Reviving and Reorienting Growth after the Pandemic: The Role of Local Infrastructure Investments

Many countries are shifting their policies from limiting the immediate economic impact of the COVID-19 pandemic to designing strategies that will revive long-term growth and will address systemic challenges, such as climate change and growing inequality. A key success factor will be the capacity to restart and reorient infrastructure investments at a time when public finances have shifted from capital to current expenditure and private investments have been held back by the uncertain course of the pandemic. The focus of this paper is on the role that local government can play in promoting infrastructure investments and transforming the problems that the crisis has highlighted into opportunities for sustainable recovery and social inclusion. The paper focuses on how to improve the enabling environment and the range of financial instruments that are available at subnational level. Local challenges are greater than those at national level because subnational authorities generally have more limited fiscal capacity and greater difficulty in attracting private investors. It also looks at specific experiences that can provide interesting insights on how to implement and finance infrastructure projects and it proposes a set of policy principles to promote effective investments in local infrastructure.

Paper prepared as part of the research project “Infrastructure investments and the role of the G20”, February 2021.