## Roads to Stronger Growth in Low-Income Countries _IMF Blog, January 12, 2017_ ## Source details **Canonical URL:** [Roads to Stronger Growth in Low-Income Countries](https://www.imf.org/en/blogs/articles/2017/01/12/roads-to-stronger-growth-in-low-income-countries) ## Other formats - [Markdown version](/en/blogs/articles/2017/01/12/roads-to-stronger-growth-in-low-income-countries/index.md) - [Structured JSON version](/en/blogs/articles/2017/01/12/roads-to-stronger-growth-in-low-income-countries/index.json) - [Bundle manifest](/en/blogs/articles/2017/01/12/roads-to-stronger-growth-in-low-income-countries/bundle-manifest.json) ## Bibliographic details - Authors: Tao Zhang, Vladimir Klyuev - Published: January 12, 2017 --- ### Overview - Authors: Tao Zhang, Vladimir Klyuev - Date: January 12, 2017 - Core message: Low-income countries should build more infrastructure—roads, electricity, sanitation, telecommunications, and water delivery—to strengthen growth and meet the 2030 Agenda for Sustainable Development. A chapter in a recent IMF report examines obstacles and policy options. ### Challenges to scaling up infrastructure - Public debt and external financing - In many low-income countries, public debt levels have risen and external financing conditions have tightened, making loans for infrastructure more difficult and risky. - During 2015 alone, the ratio of public debt to GDP rose from 34 to 42 percent. - Capacity and resource constraints - A survey identifies availability of external financing and administrative capacity constraints as key obstacles in the most vulnerable countries. - For low-income countries better connected to global capital markets, the sufficiency of domestic financial resources is the most important concern. ### Improving public investment efficiency and domestic resource mobilization - Public investment efficiency - Value for money in public investment varies considerably among low-income countries and is generally lower than in other states. - Broad principles (e.g., directing capital expenditure to the most productive projects) are understood but institutional mechanisms—effective cost-benefit analysis and transparent procurement—are often lacking. - Domestic revenue measures - More domestic resources from taxes can create space for priority spending on infrastructure. - Persisting issues: tax revenues remain lower in poorer countries partly due to lower collection efficiency. - Policy actions to expand fiscal space: improving tax administration; broadening the tax base; closing unjustified loopholes; streamlining expenditures; and, in some cases, raising tax rates. - Concessional finance and multilateral banks - Concessional financing will need to continue playing an important role. - Increasing the capital of multilateral development banks and adjusting how they deploy capital could generate more resources for the poorest countries. - The rise of new bilateral donors (particularly China) and new institutions (such as the Asian Infrastructure Investment Bank) has brought additional funds for development. - Many potential donor countries face their own fiscal challenges, limiting prospects for a large increase in multilateral and bilateral donor financing. - Even scaled up official development assistance is considered insufficient to meet the investment requirements of the Sustainable Development Goals by 2030. ### Mobilizing private finance and public-private partnerships - Evidence and potential - There is little purely private infrastructure in low-income countries outside mobile telecommunications; the mobile sector demonstrates viability of private models. - Small-scale applications (e.g., solar micro-grids) provide additional examples. - Public-private partnerships (PPPs) - PPPs are relatively frequent in electricity generation. - Critical requirements: strong institutional framework and sound PPP management to avoid undue fiscal risks. - Barriers to private investment - A favorable business environment—stable macroeconomic conditions and predictable policies—is necessary but may not be sufficient. - Numerous obstacles prevent private investors from connecting to viable projects; low-income countries often lack expertise in structuring projects to deliver acceptable risk-return profiles. - Large institutional pools of capital (close to $100 trillion in advanced economies) are seeking decent returns but face bottlenecks in accessing viable projects in low-income countries. - Role of multilateral development banks and project preparation - Multilateral development banks help structure projects and provide risk mitigation: political risk insurance, credit guarantees, subordinated debt, and other instruments. - Numerous project preparation facilities assist in structuring viable projects; example cited: the recently established Global Infrastructure Facility with an initial capitalization of $100 million. - This catalytic approach is promising, although progress has been limited so far. ### IMF support and tools - IMF instruments - The IMF’s Infrastructure Policy Support Initiative helps countries evaluate macroeconomic and financial implications of alternative investment programs and financing strategies and bolster institutional capacity in managing public investment. - These tools have been applied in countries including Cambodia, Honduras, the Kyrgyz Republic, and Togo. - The IMF allocates one-fifth of its support for national capacity building to assistance in the areas of tax policy and administration, which are key to domestic revenue mobilization. ### Key statistics and figures - 2030 (Agenda for Sustainable Development target year) - During 2015: public debt to GDP rose from 34 to 42 percent - Close to $100 trillion (large institutional pools of capital in advanced economies) - Global Infrastructure Facility initial capitalization: $100 million - IMF national capacity building allocation to tax policy and administration: one-fifth *Source: Roads to Stronger Growth in Low-Income Countries, Tao Zhang, Vladimir Klyuev, January 12, 2017.* --- ## Content in this bundle - **World Bank Document** - [World Bank Document (Markdown version)](/curated/en/602761467999349576/pdf/98023-BR-SecM2015-0233-IDA-SecM2015-0147-IFC-SecM2015-0105-MIGA-SecM2015-0061-Box391499B-OUO-9.pdf.md){rel="alternate" type="text/markdown"} - [World Bank Document (PDF)](/curated/en/602761467999349576/pdf/98023-BR-SecM2015-0233-IDA-SecM2015-0147-IFC-SecM2015-0105-MIGA-SecM2015-0061-Box391499B-OUO-9.pdf){rel="external" type="application/pdf;charset=utf-8"} - **低收入国家实现更强劲增长之路; IMF博客; 2017年1月12日** - [低收入国家实现更强劲增长之路; IMF博客; 2017年1月12日 (Markdown version)](/external/chinese/np/blog/2017/011317c.pdf.md){rel="alternate" type="text/markdown"} - [低收入国家实现更强劲增长之路; IMF博客; 2017年1月12日 (PDF)](/external/chinese/np/blog/2017/011317c.pdf){rel="external" type="application/pdf"} - **Making Public Investment More Efficient; IMF Policy Paper, June 11, 2015** - [Making Public Investment More Efficient; IMF Policy Paper, June 11, 2015 (Markdown version)](/external/np/pp/eng/2015/061115.pdf.md){rel="alternate" type="text/markdown"} - [Making Public Investment More Efficient; IMF Policy Paper, June 11, 2015 (PDF)](/external/np/pp/eng/2015/061115.pdf){rel="external" type="application/pdf"} --- ## References - [عربي](http://blog-montada.imf.org/?p=4662) - [https://www.imf.org/wp-content/uploads/2017/01/lidcs-infrastructure-chart1.jpg](https://www.imf.org/wp-content/uploads/2017/01/lidcs-infrastructure-chart1.jpg) - [recent report](http://www.imf.org/external/pp/longres.aspx?id=5086) - [https://www.imf.org/wp-content/uploads/2017/01/lidcs-infrastructure-chart2.jpg](https://www.imf.org/wp-content/uploads/2017/01/lidcs-infrastructure-chart2.jpg) - [https://www.imf.org/wp-content/uploads/2017/01/lidcs-infrastructure-chart3.jpg](https://www.imf.org/wp-content/uploads/2017/01/lidcs-infrastructure-chart3.jpg) _Source: https://www.imf.org/en/blogs/articles/2017/01/12/roads-to-stronger-growth-in-low-income-countries_