Public Private Partnership, Infrastructure Guarantee and Sovereign Debt Default

Sovereign Default has been a feature of the international financial landscape. With the pattern of revenue volatility, public debt accumulation, severe funding pressures and underlying macroeconomic variables can evolve in a manner that produces unsustainable debt paths leading to possible default. This paper discusses and develops a conceptual framework to examine the impact of default on sovereign debt arising from an event trigger resulting in the crystallization of contingent liability arising from guarantee for private participation in infrastructure provision. Findings support previous studies, which inferred the threat of contingent liabilities created by guarantee because they are not always recorded in the national account but shown as memorandum item thus producing a hidden and adverse effect on the fiscal status.