The Investment-Financing-Growth Nexus: The Case of Liberia

By John W Clark JR, Manuel Rosales Torres

November 22, 2013

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John W Clark JR, and Manuel Rosales Torres. The Investment-Financing-Growth Nexus: The Case of Liberia, (USA: International Monetary Fund, 2013) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Liberia is facing large infrastructure gaps and developmental needs that constrain the country’s growth potential. The government has set an ambitious agenda to transform the economy and to reach middle-income country status by 2030 by scaling up investment in infrastructure and human capital. Fiscal space remains constrained by rigidities in current spending and the government will need to resort to borrowing to close some of the gaps. This paper presents an estimate of the nexus between public investment, financing, and growth in Liberia using an inter-temporal macroeconomic model. The model has been calibrated as much as possible to Liberian economic data and assumes that public investment has a high economic and social rate of return and is highly complementary toward private sector investment. The objective of the paper is to contribute to the debate on how fast public investment should be scaled up to address the country’s developmental needs. The paper also highlights the trade-offs and potential risks associated with different financing options and the required changes in fiscal policy to ensure macroeconomic stability.

Subject: Exchange rates, Expenditure, Foreign exchange, Infrastructure, National accounts, Public debt, Public investment and public-private partnerships (PPP), Public investment spending

Keywords: A. baseline investment scenario, Aid, Debt Sustainability, Exchange rate, Exchange rates, Fiscal Policy, Growth, Infrastructure, Infrastructure investment, Investment adjustment, Investment efficiency, Investment program, Investment surge, Project investment cycle, Public Investment, Public investment and public-private partnerships (PPP), Public investment spending, Southeast Asia, Sub-Saharan Africa, WP

Publication Details

Pages:

23
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/237
Stock No:

WPIEA2013237
ISBN:

9781475534931
ISSN:

1018-5941

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