Improving local infrastructure finance in developing countries through grant-loan linkages : ideas from Indonesia's water sector
By: SMOKE, Paul
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ArticlePublisher: New York : Marcel Dekker, 1999International Journal of Public Administration - IJPA 22, 11-12, p. 1561-1585Abstract: In recent years, developing countries under fiscal pressure have increasing recongnized significant weakness in their intergovernmental mechanisms for financing local infrastructure. Many countries are in the process of rationalizing poorly coordinated and subjectively allocated grant systems as well as loans. Such efforts, however, are typically undertaken independently of each other, often providing conflicting incentives for local fiscal behavior. I argue that the reform of grant and loan mechanisms should be explicity linked to improve the overall effectiveness of the infraestructure finance system. The potential complications involved in designing grant-loan likages, however, are considerable. I illustrate some key issues by examining the water sector in Indonesia, concluding with suggestions for how to think about creating such linkages in other sectors nad countries.
In recent years, developing countries under fiscal pressure have increasing recongnized significant weakness in their intergovernmental mechanisms for financing local infrastructure. Many countries are in the process of rationalizing poorly coordinated and subjectively allocated grant systems as well as loans. Such efforts, however, are typically undertaken independently of each other, often providing conflicting incentives for local fiscal behavior. I argue that the reform of grant and loan mechanisms should be explicity linked to improve the overall effectiveness of the infraestructure finance system. The potential complications involved in designing grant-loan likages, however, are considerable. I illustrate some key issues by examining the water sector in Indonesia, concluding with suggestions for how to think about creating such linkages in other sectors nad countries.
Volume 22
Numbers 11-12
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