Beyond sovereign guarantees: The case for sub-national finance
March 16, 2015 Editor 0
In many countries, central governments have devolved the responsibility of infrastructure service provision to the sub-national level, which is essential for economic growth. Along with this devolution of provision responsibility comes the requirement to raise revenues, enhance
efficiencies, improve commercial viability, and reduce a dependence on external financial support — including central government guarantees.
However, central governments are increasingly unwilling or unable (due to limitations of fiscal space) to guarantee sub-national borrowings. This new paradigm is testing the sub-nationals’ ability to raise financing to fulfill newfound responsibilities in infrastructure service provision.
Perhaps this is a blessing in disguise. Historically, easy access to sovereign guarantees has created perverse incentives for not pursuing more sustainable financing solutions. This dependence has also tainted the way that sub-nationals are perceived by the markets, by making them seem like reactive agents of development. This in turn has limited their access to finance and therefore their ability to develop. This approach must evolve, because whether the focus is climate change, massive migratory movements, or basic infrastructure needs, the struggle to advance the global fight against poverty and unsustainable development may be won or lost primarily at the local level in developing countries.
- Hidden Roadblocks: Structural Barriers that Limit Women’s Financial Inclusion
- Six Financial Sector Challenges for Emerging and Developing Economies
- Partnering to Make Investment Climate Reforms Happen for Development
- The Gender Gap in Access to Finance
- Credit for All: Increasing Women’s Access to Finance
- Rethinking saving practices in the digital era
Categories: World Bank PSD
Subscribe to our stories
- Prize-winning projects promote healthier eating, smarter crop investments June 28, 2018
- Reliable energy for all June 28, 2018
- Making marble from bottles: plastic waste’s second life in Kenya June 28, 2018
- A regional enterprise to commercialize an integrated technology for waste water treatment and biowaste conversion in eastern Africa May 27, 2018
- Dr Peggy Oti-Boateng May 27, 2018