Borrowing back better: how to finance major infrastructure projects

By on 14/11/2022 | Updated on 14/11/2022
A dark lit tunnel bending to the left

There is increasing awareness that if infrastructure projects are to be successful, they must be climate-friendly, resilient and primed for connectivity. And as the audience of a Global Government Forum webinar heard, achieving this in the current economic climate requires new and creative ways to finance them

Even in the wake of the 2008 economic crash, infrastructure projects were significantly easier for governments to deliver than they are today. Interest rates were stable and trade relations with the producers of commodities needed for building works were good. But the early 2020s have radically altered the state of play. High inflation stemming from the pandemic and the war in Ukraine has pushed central banks to hike interest rates, steepening the cost of borrowing to levels that are casting doubt on investment in new infrastructure projects. The projects are often essential, but only an alternative means of financing them will ensure that they go ahead.    

To discuss the issues, four experts – Alexandre Araujo Carneiro of Brazil’s Department of Development and Development of Infrastructure; Chris Creed, senior advisor at the Loan Programs Office within the U.S. Department of Energy; Ian Brown, head of banking and investments at UK Infrastructure Bank; and Michael Flynn, global infrastructure, transport and regional government sector leader at Deloitte – convened for the webinar Staying on track: how to fund infrastructure projects as governments’ borrowing costs rise.

Touching on the financing options open to governments, from unlocking investment in different sectors to using pension funds, here are some of the key points raised during the webinar with accompanying clips:

The advantages of partnering with the UK Infrastructure Bank to attract private financing by providing funding and loan guarantees for first-of-a-kind projects otherwise deemed too risky. 

New infrastructure projects that are designed to meet both climate and social justice criteria. In the US, projects with these aims have focused on redressing historical under-investment in native communities. 

The necessity of incentivising private sector partners to help governments achieve their net zero target and stimulate economic growth in a more equitable way.

Why, as Deloitte’s Michael Flynn explained, it is key for the public sector to explore the relative advantages of funding projects through a mix of public and private sector investment. 

How, after Brazil shifted away from dependence on the World Development Bank for funding, it began using government-issued incentivised bonds. Alexandre Araujo Carneiro explained that a bill was passed to allow these bonds to be denominated in a foreign currency and to be traded in other jurisdictions with the same benefits they have in Brazil. 

To learn all this and more, you can watch the 75-minute webinar via our dedicated event page. The webinar – hosted by Global Government Forum with the support of knowledge partner Deloitte – was held on 12 October 2022.

About Jack Aldane

Jack is a British journalist, cartoonist and podcaster. He graduated from Heythrop College London in 2009 with a BA in philosophy, before living and working in China for three years as a freelance reporter. After training in financial journalism at City University from 2013 to 2014, Jack worked at Bloomberg and Thomson Reuters before moving into editing magazines on global trade and development finance. Shortly after editing opinion writing for UnHerd, he joined the independent think tank ResPublica, where he led a media campaign to change the health and safety requirements around asbestos in UK public buildings. As host and producer of The Booking Club podcast – a conversation series featuring prominent authors and commentators at their favourite restaurants – Jack continues to engage today’s most distinguished thinkers on the biggest problems pertaining to ideology and power in the 21st century. He joined Global Government Forum as its Senior Staff Writer and Community Co-ordinator in 2021.

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