The International Monetary Fund (IMF) recently urged member governments to seize a low interest rate opportunity to invest in infrastructure to drive recovery from the COVID-19 pandemic and a shift toward greener energy. Its research shows public investment in infrastructure, including health care systems, digital infrastructure, and addressing climate change can pay back more than two to one in economic growth within two years.
IMF said in its fiscal monitor that increasing public investment by 1 per cent of gross domestic product (GDP) in advanced and developing economies would grow their GDP by 2.7 per cent, creating 7 million jobs directly, and between 20 million and 33 million jobs overall when considering the indirect macroeconomic effects.
“Even before the pandemic, global investment had been weak for over a decade, despite crumbling roads and bridges in some advanced economies and massive infrastructure needs for transportation, clean water, sanitation, and more in most emerging and developing economies,” IMF fiscal affairs director Vitor Gaspar said in a blog post.
He added that ‘low interest rates globally also signal that the time is right to invest’ despite the IMF’s frequent warnings about a massive buildup of debt in developing countries.
Some countries with tighter financing conditions will have to take a more gradual approach to scaling up infrastructure development, but the improved growth prospects could pay off if projects are well-managed and set the stage for future growth, the report said.
“Investment is now urgently required in sectors critical to controlling the pandemic, such as health care, schools, safe buildings, safe transportation, and digital infrastructure,” a global newswire quoted IMF as saying in its report.
The fund said public investment in infrastructure is feasible and can be delivered quickly if governments invest in maintenance of infrastructure, review and restart projects that were shelved at the start of the pandemic, speed up projects in the pipeline and plan immediately for a post-pandemic investments.
It added that official aid for adaptation to climate change would pay back more than 100 per cent in growth, and there is a need to double a currently planned $10 billion to adapt countries to climate change to around $25 billion.
