As well as considering fiscal exposure project-by-project, some governments introduce targets or rules limiting aggregate exposure. A challenge is defining which types of fiscal commitments should be included- for example, does the rule apply to direct liabilities only, or are contingent liabilities included?
One option is to introduce specific limits on PPP exposure. This approach is described in Irwin's article on controlling spending commitments in PPPs [#161, p.114-115]. For example:
• Peru's Legislative Decree No.1012 (2008) [#199, Article 13] states that the present value of the total fiscal commitments to PPPs-firm commitments and measurable contingent liabilities-shall not exceed 7 percent of GDP. However, every three years, the President may, with the endorsement of the Ministry of the Economy and Finance, issue a decree increasing or decreasing this limit, depending on the infrastructure needs of the country
• In Hungary, the public finance law limits the total nominal value of multi-year commitments in PPPs to 3 percent of government revenue (Act 38 of 1992, Article 12, quoted in Irwin paper in [#161])
• Brazil's Federal PPP Law (Law 11079, 2004) [#34] initially limited total financial commitments undertaken in PPP contracts to a maximum of 1 percent of annual net current revenue-in 2009 Law 12024 raised this limit to 3 percent, and in 2012 Law 12766 raised it again to 5 percent.
As Irwin describes, creating PPP-specific limits-distinct from other limits on public expenditure-can simply create incentives for agencies to choose public procurement over PPP even when PPP would provide better value for money (or vice versa). Nonetheless, given the difficulties in deciding whether a particular PPP commitment is affordable, limits on aggregate exposure can be a helpful way to ensure the government's total exposure to PPP costs and risk remains within manageable limits.
An alternative is to incorporate limits on PPP commitments within other fiscal targets. For example, some governments introduce targets or limits on public debt. Some types of PPP commitment may be included within measurements of public debt, following international norms or national rules. However, this usually only applies in limited cases and restricted to the national level as highlighted by Liu and Pradelli [#177]. Their paper proposes a more rigorous monitoring framework of fiscal risks imposed by PPP debt by using a minimum set of five sub-national debt indicators which also takes into account SPV's debt. Irwin [#161] also describes an alternative of establishing a limit on 'debt plus PPP commitments'.