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Having your cake

February 22, 2015

 Abstract: A national infrastructure fund that functions like a venture capital fund, but with funds mobilised by the government, is essential to kick-start infrastructure development in the country. Current budgetary commitments to investment in infrastructure could be channelised into the fund as equity. It offers an elegant way to use the government balance sheet to leverage funding of infrastructure projects without raising the deficit. Capital can be raised by the new entity in three tiers, namely:

  • Sovereign debt (which will increase the debt to GDP ratio in the short term; but the adverse consequences can be contained);
  • Credit enhancement to bonds issued by the NIF with budgetary support by the government; and
  • Direct bond issuance by NIF without any fiscal support or guarantee from the government.

Keywords: infrastructure; financing policy; financial risk and risk management; public policy

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