Author

El Daher, Samir

1998

Number of Pages:

4

Full Text

Municipal Bond Markets--Prospects for Developing Countries

Abstract

Against a background of fiscal restraint, governments in developing countries have come to realize that

private resources must be mobilized to support the growing demand for infrastructure services. One way is

through privatizations and concessions for private provision of infrastructure services which are taking place

at a growing pace.

Decisions for the provision of these services are also being increasingly decentralized with municipalities

playing a growing role in forging partnerships with financiers, operators and constituents. Municipal

governments seek to fund capital investments and cover operating costs through local taxes and user charges

and, as available, central government transfers. Where essential services - that are not provided through

private operations – cannot be funded by current revenues, the financing gap that emerges would have to be

filled through borrowings. In many developing countries, local government borrowings have largely been

confined to loans from commercial banks or specialized financial institutions, often with central government

guarantees.

This note discusses the conditions underlying the development of municipal credit markets which can provide

a vehicle to narrow local government resources gap through debt funding supported by the taxing power of

local governments and revenue bonds secured by the earnings of such projects as water facilities and toll

roads.