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Infrastructure Financing Gap Endangers Development Goals

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  • Developing countries could face an infrastructure financing gap as high as $270 billion a year, according to Bank estimates
  • These funding shortfalls threaten key development targets to lift poor people out of poverty
  • Bank Group to invest over $45 billion in infrastructure over the next three years

April 23, 2009—Greater access to electricity has raised non-farm incomes by 61 percent in Tanzania.

Better roads in Ghana's rural areas have reduced the cost of moving goods and people by one-third.

Across Africa, women who used to carry water long distances have gained on average four hours back in their day, thanks to improved (and closer) water services.

Throughout the developing world, infrastructure is improving living conditions and reducing poverty.
But these life-changing investments are increasingly threatened as budgets shrink in the global financial crisis.

The World Bank estimates all developing countries could face an infrastructure financing gap as high as $270 billion a year.

Another $110 billion of privately financed projects could be delayed. About $70 billion worth of existing projects are at risk, according to Bank research.

Such funding shortfalls threaten key development targets that the World Bank Group and its partners have been working toward for years, says Katherine Sierra, vice president of Sustainable Development at the World Bank.

"It's well known that infrastructure is a major contributor to growth and human development and a key ingredient for achieving all the Millennium Development Goals" she says.

"Clean water, proper sanitation, transportation, access to markets, electricity and energyall are made possible by infrastructure development. We must continue to make progress on these fronts and to avoid a greater human crisis."

The challenges are great:

  • Almost 900 million people don't have safe water to drink
  • 1.6 billion don't have access to electricity
  • 2.5 billion lack adequate sanitation services
  • 1 billion do not have easy access to an all-weather road

4 hours

The amount of time African women gain in their day thanks to better water services


61%

Increase in non-farm incomes due to
greater access to electricity

The World Bank’s lending for infrastructure-related programs and projects grew by 88 percent since 2003, reaching $11.7 billion in fiscal year 2008. \ Now, new World Bank Group programs—the Infrastructure Recovery and Assets (INFRA) platform and IFC’s Infrastructure Crisis Facility—aim to scale up infrastructure investment over $45 billion over the next three years. And MIGA also stands ready to mitigate the risks that typically affect infrastructure investments.

Africa 

Infrastructure development is a top priority for Africa. Many countries on the continent have frequent power shortages and regular interruptions in services. And the problem is compounded by the exceptionally high price of the services compared to other parts of the world.

Though the World Bank has doubled infrastructure assistance to the region to over $2.5 billion since 2003, it’s not nearly enough. The Bank estimates the region faces a financing gap of some $50 billion.

East Asia and Pacific Region

Rapid economic growth and climate change are shaping infrastructure needs in the region. Cleaner energy systems, including energy efficiency and renewable energy programs, mass transit systems, water supply, waste-water treatment, gas distribution, and transport logistics are all important areas, according to the Sustainable Infrastructure Action Plan.

Eastern Europe and Central Asia 

Low-income countries in the region need continued support for improved infrastructure
services. The World Bank Group will continue to expand energy efficiency and renewable energy business and focus on improving quality of service in roads, heating, water, and sanitation in rural areas. Transport lending is expected to rise substantially.

Latin America and the Caribbean

The Bank Group expects there will be increased demand for projects in energy diversification and market reform, water supply and sanitation expansion, improved logistics infrastructure, as well interventions to address urban congestion, pollution and housing constraints. In South America, IFC will focus on power, climate change, and transportation, while in Central America, IFC will pursue investments across sectors. Transportation projects in ports and roads sub-sectors and fostering regional integration will be a key priority going forward for IFC in the region. In the Caribbean, the emphasis continues to be to find regional solutions to infrastructure investment and recovery from natural disasters.

Middle East and North Africa

Most countries in the region are middle income countries with alternative sources of financing for their investment programs. The Bank Group’s focus is on helping countries reduce the costs of doing business, such as by adjusting utility and transport service tariffs to cost reflective levels, while implementing institutional and regulatory reforms to promote greater efficiency in the provision of services. In the water sector, the World Bank will focus its intervention on improving the management of scarce water resources, targeting both the resource and service side, while promoting integrated management of surface and ground water resources, taking into account the new challenges posed by climate change.
.
South Asia

A key priority is addressing the region’s rapid urbanization and the stress it is placing on city managers and urban services. The region anticipates scaling up lending in the energy sector, in particular for power transmission and hydro-electric generation, as well as low-carbon approaches to energy security. The World Bank continues to build on a strong history of engagement in the roads sector and is increasingly engaging in urban transport.




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