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While debt-financed productive public investment raises a country's debt ratios in the short run, it can also generate higher growth, revenues, and exports, leading over time to lower debt ratios. This paper develops a framework to assess whether countries meet the conditions for realizing the net benefits over the costs of public investment debt financing. While it is possible to achieve debt sustainability with an appropriate mix of concessional and non-concessional financing, this is a necessary but not sufficient condition. It is also important to ensure the operational viability of public investment projects by having in place adequate project management: (i) project screening and appraisal, (ii) a clear connection between capital and recurrent expenditures once the projects are launched, and (iii) safeguards for appropriate project implementation and facilities operations. To illustrate the strength of these results, the paper carries out three measurement exercises: (a) a simulation of the degree to which the ratio of optimal public investment responds to changes in key parameters related to project management in a general equilibrium model; (b) application of the public investment management (PIMa) index to benchmark a country's public investment management capacity; and (c) presentation of the results of the Investment, Savings, and Macroeconomic Vulnerabilities tool aimed at tracking country choices in public finance and the impact of public projects on private investments.

Access to Finance --- Debt Markets --- Debt Sustainability --- Economic Theory & Research --- Finance and Financial Sector Development --- Investment & Investment Climate --- Macroeconomics and Economic Growth --- Public Investment Management --- Public Sector Development

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This paper uses a unique survey data set of 105 central banks to investigate whether investment policies for central bank foreign reserve portfolios are linked to the governance arrangements for reserve management. The paper evaluates whether a central bank's investment decision-making structure impacts how much risk institutions take in their reserve management operations and the level of diversity in their reserve portfolios. Additionally, it explores the implications of the broader governance environment on reserve management. The analysis yields four key findings. First, internal governance arrangements matter for foreign reserve portfolio investment policy; the empirical results indicate that reserve portfolios are more diversified in central banks in which the middle office directly reports to the board. Second, controlling for the level of reserves, the macroenvironment, and the broader governance environment, reserve portfolios are more diversified in central banks where the back, middle, and front offices are separated. Third, the regression analysis also reveals that central banks in countries where the Ministry of Finance has an obligation to cover negative equity have fewer eligible currencies and are therefore less diversified. Fourth, central banks where boards actively exercise portfolio oversight usually have portfolios with more risk and diversification. Portfolios with longer investment horizons, more currencies, and a broader set of asset classes have performed better historically while limiting downside risk. Given that the analysis controls the broader governance environment, the data indicate that any central bank can improve its internal governance regardless of the external governance environment. This paper contributes to the literature on central bank foreign reserves management and on understanding the importance of governance arrangements in investment policy.

Central Bank --- Central Bank Governance --- Finance and Financial Sector Development --- Financial Crisis Management and Restructuring --- Financial Structures --- Macroeconomic Management --- Macroeconomics and Economic Growth --- Public Investment Management --- Public Sector Development --- Reserve Management Policy --- Risk Tolerance

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There is significant room to improve public investment efficiency in sub-Saharan Africa. Investment in sub-Saharan African countries is lagging vis-à-vis peers such as emerging and developing Asia as well as Latin America and the Caribbean, and the region’s infrastructure is perceived as being of relatively low quality. Improving the efficiency of sizable investment programs in the region could contribute to more solid economic growth and help achieve desired social priorities and development goals. Results point to some variability in public investment efficiency within the region. Comparing efficiency scores across country groups suggests that investment efficiency in sub-Saharan African oil exporters tends to be lower than in sub-Saharan African non-resource-intensive countries. Additionally, countries in East African Community (EAC) perform better than those in Central African Economic and Monetary Community (CEMAC) and West African Economic and Monetary Union (WAEMU). Stronger institutions could foster more efficient public investment. The regression results in this paper show a positive correlation between public investment efficiency and the quality of institutions, suggesting that devel-oping stronger institutions in sub-Saharan Africa could lead to a significant improvement in investment efficiency. This is particularly relevant for coun-tries with weak institutional quality, where governments may use capital spending as a vehicle for rent-seeking, leading to inefficient spending. Given the current drive for scaling up investment in sub-Saharan Africa, the task of improving institutions quickly should become a priority.

Loans --- Economic Development --- Africa, Sub-Saharan --- Business & Economics --- Infrastructure --- Public Finance --- National Government Expenditures and Related Policies: Infrastructures --- Other Public Investment and Capital Stock --- Investment --- Capital --- Intangible Capital --- Capacity --- Public Administration --- Public Sector Accounting and Audits --- Public finance & taxation --- Macroeconomics --- Public investment and public-private partnerships (PPP) --- Public investment spending --- Public Investment Management Assessment (PIMA) --- Capital spending --- Expenditure --- National accounts --- Public financial management (PFM) --- Public-private sector cooperation --- Public investments --- Saving and investment --- Capital investments --- São Tomé and Príncipe, Democratic Republic of

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Public investment is likely to be an important component of any postcrisis recovery program. As countries work to ensure a smart, green, fair recovery, investing in modern, resilient, and efficient infrastructure assets will be key. This How to Note discusses how countries should manage public investments to recover from the COVID-19 pandemic and similar crises. It provides countries with guidance on making efficient use of public investment to support economic recovery on three different capacity levels: basic, medium, and advanced.

Nepal --- Economics: General --- Macroeconomics --- Public Finance --- Infrastructure --- Environmental Economics --- Informal Economy --- Underground Econom --- Foreign Exchange --- National Government Expenditures and Related Policies: Infrastructures --- Other Public Investment and Capital Stock --- Investment --- Capital --- Intangible Capital --- Capacity --- Environmental Economics: General --- Public Administration --- Public Sector Accounting and Audits --- Economics of specific sectors --- Economic & financial crises & disasters --- Public finance & taxation --- Environmental economics --- Economic sectors --- Financial crises --- Public investment spending --- Expenditure --- National accounts --- Public Investment Management Assessment (PIMA) --- Public financial management (PFM) --- Informal sector --- Economics --- Currency crises --- Public investments --- Saving and investment --- Environmental sciences