Scaling Up Quality Infrastructure Investment

32 Pages Posted: 4 Feb 2022

See all articles by Olivier Bizimana

Olivier Bizimana

International Monetary Fund (IMF)

Laura Jaramillo

International Monetary Fund (IMF)

Saji Thomas

International Monetary Fund (IMF)

Jiae Yoo

International Monetary Fund (IMF)

Date Written: April 1, 2021

Abstract

South Asia needs large infrastructure investments to achieve its development goals, and public investment can also support the Covid-19 recovery. Regression estimates that account for the quantity and quality of investment suggest that public infrastructure was a key driver of productivity growth in South Asia. Going forward, higher public infrastructure spending can raise growth, but its benefits depend on how it is financed and managed. Model simulations show that tax financing, concessional lending, or private sector financing through public private partnerships (PPPs) are more advantageous than government borrowing through financial markets because they support growth while containing the impact on public debt. However, the optimal choice also depends on available fiscal space, taxation capacity, implementation risks, and public investment efficiency. To reap the most benefits from higher infrastructure investment, South Asian countries need to manage fiscal risks carefully, including from PPPs and state-owned enterprises, and improve public investment efficiency.

Keywords: infrastructure investment, tax financing, quality of investment, PPP financing, efficiency gap, multiyear investment planning, Public investment spending, Infrastructure, Capital budget, South Asia, Asia and Pacific, Caribbean

JEL Classification: F31, E26, H54, E22, H63, H61

Suggested Citation

Bizimana, Olivier and Jaramillo, Laura and Thomas, Saji and Yoo, Jiae, Scaling Up Quality Infrastructure Investment (April 1, 2021). IMF Working Paper No. 2021/117, Available at SSRN: https://ssrn.com/abstract=4026293

Olivier Bizimana (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Laura Jaramillo

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Saji Thomas

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Jiae Yoo

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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