Banks or Bonds? Building a Municipal Credit Market

Authors: George E. Peterson, Senior Fellow, The Urban Institute, Washington, DC

Abstract: Asian cities cannot finance the infrastructure investments they need without accessing private domestic savings. Urban growth has multiplied demand for investment in water systems, wastewater collection and treatment, roads, and other facilities. At the same time, decentralization strategies have shifted much of the responsibility for this investment to local governments. Private financing can be attracted to urban infrastructure in different ways—including direct private investment in income-earning facilities—but perhaps the most critical avenue will be the local credit market. In a world of decentralized governance, domestic credit markets must be capable of generating long-term financing for cities and their infrastructure agencies.

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