This chapter discusses method of financing transport infrastructure and the implication for public finance. In this chapter, "financing" refers to the raising of financial capital to fund infrastructure. However, financing infrastructure is not a self contained issue. As the chapter shows, the optimal way to raise capital cannot be separated from the question of how capital is serviced and repaid. Also, financing has implications of the ownership, organization, and management of infrastructure. This chapter takes as its starting point that the proposed transport infrastructure represents an efficient use of resources, generally as determined by cost-benefit analysis. It assumes that the expected social rate of return generated by the proposed capital formation exceeds the rate of return available from other uses of scarce capital. This is a necessary condition for the efficient allocation of publicly or privately financed resources. It is of course possible that the social viability of a project depends on how the project is delivered. However, discussion of cost-benefit analysis and related issues of resource allocation are outside the scope of this chapter.
Abstract