Public investments are an important tool for economic growth and development. For sub-Saharan Africa, the issue of optimal level of public investment is under-researched. Public investment trends show that during the booming years of the 2000s public investment went up in all developing countries and emerging markets. Public investment in Low-Income Countries (LICs) and Lower Middle-Income Countries (LMICs) is higher as a percent of GDP than in other emerging markets and advanced economies and has followed a general upward trend since 2000, first surging before the global financial crisis and then picking up again until 2015. This trend after the global financial crisis was mainly the result of high export commodity prices, advancing in particular countries that depend heavily on these exports for their public finance. However, with the recent fall in commodity and fuel prices, the literature shows that now only the more diversified and frontier economies particularly in LMICs are able to remain their public investment levels.
K4D helpdesk reports provide summaries of current research, evidence and lessons learned. This report was commissioned by the UK Department for International Development.
Quak, E. (2018) The Public Investment Gap: the Need for External Finance to Increase Public Investment. K4D Helpdesk Report no. 382. Brighton, UK: Institute of Development Studies.