gain regulatory approval for an increase in fees needed to keep a project going.

The government’s priorities could also shift, putting unsolicited projects at risk. All projects also face completion risk if construction is delayed.

“Finally, project costs could change by way of variations. In principle, an increase in project cost would increase the fiscal risk for that particular project,” it added.

Separately, the Department of Public Works and Highways (DPWH) listed in a note Monday 10 PPP projects it wants to be declared priorities.

These are the Central Luzon Link Expressway, the Davao-Digos Expressway, the second phase of the North Luzon Expressway East, the Metro Cebu Expressway, the Mindoro Batangas Super Bridge which is a floating bridge, the Luzon Eastern Seaboard Highway, the Davao Expressway, the DPWH Central Office Building, the  rehabilitation or reconstruction of Kennon Road, and the Laguna Lakeshore Expressway Dike Project. — Beatrice M. Laforga

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