Municipalities in low- and middle-income countries face challenges in securing adequate funding for necessary urban infrastructure projects. Investment requirements in these regions are estimated at 2 to 4 percent of their combined GDP annually. However, current investment levels fall short, leaving a financing gap of about 1 to 3 percent of GDP.
Relying solely on public and international development funding is insufficient to bridge this gap. Presently, most funding for municipal infrastructure projects is sourced from public finances. Therefore, utilizing private and commercial finance is imperative to augment investment flows to meet these needs.
A recent report by the World Bank Group, titled "Unlocking Subnational Finance: Overcoming Barriers to Commercial Finance for Municipalities in Low and Middle Income Countries," aims to tackle this developmental issue. The report provides an overview of the minimal financial flows available to municipalities in developing countries in recent years. It highlights the primary factors limiting these financial inflows and suggests strategies for national governments and development partners to overcome these challenges.