A few words about investment and debt

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Piggy bank, Government debt, Transparency
Image credit: Shutterstock, Tom Mc Nemar

On this blog, we speak a lot about investments—particularly private-sector investments in productive, sustainable developing-country infrastructure. Today we insert a word of caution, one that perhaps complicates the picture and makes strong analysis of each country’s needs and resources more important.

Public debt in developing countries has been increasing and the share of the world’s poorest countries at high risk of external debt distress has doubled since 2013. The median interest payment among low-income countries rose 128 percent between 2013 and 2017, while government revenues grew just 31 percent. This rise in debt-servicing costs has left many governments with less to spend on critical public services. These developments pose a challenge to the global effort to end extreme poverty and achieve the SDGs by 2030.

Governments need to find ways to finance these investments without letting debt grow to unmanageable levels. This is not easy. Here, debt transparency is critical. Policymakers in borrowing countries need reliable debt information to make informed borrowing decisions. Creditors, donors, analysts, and rating agencies need it to assess sovereign creditworthiness, and to appropriately price debt instruments. Citizens need it to hold their governments accountable.

The World Bank Group takes a comprehensive approach to enhancing debt transparency—through its own engagement with countries and in close collaboration with the IMF. Also together with the IMF, we have tools and expertise that can help countries manage their debt more effectively.

We just launched version 2.0 of the Public Fiscal Risk Assessment Model (PFRAM), an analytical tool to assess fiscal costs and risks arising from PPP projects. It’s designed to assist governments in assessing fiscal implications of PPPs, as well as in managing these projects proactively. Since it was launched in April 2016, PFRAM has been used in the context of IMF and WBG technical assistance, as well as by country authorities (for example, PPP units in Ministries of Finance, public corporations) to better understand the medium- to long-term fiscal implications of PPPs. Building on experience gathered from developers and users, this new version improves the user interface making it easier to understand by non-PPP experts and extends the tool’s coverage and functionalities. 

We’ve also launched launched a new, self-paced course on assessing fiscal implications and managing related fiscal risks—using real case studies to explain key concepts and includes downloadable resources for later use.

I urge you to read this important blog from our colleague Ceyla Pazarbasioglu, Vice President for Equitable Growth, Finance and Institutions at the World Bank Group, that discusses debt and its implications for development.

 

This blog is managed by the Infrastructure Finance, PPPs & Guarantees Group of the World Bank. Learn more about our work here.

Authors

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Motahar Ahmed Khan
October 27, 2019

How can I got private partnership details please

Shahid Ajaz
October 27, 2019

Leading global institutions should encourage countries like Pakistan where millions of pelple are ready to work and contribute for a global cause.
Pakistanis are contribution in IT start up ventures and adding value to products and services for a happier and sustainable global business market.
Investing in people is the best option for tech savvy organizations.
Entreneuership in deveoping countries should be funded thriugh a global fund so as to remove stigma of poverty frpm people's life.

Thanks for your time.

Shahid Ajaz