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Private and Public Finance for Infrastructure Investments

Public and private sources of finance for infrastructure investment are not necessarily substitutable; each has its own incentive structures, goals and mandates. This is reflected in the breakdown of public and private finance across sectors. The table above shows that public investment typically accounts for more than half of all infrastructure investment globally. In developing economies, three quarters of infrastructure is financed by the public sector (government, official development assistance, and development banks), while in developed countries this pattern is reversed, with around two thirds of investment by the private sector.

Source  Per cent 
Domestic government budgets 67 - 72 
Private sector 20 - 30 
Aid and multilateral development bank financing 5 – 8 
Other developing country governments 
The proportions of public and private investments across countries reflect different institutional frameworks, policies and levels of development, as well as varying investment needs. In developed countries, for example, much infrastructure investment is in maintenance rather than new greenfield investment.  Different sectors also have different capital structures. While ratios vary by country, private investment generally represents the majority of new investment in telecommunications, while public investment is generally greater in social infrastructure and/or when there are low financial returns. In the United States of America, for example, public investment represents around 90 per cent of the investment in transportation and water and sewage, while private investment represents 100 per cent of investment in telecommunications, and around 90 per cent in the power sector. In Africa, transport and water have also been financed almost exclusively with public funds, but in contrast to developed countries, energy and communications are also largely publically funded (at 89 and 87 per cent respectively). Areas traditionally financed by public spending, i.e. transportation (primarily roads) and sewage and water, make up more than half of total investment needs, though power and communication, which tend to have a greater private component, are also significant.