IMF against public-private partnership in building roads

IMF against public-private partnership in building roads

The International Monetary Fund does not see public-private partnership as the right way of building roads in Western Balkan countries.

This is confirmed by a recent report which proposes other means of securing funding to build road infrastructure.

“Western Balkan countries (Albania, Bosnia and Herzegovina, Kosovo, Former Yugoslav Republic of Macedonia, Montenegro, and Serbia) have underdeveloped transport, power, and telecoms networks, compared with the European Union (EU) average. Closing the public infrastructure gap will help the region catch up with Western European living standards. But where will the money come from? Increased financing will be needed both from domestic and foreign sources. Better planning and implementation of public investment projects is also a must”, the report says.

The IMF recommends the following actions:

  • “Investing in investing”: bolstering the capacity to plan, select, and carry out infrastructure projects would ensure that available resources are put to better use and would improve the region’s ability to absorb available donor financing. Importantly, infrastructure projects should not fall victim to politicization. Countries can avoid that by establishing public investment schedules based on concrete, quantifiable goals and transparent assessment methodologies.
  • Many infrastructure networks stretch over borders. For this reason, better regional coordination of investment projects will be essential.
  • Countries should consider saving on their recurring expenses to find resources for costly projects. Governments could create further room for maneuver by broadening their tax base (by eliminating exemptions and tax incentives) and strengthening tax compliance, both of which result in more revenues collected.
  • External financing should play a larger role in public infrastructure development in the Western Balkans, leaving domestic financial resources to serve the needs of the private sector. Official donor, multilateral and bilateral financing on concessional terms will have to play a dominant role, especially in countries with high public debt.
  • Last but not least, countries should not endanger their overall macroeconomic stability by overambitious or poorly executed public infrastructure projects. Trade-offs between economic growth, inflation, and external current account deficits should be a key element of any policy discussion on scaling up public infrastructure in the region..