October 12, 2020

IMF Urges Countries To Invest In Infrastructure

As Connecting the Dots reported last week, the Canadian government plans to invest $10 billion in infrastructure as part of its efforts to help industry recover from the fallout of the coronavirus pandemic.

While the U.S. Congress and White House have been trying for years to reach agreement on an infrastructure package, Canada is not the only leader taking action to support new rounds of infrastructure spending.

In its latest Fiscal Monitor, released on October 5, the International Monetary Fund (IMF) argued that governments around the world should, as Reuters put it, “seize a low interest rate opportunity to invest in infrastructure to drive recovery from the coronavirus pandemic and a shift toward greener energy.”

The IMF noted that its research indicates public investment in infrastructure could “pay back more than two to one in economic growth within two years.” Specifically, the IMF said increasing public investment by one percent of gross domestic product in advanced and developing economies would grow those nations’ gross domestic product by 2.7 percent and create between 27 million and 40 million direct and indirect jobs.

The IMF called for investments in health care, schools, safe buildings, safe transportation, and digital infrastructure in particular. The IMF will present the research at its annual meeting, and the annual meeting of the World Bank, which get underway this week.

In a blog post, IMF Fiscal Affairs Director Vitor Gaspar 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.”

Gaspar concluded, “[P]ublic investment is a powerful element of the stimulus packages to limit the economic fallout from the pandemic. Even as countries continue to save lives and livelihoods, they can lay the foundation for a more resilient economy by investing in job-rich, highly productive, and greener activities.”

Click here to read Gaspar’s full blog post, here to read the IMF’s October Fiscal Monitor, and here to read a recent book published by the IMF called Well Spent: How Strong Infrastructure Governance Can End Waste in Public Investment.