Member-only story
International financial institutions are key to meeting the infrastructure financing gap
At the June 2022 G7 summit, leaders from the world’s richest countries announced the launch of the Partnership for Global Infrastructure and Investment (PGII) to mobilize up $600 billion in public and private investments by 2027. The goal was to meet the infrastructure needs of low- and middle-income countries, and the Biden administration declared it would offer one-third of the mobilized amount through grants, federal financing, and private sector investments.
The White House memorandum set forth the administration’s approach to executing PGII, highlighting infrastructure-related priorities that “will be especially critical for robust development in the coming decades: climate and energy security, digital connectivity, health and health security, and gender equality and equity.”
In their joint communiqué, G7 leaders recognized the role multilateral development banks (MDBs) play in leveraging private capital in particular. The new G7 resource mobilization effort envisions joint action with the MDBs and other financing institutions to consolidate a pipeline of bankable projects, improve project preparation capabilities, and align support for policy and regulatory frameworks for sustainable infrastructure investments.
As international financial institutions, the MDBs provide loans and grants as well as technical assistance and policy advice- to low-income and middle-income countries to promote economic and social development. These institutions allow donor nations including G7 countries to share the cost of development interventions. MDBs are able to provide aid on a larger scale than many development cooperation agencies operated by individual countries such as USAID and Germany’s GIZ.
The MDBs also set high standards for projects when it comes to environmental, social, and governance issues. They can also act as a force multiplier by crowding in financing from other public and private finance institutions when preparing loans for major infrastructure projects. MDBs also take into account a country’s debt burden before approving loans (something not done by China in its overseas lending). In short, the MDBs promote high quality and sustainable infrastructure development in ways that complement and…
