Why Infrastructure Financing Facilities Often Fall Short of Their Objectives

43 Pages Posted: 20 Apr 2016

Date Written: November 30, 1999

Abstract

To encourage the private funding and provision of infrastructure services, governments have used specialized financing facilities to offer financial support to investors. A study of five cases shows that these facilities have often fallen short of their objectives, for two main sets of reasons. First, the environment was not conducive to private participation in infrastructure. And second, the facility was faulty in design.

To encourage the private funding and provision of infrastructure services, governments have used specialized financing facilities to offer financial support to investors, often in the form of grants, soft loans, or guarantees.

Klingebiel and Ruster present case studies of infrastructure financing facilities in various stages of development in Colombia, India, and Pakistan. They also present case studies of government-sponsored financing facilities (not of infrastructure) in Argentina and Moldova. They find that these facilities have often fallen short of their objectives for two main sets of reasons. First, the environment was not conducive to private participation in infrastructure because of poor sector policies, an unstable macroeconomic environment, and inadequate financial sector policies, among other reasons. Second, the facility was faulty in design - in terms of sectors targeted, pricing of instruments, and consistency of objectives and instruments.

This paper - a product of Private Participation in Infrastructure, Private Sector Development Department - is part of a larger effort in the department to examine government policies in infrastructure. Daniela Klingebiel may be contacted at dklingebiel@worldbank.org.

Suggested Citation

Klingebiel, Daniela and Ruster, Jeff, Why Infrastructure Financing Facilities Often Fall Short of Their Objectives (November 30, 1999). Available at SSRN: https://ssrn.com/abstract=630730

Daniela Klingebiel (Contact Author)

World Bank - Policy Unit ( email )

1818 H Street NW
Room MC 9-903
Washington, DC 20433
United States
202-473-7470 (Phone)
202-522-2031 (Fax)

Jeff Ruster

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States