The need for infrastructure building, replacement and updating is large worldwide and governments - particularly subnational governments - will need to mobilise budgetary resources while simultaneously restoring public finances to sound health and meeting other spending pressures. This paper considers the factors affecting investment in infrastructure (with an emphasis on fixed networks), the specific characteristics of the different financing modalities applicable to subnational governments and highlights the challenges that are specific to subnational governments. In order to rise to the challenge, subnational governments will need to enhance their capacity to raise own revenue, to make the most of intergovernmental grants and transfers, and to mobilise private-sector funds, including by tapping capital markets, where permitted. In order to exploit fully the various financing options, subnational governments in many countries will need to strengthen their technical capacity to design and implement investment projects, as well as manage increasingly complex, multi-year budgets, especially when there is private sector involvement.
de Mello, Luiz and Sutherland, Douglas, "Financing Infrastructure" (2014). International Center for Public Policy Working Paper Series. 24.