Hitting the Trillion Mark: A Look at How Much Countries Are Spending on Infrastructure

Abstract

Finally, the World Bank recently developed a regional baseline of public spending by leveraging the wealth of micro fiscal data collected by the BOOST initiative in more than 55 countries (with another 15 in progress). This baseline allows us to examine annual trends, execution rates, funding sources, and levels of capital expenditure by general government across infrastructure sectors. The BOOST database covers 25 countries in Africa-which has enabled the World Bank to develop a regional baseline of annual public spending across infrastructure sectors in Sub-Saharan Africa (World Bank 2017). It also includes 14 Latin American and Caribbean countries, which the World Bank and IDB teams are using to derive investment estimates ground-truthed in the IDB's country-specific fiscal analysis. The hope is that, in the future, estimates could be derived from BOOST data instead of requiring costly country visits. Three Possible Proxies Based on Four Data SetsInfrastructure typically includes transport, energy, and water and sewerage, with some debate about whether information and communication technology (ICT), flood defense, and irrigation should be included. In this report, we include the following four sectors: Transport, which includes civil engineering works on highways, bridges, streets, roads, railways, tunnels, airfield runways, ports and harbors, waterways, and related harbor and waterway facilities, among others, as well as nonresidential buildings. Related machinery and equipment, including ICT, are also included.  Energy, which encompasses nonresidential buildings and civil engineering works for power plants, power stations, hydroelectric dams, electricity grids, long-transmission 10 lines, power lines, transformer stations, and gas and oil pipelines, among others. Related machinery and equipment, including ICT, are also included. 4  Water and sewerage, which includes nonresidential buildings, civil engineering works and machinery and equipment for dams, irrigation, and flood control waterworks, local water and sewer mains, local hot-water and steam pipelines, sewage, and water treatment plants. Related machinery and equipment, including ICT, are also included. However, BOOST does not include irrigation.  Information and communication technology, which comprises nonresidential buildings and civil engineering works for telephone and Internet systems, land-and sea-based cables, communication towers, and telecommunication transmission lines, among others.Related machinery and equipment, including ICT, are also included. PPI data exclude fully privatized investment that is not part of a public infrastructure project.We use four data sets to construct three estimates of capital spending in infrastructure (figure 1): Two estimates based on systems of national accounts. 5 Here we follow ADB (2017) and use GFCF as the key macroeconomic aggregate in national accounts relevant to assessing infrastructure investment. GFCF measures the total value of fixed assets that are used in production for more than one year plu...

Understanding the Cost of Achieving the Sustainable Development Goals

“…The WBG is a strong advocate of quality and efficiency of spending related to the SDGs. Specifically, this has entailed advising countries to spend on the right sectors, and to use the right spending metrics-rather than to simply spend more (Fay et al 2019). These aspects have guided the WBG's work with its client countries on developing plans to finance investment gaps and the SDGs, including through regular Public Expenditure Reviews and the country engagement component of the Human Capital Project, which identifies policy priorities to achieve the education and health-related SDGs (i.e., SDG 3 and SDG 4).…”

“…The findings ofRozenberg and Fay (2019) are backed by the first consistently-estimated stocktaking of past infrastructure investment in low-and middle-income countries(Fay et al 2019). These estimates include a lowerbound estimate of 3.4 percent of these countries' aggregate GDP, a central estimate of around 4 percent, and an upperbound estimate of 5 percent for 2011, with the corresponding absolute amounts of $0.8 trillion, $1.0 trillion, and $1.2 trillion, respectively.…”

Tracking finance flows towards assessing their consistency with climate objectives

“…The coverage of GFCF is in line with the suggested scope of tracking, noting that GFCF also covers investments in intellectual property products, which represents 1% to 30% of the total depending on the country. The usefulness of GFCF to assess progress towards Article 2.1c is, however, currently limited due to the level of aggregation at which data are collected (see for instance (Fay, Han, Il Lee, Mastruzzi, & Cho, 2019)). GFCF statistics are aggregated at the actor (institutional sector) level and do not provide information on the underlying sources of finance of the investment flows tracked.…”

Rising incomes and inequality of access to infrastructure among Latin American Households

“…A recent effort to improve country-level infrastructure spending data using both national account and public budget sources (Fay et al, 2019) indicates total investments between 2 and 3.2% of GDP, of which between 17 and 27% correspond to private investments. Considering these levels, Latin American average investment in infrastructure is unlikely to exceed 2-3.5% of GDP in the near future, very much in line with current levels.…”