Recent Economic Development in Infrastructure

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Financing Public Infrastructure in Sub-Saharan Africa: Patterns and Emerging Issues, Cross-Country Annex

2009, Briceño-Garmendia, Cecilia, Smits, Karlis, Foster, Vivien

To be credible, any plan for scaling up infrastructure in Africa must rest on a thorough evaluation of how fiscal resources are allocated and financed. Because in every plausible scenario the public sector retains the lion's share of infrastructure financing, with private participation remaining limited, a central purpose of such an evaluation is to identify where and how fiscal resources can be better used if not increased without jeopardizing macroeconomic and fiscal stability. The stakes are high, because the magnitude of Africa's infrastructure needs carries a commensurate potential for misuse of scarce fiscal resources. The authors analyze recent public expenditure patterns to identify ways to make more fiscal resources available for infrastructure. The authors do this in three ways. First, we quantify the level and composition of public spending on infrastructure so as to match fiscal allocations to the particular characteristics of individual subsectors and to countries' macroeconomic type (low-income fragile, low-income no fragile, oil-exporting, and middle-income). Second, the authors evaluate public budgetary spending for infrastructure against macroeconomic conditions to get a sense of the scope for making additional fiscal resources available based on actual allocation decisions in recent years. And, third, the authors look for ways to make public spending for infrastructure more efficient, so as to better use existing resources. Any exercise of this kind encounters data limitations. First, because it was not feasible to visit all sub national entities, some decentralized infrastructure expenditures probably have been underrepresented, with particular implications for the water sector. Second, it was not always possible to fully identify which items of the budget are financed by donors, and contributions by nongovernmental organizations (NGOs) to rural infrastructure projects are likely to have been missed completely. Third, it was not always possible to obtain full financial statements for all of the infrastructure special funds that the authors identified. Fourth, accurate recording of annual changes in fixed capital formation (capital expenditure) of State-owned enterprises (SOEs) remains a methodological challenge. Fifth, accurate measurement of existing public infrastructure stock will require further methodological development.