Fiscal risks of infrastructure in the global south, developing EV charging P3s, and deploying drones in civil construction

A new book argues that low- and middle-income countries must "improve their understanding of the fiscal risks" of infrastructure if they are to achieve their sustainable development goals.

By 2050, the number of people living in cities will increase by 2.5 billion globally, but mostly across low- and middle-income countries in the global south. According to the World Bank, these countries will need to spend at least 3.5% of GDP in building out their electricity and transportation infrastructure sectors, not only to keep pace with the rich world but also to keep their carbon emissions in check.

The biggest financial risks for LMICs in developing new infrastructure projects are (perhaps unsurprisingly) cost overruns, revenue shortfalls, and contingent liabilities. While these are risks in any geography, they are particularly acute in LMICs which have little buffer space in their budgets if problem projects crowd out their ability to implement other essential spending. Contingent liabilities in particular - government guarantees or explicit or implicit commitments to cover project-related risks - can ultimately increase levels of public debt and have negative domino effects that are amplified by the challenges inherent in growing a developing economy.