In the face of crumbling bridges and super-low interest rates, many countries are talking and planning to increase spending on infrastructure. And it’s not just about more spending; it’s about smart spending. This is something that the IMF has urged countries to consider for several years, starting with our Fall 2014 World Economic Outlook.
Bridges, roads, and highways, along with telecoms, ports and airports are all part of the backbone that supports a country’s growth and the global economy.
Investing in building schools, public housing and hospitals, known as social infrastructure, can provide a powerful impetus for economic activity and jobs in countries. Canada and the United Kingdom have announced and begun plans to invest billions in the coming years to fix and modernize their infrastructure, sorely in need of an upgrade. The incoming U.S. Administration has also indicated its intention to increase investment in infrastructure.
For the past several years, the IMF has analyzed the data and produced new research on the benefits and best way to spend taxpayer dollars on infrastructure. With interest rates still low, the IMF research suggests that debt-financed investment could virtually pay for itself by boosting demand in the short run and productivity in the long run. But that comes with a caveat: the quality of investment matters. So countries should invest well, where there is a clear need, and invest efficiently.
Two weeks ago, IMF Deputy Managing Director Tao Zhang gave a speech about how countries can meet the growing needs, and challenges, of investing in public infrastructure.
