EMERGING and developing countries like Zambia are struggling to mobilise billions of dollars required to build the urgently needed infrastructure to stimulate economic growth, says the World Bank group president Jim Yong Kim.
Mr Kim said as advanced economies continued to dominate the use of scarce long-term funding, emerging and developing countries were struggling to mobilise funds required to build infrastructure to kindle economic growth.
In a press statement, Mr Kim said it would be a challenge to achieve high and sustainable rates of economic growth if countries failed to invest in infrastructure.
“Private sector construction of plants and investment in machinery and equipment are also important. There is need to invest in schools, roads, power generation, electricity distribution, railways and other modes of transport and communication,” he said.
He however said there was no “magic bullet” that would promote long-term finance pointing to the need for fundamental institutional reforms.
Mr Kim explained that reforms incorporating the promotion of macroeconomic stability, low inflation and viable investment opportunities would help grow economies.
“Also needed is the establishment of a regulated and legally enforceable banking and investment system that protected creditors and borrowers; and formulating a framework for capital markets and institutional investors,” he said.
Meanwhile, the banks latest ‘Global Financial Development Report 2015/2016: Long-Term Finance’ report showed that, since 2008, a persistent shortage of long-term finance had hampered the growth of companies.
It also showed that companies were stunted, the ability of credit-worthy families to borrow for education and housing and left underdeveloped countries struggling to grow their national and regional economies.
However, while emerging markets’ shared of the global economy increased over the past decade, advanced economies continued to dominate the use of long-term financing.
The report also showed that in developing countries, 66 percent of small firms and 78 percent of medium-sized firms reported long-term liabilities, compared with 80 percent and 92 percent respectively in high-income countries.
In the report, firms in high-income countries financed about 40 percent of their fixed assets externally, compared with less than 20 percent in low-income countries.
The report stated that long-term financing could contribute to “faster growth, greater welfare, shared prosperity and enduring stability” and the extension of the maturity structure of finance was considered to be at the core of sustainable financial development.