This Topic Guide provides a framework for understanding the underlying issues and challenges of sub-national finance as well as examples of emerging good practices in financing capital investment in infrastructure and services at sub-national level in developing countries. The guide is designed to assist DFID Advisers to develop business cases to address the issues and challenges in developing policy, building institutional capacity and designing mechanisms that will enhance sub-national financing of infrastructure and services in developing countries. In doing so, the guide considers the following key issues:
- Importance of planned and inclusive urban development for the promotion of growth and poverty reduction
- Addressing the infrastructure investment requirements of sub-national government
- High dependency on intergovernmental transfers and limited own revenue potential as an outcome of incomplete decentralisation and weak regulatory frameworks for fiscal devolution
- Mechanisms to promote credit worthiness and bankability of sub-national borrowers and projects in accessing new forms of infrastructure financing.
The guide is structured in 4 sections:
- Section 1 considers the need for and relevance of sub-national infrastructure financing.
- Section 2 highlights the policy and regulatory frameworks for sub-national financing focusing on: intergovernmental transfers (IGTs) and grants; own-source revenue (OSR); and municipal borrowing.
- Section 3 examines the instruments and mechanisms for sub-national financing focusing on: municipal borrowing and municipal development funds; pooled financing; private financing; municipal bonds.
- Section 4 highlights key issues and inferences going forward.
This Topic Guide has been produced by Evidence on Demand with the assistance of the UK Department for International Development (DFID) contracted through the Climate, Environment, Infrastructure and Livelihoods Professional Evidence and Applied Knowledge Services (CEIL PEAKS) programme, jointly managed by DAI (which incorporates HTSPE Limited) and IMC Worldwide Limited.
Slater, R.; Goyal, H. Topic Guide: Sub-national financing for urban infrastructure. Evidence on Demand, UK (2015) 59 pp. [DOI: 10.12774/eod_tg.march2015.slaterretal]