Financing Infrastructure in Developing Countries

Analysis 74: Financing Infrastructure in Developing Countries through Public-Private Partnerships

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Eva HanfstänglEhemalige Mitarbeiterin
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Since the world’s governments adopted the 2030 Agenda and its 17 Sustainable Development Goals (SDGs), they declare that a massive increase of investment, including in public infrastructure, would be required to realize the economic, social and environmental goals. Normally, governments pay for their long-term investments in infrastructure and other public services by first borrowing the necessary funds and then repaying them over the life of the investment out of their fiscal revenues. Developing countries may borrow from development institutions like the World Bank and other development banks or by issuing bonds that are purchased mainly by pension funds and other institutional investors. However, concerns about unsustainable debt levels of many developing countries, on one side, and concerns about low returns on bonds owing to the low-interest rate environment internationally, on the other, have turned government attention to alternate means for organizing and financing infrastructure investment.

The key question is whether mechanisms might be available that would yield more revenue for creditors while guiding more private funds into public-interest investment. Public-private partnerships (PPPs) are such a mechanism and are now favoured internationally for infrastructure investment.

We present this discussion paper as a starting point for civil society and governments to engage in thinking about how to design public-private partnerships in a way that can best serve society and the environment. This notwithstanding, the views and opinions expressed herein are those of the authors and do not necessarily reflect the views of Bread for the World (Brot für die Welt).