UNU-WIDER WP/2012/56 Aid and Infrastructure Financing: Emerging challenges with a focus on Africa

The central argument of this study is that given the magnitude of the investment in infrastructure that is required, especially in Africa, the role of foreign aid in the future should be distinctly different. While aid will be required to continue to fill the ‘savings gap’ in some small countries and land-locked countries, in most other countries aid can play a very different role in facilitating the creation of institutional mechanisms that help mobilize more funding from other sources. These include domestic revenues (which already fund a large proportion of infrastructure), investments by China and the other ‘BRICs’, sovereign wealth funds and infrastructure funds. There are already examples of aid playing such a leveraging role. What is needed is to take this to a new and higher level. The study provides an overview of evidence on infrastructure needs and also possible magnitudes of flows from different sources for investment in infrastructure.