REVIEW: Private infrastructure financing is crucial for the progress of developing nations.

Emerging economies face significant funding and infrastructure gaps due to socioeconomic challenges and recent crises. Governments struggle to provide essential services to struggling households. Sustainable solutions and funding are urgently needed.

The World Bank conducted a study to assess the impact of global events on the availability and affordability of financing for emerging and developing economies. The study found that while the COVID-19 pandemic did not have a lasting impact on the risk appetite of most international financiers, the war in Ukraine and higher interest rates have adversely affected risk appetite.

The pandemic put a strain on the fiscal space of emerging economies, pushing them further into debt and limiting their ability to respond to future shocks. This has made it difficult for them to catch up with high-income countries.

Another key finding of the study is that financing for low-carbon transitions in emerging markets is at risk of being displaced by investments in developed economies. The study found that European and the United States' large-scale subsidy schemes for green projects make it more attractive for investors to finance projects in developed economies.

The study also revealed that project investment costs have increased substantially due to a combination of factors including inflation, higher commodity prices, and higher borrowing costs. This has made projects less affordable, particularly for low-income populations.

The study concluded that the role of multilateral development banks (MDBs) and philanthropies in emerging markets is more important than ever in light of the challenges facing those economies.

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