Financing Infrastructure Investment

Explores ways for Sri Lanka to finance its infrastructure investment through private sector involvement and strengthening of government institutions, and offers policy recommendations on how to close the infrastructure gaps. Sri Lanka will require an additional 3.84 to 6.9 percent of GDP to modernize infrastructure enough to sustain high growth in the future. This will pose a challenge for fiscal sustainability given the high level of public debt. Reducing the losses of state-owned enterprises delivering infrastructure services could free up some resources, by streamlining tariffs to improve their responsiveness to costs in energy, water, and sanitation. Use of private-public partnerships (PPPs) could allow the government to share the risk of infrastructure investment with the private sector while retaining a government role that can be helpful, for example, in overcoming public opposition to infrastructure improvements, such as locating sites for waste disposal. In cases where a low-cost, local solution to a funding gap cannot be found - such as for local water and sanitation networks - foreign investment may be an option.