NDB members share views on how to finance infrastructure
BRICS members at the 9th New Development Bank meeting discussed their challenges and experiences of financial funding of infrastructure projects.
The BRICS-led New Development Bank (NDB), formerly referred to as the BRICS Development Bank, is a multilateral development bank established by the BRICS states Brazil, Russia, India, China, and South Africa .
TD Sivakumar, the chief general manager, Export-Import Bank of India, said India had an infrastructure gap of 5% of gross domestic product, which required finance to realise India’s growth.
For example, India had created the National Infrastructure Pipeline for 2019 to 2024, an infrastructure projects database, with an initial sanctioned amount of $1.4 trillion (R25trl).
India had also created a the National Monetisation Plan for financing projects. Currently about 80% to 85% of the infrastructure projects were financed by public sources.
“But as more requirements come, we need private sector funding,” he said.
Sivakumar explained that infrastructure projects had very long gestation projects. If there was foreign currency financing, sometime it was phased for forex risk.
It was a better alternative to do local currency financing, he added.
A few years back, India had introduced rupee-denominated bonds, called masala bonds, wherein Indian companies could issue bonds outside India in rupee, and they could raise long loans and it can be repaid in rupee.
He said recently, India was trying to do Indian rupee settlements in terms of promoting Indian currencies and international currency, which was slowly picking up.
Meanwhile, Nelson Henrique Barbosa Filho, the director of Planning and Project Structuring, said the Brazilian Treasury was making progress with sustainable bonds. The bonds were issued by a special fund managed by the Brazilian National Development Bank.
“The Brazilian Treasury bears the exchange rate risk as the Treasury, together with the Brazilian Central Bank, has a large volume of exchange for foreign exchange reserves and can better manage the systemic risk. This has already increased the financing of infrastructure in Brazil. The total issue so far is $4 billion for this fund,” he explained.
Another $4bn pipeline for next year was focused mostly on environmental infrastructure, the recovery of degraded lands and water resources, as well as social infrastructure, urban development, public education, public health and public security, he said.
Filho said this was one way to share, or to properly allocate, the risks.
Talking about good projects, Filho said it was important to have a large team dedicated just for projects.
“At the moment, we are preparing 185 projects with a total investments of around $46bn and a very broad portfolio, from nuclear plants to public parks, from schools to railways.”
Ralph Gunn, the senior vice president Energy, Infrastructure and ECA Finance Standard Bank of South Africa, said there needed to be speed to market in the preparation phase of good, bankable projects.
Infrastructure projects required long-term funding.
“When we look at local currencies there are very few local currencies that can sustain long-dated loans. And so that is a key area that is needed to unlock the additional liquidity required on the long-term aspects,” he added.
Gunn said as regards regionalised infrastructure projects one needed to start looking at local currency initiatives across the regions, rather than looking at the forex risk that was associated to a hard currency loan versus local currency repayments or revenue lines of local currency.
BUSINESS REPORT