The four financing options, as previously outlined, should be able to adequately finance the required infrastructure investment for the first five years of the NIIMP. In total, potentially up to USD 145 billion is available to finance the USD 86billion needed, in addition to already committed private sector investments. Nonetheless, assuming a base amount of financing from public current accounts, the government will have to make a strategic choice as to how much to leverage from debt, the Sovereign Wealth Fund, public pension funds, and PPPs. It is recommended that priority should be given to non-debt options, and debt to be used, if required, to finance asset classes where funds can be generated through asset use to repay the debt.
These financing decisions will need to be made on a project-by-project basis to ensure optimal risk allocation. The government should follow a carefully structured process when considering whether to finance through current accounts, debts, other sources or PPPs.
Four important questions can help to determine which financing option is best for a given project:
- What are the main goals to be achieved by the asset? (What is the public service mission of the asset? What are the non-financial goals?)
- Who needs to maintain ownership over the asset or its revenues? (Public developer, private developer or a mixture of both)
- Which option will minimise financing costs? (How important is minimising the cost of financing to the project? What overall project budget can be supported by each financing option? What degree of flexibility is required for repayment of debt? What level of risk is inherent in the project?)
- What are the capabilities required for the project, and who is in the best place to ensure these capabilities? (How importantare specialised skills? Where do these skills exist today? Where should they exist?)