Off the Books: Understanding and Mitigating the Fiscal Risks of Infrastructure

Abstract

Sustainable infrastructure is a key enabler of economic and social development, as well as environmental sustainability. Quality infrastructure enhances productivity and competitiveness, contributing to economic growth and employment as well as facilitating international trade. Broad coverage of infrastructure services promotes social inclusion and equity and supports the formation of human capital. Green infrastructure safeguards local environmental quality, while contributing to the global decarbonization process. The challenge of delivering sustainable infrastructure services is a complex one that goes far beyond "bricks and mortar" to encompass good policy, sound planning, efficient procurement, smart regulation, transparent governance, affordable finance, and functional markets. The Sustainable Infrastructure Series covers a wide range of policy topics relating to network infrastructure services, including energy, multimodal transportation, information and communications technology and digital development, water and sanitation, and urban and rural infrastructure, as well as irrigation and flood management.

Managing rising subnational fiscal risks

“…Intermediate-level governments may also face strong pressures to bail out financially distressed local governments in their respective jurisdictions. Moreover, even in the absence of explicit guarantees, SNGs may need to renegotiate PPP contracts or provide unbudgeted-for financial support to the private partner, to avoid a more costly early termination of the arrangement (Herrera-Dappe et al, 2023).…”