LOCAL GOVERNMENT BORROWING - ppiaf

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Types of Borrowing • Project Finance • Similar to PPP structure. Debt is secured by project income/revenue enue only, but there is public ownership. Private lenders should have lower hurdle rates of return than private equity investors, as less exposed to risk • Revenue Finance • Debt is secured by designated revenue sources, or by all revenues es of a ring-fenced entity (e.g.water( company) • General Obligation/Balance Sheet Finance • Debt secured by all taxing powers and alienable assets of local government • Trend in developing countries: • Specific revenues that can be legally pledged to debt service • Stable, predictable and growing revenue source is preferred • Contrast to developed countries, where general obligation debt traditionally t has been least risky
Market Credit: Successes But Not on Scale Predicted • India: More than a decade of intensive investment in market development by government and donors. Result: • US$200 million in total municipal bonds • Compares with US$500 million in land sales by Mumbai Metropolitan Regional Development Authority from single site in 2006-07 07 • Philippines: More than a decade of intensive market support • Roughly US$60 million of combined municipal bonds and commercial bank lending to local governments • Brazil: Decades of preparation for local borrowing • Fiscal Responsibility Act now prohibits local bond issuance, severely erely restricts other kinds of local debt • South Africa: Critical role at critical juncture by INCA • But today Development Bank of Southern Africa expanding at expense of private sector
Page 1 and 2: LOCAL GOVERNMENT BORROWING George E
Page 3 and 4: Local Capital Budget • Sources of
Page 5: Why Establish Private Credit Market
Page 9 and 10: • Mexico’s System Reform: Mexic
Page 11 and 12: US Financial Crisis • Mexico in R
Page 13 and 14: Specialized Finance Institutions
Page 15: Final Messages • Private sector p

LOCAL GOVERNMENT BORROWING - ppiaf

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