Government Guarantees in Infrastructure Projects: A Second, Third Look at the Policy

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To encourage private sector participation in public infrastructure projects, government guarantee has been utilized as an instrument to mitigate the risks associated with public investments. However, this creates contingent liabilities that the government has to face. This issue argues that the government must move towards project financing structures having less provision for subsidies and guarantees. Private sector should then have greater risk participation while strict monitoring measures should be implemented concerning contingent liabilities.