Financing infrastructure in developing countries: framework and challenges

Abstract

Infrastructure is an essential pillar for growth, particularly in developing countries that lack access to the basic and vital services. Therefore, global infrastructure needs across countries and income groups are vast, and current infrastructure investment is not sufficient to meet them all. The nascent investment gap is too large to be financed exclusively by governments; thus, a call for additional capital funds is emergent. In this work various financing mechanisms, including government spending, public-private partnerships, foreign borrowing by supranational institutions, and alternative sources are studied and compared according to existing preconditions in developing countries and sectors of the economy. The case study, based on data from energy and transport infrastructure projects financed by the European Bank of Infrastructure and Development in Ukraine, proves that this source of funding is effective in developing countries due to the promotion of structural and sectoral reforms, development of competition and support the private sector.