NEWS: Municipal governments must find innovative ways to fund infrastructure

In emerging markets and developing economies, where many are still recovering from COVID-era deficits, city government officials have a difficult task in funding infrastructure development. The cost of market finance has increased quickly due to rising interest rates, and available fiscal space for public funding remains limited. Furthermore, inflation is raising the basic cost of implementing infrastructure projects, while climate change is placing additional strain on project budgets by increasing the costs of resilient infrastructure designs.

Municipal governments in emerging market and developing economies face challenges in funding infrastructure development due to rising interest rates, limited fiscal space, inflation, and climate change. Innovative financing options are needed to close the financing gap. Building creditworthiness, solid capital planning, land value capture, asset recycling, and public-private partnerships are potential solutions. 

The Northern Line extension in London and the Mzimbazi Basin Development Project in Tanzania illustrate successful implementation of land value capture. Asset recycling has been used in Australia and India to unlock capital for new infrastructure investments. Public-private partnerships remain a traditional mechanism for mobilizing financing when used in the right circumstances.

Municipal governments in developing economies should investigate novel strategies for financing their infrastructure

This hardhatNEWS article on how city governments can meet the infrastructure demands of their citizens was published on the World bank blogs

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