The global investment need for infrastructure is forecasted to amount to 94 trillion USD between 2017 and 2040. An additional 3.5 trillion USD would be needed to meet the sustainable development goals for water, sanitation, and electricity by 2030. If current infrastructure investment trends persist, the global infrastructure gap can amount to 18 trillion USD by 2040.
Literature commonly distinguishes between financing (how to pay upfront) and funding (how to pay back the initial financing structure) of infrastructure. In general, there are three main ways of financing infrastructure development: Public Balance Sheets (via tax income or public debt), Private Participation in Public Infrastructure (e.g. through debt or equity investment) and Privately-owned infrastructure (fully financed, operated, and constructed by private firms; the government may still play a role through e.g. granting concessions). Later on, infrastructure can be funded through e.g. user fees or tax funding.
In practice, it is the public sector that dominates infrastructure spending with about 90% of investment in low- and middle-income countries coming from public balance sheets, while private sector investment in infrastructure through the primary market has been declining over the last decade. To close their national infrastructure investment gaps, governments need long-term financing plans, raise public revenues, and prioritize spending on socially and environmentally sustainable infrastructure. At the same time, countries cannot continue to rely on public investment alone, particularly as public budgets are increasingly strained due to the COVID-19 pandemic.