Understanding Public Spending Trends for Infrastructure in Developing Countries

Evidence of public expenditure on infrastructure is extremely sparse. Little is known aboutthe trends and patterns of infrastructure expenditure, and there is no real basis for assessing the adequacy andefficiency of infrastructure spending. Drawing on the World Bank’s novel BOOST database, this paper provides a firstrelatively disaggregated picture of infrastructure spending trends and patterns for a large sample of more than 70developing countries covering 2010–18, drilling down into expenditure by sector for roads as well as electricity, anddistinguishing operating from capital expenditure. Complementary sources of data are tapped to allow comparisonbetween expenditure patterns on and off budget. The study finds that on-budget expenditure on infrastructure has beenlow both in absolute terms (1 percent of gross domestic product) and relative terms (5 percent of total publicspending), as well as declining over time. Overall, infrastructure spending declined by about one-third over2010–18 (with the road sector bearing the brunt of the decrease), and now lies well below estimates of the requiredlevels, except in a handful of cases. There is evidence that low-income countries, despite lower spending envelopes,attach greater priority to public investment and infrastructure spending than their middle-incomecounterparts. Econometric analysis suggests that infrastructure spending in low- and middle-income countrieshas been historically procyclical, although to a lesser degree than total expenditure. In the transport sector, roadfunds are shown to play a substantial role in funding road maintenance, appearing to improve the adequacy of funding,while attenuating pronounced capital biases in road sector spending, but there is little evidence of efficiencyimprovements over time.