2024 Public Sector Perspectives

Marieta Zbojovska Public Sector Group, Corporate Banking Nicolas de Callatay Chief Country Officer for Belgium and Head of Public Sector Banking for EU institutions Asset Monetization: A Paradigm Shift Unlocking the Value of Public Sector Assets by Tapping Private Capital and Operational Efficiencies T he turbulent interest rate environment has, among others, slowed down the access tomore traditional sources of capital, such as international capital markets and lending at sustainable rates, leaving room for alternative financing and innovative asset management approach. Idly sitting public sector assets represent an opportunity to create a new source of revenue by unlocking the value of otherwise unutilized or underutilized public assets. Traditionally, governments have had tendency to turn towards capital markets as a primary capital source to meet additional financing needs, when operating in a challenging macroeconomic environment within fiscal and resource constraints. While investment grade governments have maintained their access to the international capital markets, albeit at a higher cost, the opportunity window has significantly contracted, if not completely closed, for lower credit rated sovereigns, currently looking at high double-digit yields. Capacity of other capital sources, such as domestic credit markets, development finance institutions or bilateral loans is also constrained, and in most cases does not fully meet the financing requirements. Both, the increased cost of borrowing and restricted access to the international capital markets, offer an opportunity for governments to look closer at alternative financing sources, making them relatively more attractive than before. The concept of the ‘public wealth’ has been around since the last century, yet it still remains generally overlooked and unexplored, as a result of a lack of accountancy, audit, supervision, and regulation of public assets. In most countries the value of public assets exceeds public debt. 1 Having in place a framework triangulating focused public asset management has potential to kick-start growth, open up fiscal space by widening the revenue base by up to 3% of GDP 2 and enhance fiscal buffer to weather future exogenous shocks. Subsequently, the government eliminates the need to resort to debt, exhausting existing savings, or being forced to revert to excessively painful austerity measures, vital especially for emerging markets. 1 IMF (2018) Fiscal Monitor. Managing Public Wealth 2 IMF (2019) A Global Picture of Public Wealth Santiago Silva Restrepo Public Sector Group, Corporate Banking Citi Perspectives for the Public Sector 37 36 The concept of the ‘public wealth’ has been around since the last century, yet it still remains generally overlooked and unexplored, as a result of a lack of accountancy, audit, supervision, and regulation of public assets. Asset Monetization: A ParadigmShift Unlocking the Value of Public Sector Assets by Tapping Private Capital and Operational Efficiencies