Daily Management Review

World's Governments Urged By IMF To Boost Infra Investment For Fast Post-Pandemic Recovery


World's Governments Urged By IMF To Boost Infra Investment For Fast Post-Pandemic Recovery
Governments of member states of the International Monetary Fund (IMF) should note the low interest rate and take advantage of it to invest in infrastructure which will help in staging a recovery from the economic hit to the global economy by Covid-19 pandemic while also helping to move towards greener energy, said the international organization.
The payback can be more than two-to-one in economic growth within two years for al investments that are made by governments through public investment in infrastructure, including investments in healthcare systems, digital infrastructure and addressing climate change, said the IMF said in chapters from it fiscal monitor.
If governments of the advanced and developing economies make an increase of investment of just 1 per cent of their GDP, tat investment will grow the GDP of the countries by 2.7 per cent while generating 7 million direct jobs and between 20 million and 33 million jobs in the cascading effect of the investment through the indirect macroeconomic effects of the investments, the IMF said.
"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.
Even though the IMF has frequently warned about a massive buildup of debt in developing countries, "low interest rates globally also signal that the time is right to invest", he added.
A more gradual approach to scaling up infrastructure development will have to be taken up by countries that have tighter financing conditions. But if projects are well-managed, there can be a good pay off because of the improved growth prospects and that could set the stage for future growth.
"Investment is now urgently required in sectors critical to controlling the pandemic, such as healthcare, schools, safe buildings, safe transportation and digital infrastructure," the IMF said in its report.
The IMF suggested a number of measures for government to take to make it feasible for governments to make public investment in infrastructure which include making investments in maintenance of infrastructure, reviewing and restarting of projects that had been stopped or scrapped when the pandemic hit the world, speeding up the number of projects in the pipeline and make immediate plans of investment soon after the pandemic is over.
There would be a return in the form of more than 10 per cent in GDP growth form investments made in official aid for adaptation to climate change, the IMF said and added that governments need to increase the currently planned $10 billion to adapt countries to climate change by more than 100 per cent to about $25 billion.
In April, the IMF had predicted that the global GDP would shrink by 3 per cent for 2020 which was later increased in June by it to estimate a contraction of 4.9 per cent when the globally applicable lockdowns of business and economies by various governments were in full swing.