may be implemented more efficiently if private sector companies, with specialist expertise, invest in, and manage the project and bear the risks that the project will not be completed on time and within budget. these are important advantages, not least because project implementation capacity is weak in uganda and some other countries in the region. however, it is a misperception that ppps reduce the fiscal burden on the government over the long term ; instead they usually only extend the time frame over which the fiscal costs are incurred. ppps in many countries have bis central bankers ’ speeches also entailed substantial quasi fiscal liabilities because of implicit or explicit public guarantees given to private investors. ppps should be one of the options considered by governments for developing infrastructure but they should not be seen as a panacea for a shortage of budgetary resources. thank you very much for listening. bis central bankers ’ speeches

such as treasury bills and bonds through regular auctions. issuing local currency instruments on the domestic market is the optimal vehicle for raising private sector finance for the budget. with such instruments auctioned in competitive market and actively traded in the secondary market, their pricing is relatively cheaper than other forms of debt such as commercial bank loans. the main investors in local currency denominated government bonds are pension funds, insurance companies, commercial banks and, to a lesser extent, offshore portfolio investors. all of these investors are acutely aware of the need to balance risk with competitive rates of return. the main risk facing investors in local currency bonds is that the government ’ s fiscal position becomes unsustainable, such that it either defaults on its debt or has to resort to inflationary finance to service its debt, which would then erode the real value of the debt. hence to mitigate these risks, government must be able to demonstrate, in a credible manner, that it will not allow its fiscal position to become unsustainable. to generate confidence in the sustainability of public finances, governments should formulate their budgets within a medium term fiscal framework which clearly shows the path of the fiscal deficit over at least the next five years and the associated path of public debt. a fiscal framework in which fiscal deficits are so large as to require continuously rising public debt to gdp ratios will be perceived as being unsustainable and is, therefore, not conducive bis central bankers ’ speeches to mobilising long term finance from the private sector except at very high interest rates. therefore, the prerequisite for mobilising long term finance for infrastructure projects is a prudent fiscal framework, in which the future path of public debt remains comfortably within sustainable levels. the most important message which i want you to take from my remarks this morning is that any consideration of mobilising finance for infrastructure by governments must take place within a framework of fiscal sustainability. the second category of infrastructure project is that of commercial projects. these are projects for which it is feasible, and usually optimal, to sell the services produced by the infrastructure directly to the users, with the tariffs charged covering the full cost of producing the service, including its debt servicing. they include electric power generation and port facilities. such projects are usually owned by separate legal entities from government ; e. g. limited liability corporations. increasingly in east africa, as elsewhere in the world, the corporations which own and manage these projects are owned by the private