Home News emerging markets: Global experts call on EMs to rethink long-term financing

emerging markets: Global experts call on EMs to rethink long-term financing

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emerging markets: Global experts call on EMs to rethink long-term financing

Emerging markets would require over $53 trillion for infrastructure financing, but countries need to develop a new long-term financing model, said Auguste Tano Kouame, country director, World Bank.

Kouame said that the Indian government had done well, and reforms such as the National Infrastructure Pipeline and Production-Linked Incentive schemes are steps in the right direction. However, he said, more can be done to fund long-term infrastructure projects, and not just the Indian government but all emerging markets need to be innovative.

“Long-term, green investments and investments in public goods are risky,” Kouame said, suggesting that countries need to follow a blended public-private partnership model for long-term financing options. “Countries need to use global financial institutions differently and bring them in for these blended partnerships,” Kuoame pointed out during a session at the Confederation of Indian Industry’s (CII’s) Partnership Summit in Delhi.

Commenting on the crisis emanating from the US after the Silicon Valley Bank episode, Sopnendu Mohanty, chief financial officer of the Monetary Authority of Singapore, said that there is going to be a capital crunch in the markets, which would end up impacting sentiments, but countries need to stay the long course.

“We got to stay on this journey to build capacity for emerging markets. Path to profitability is long,” Mohanty added.

The participants highlighted that the traditional structures were not equipped to handle such requirements, given the risky nature of these investments.

The green lens also needs to be kept in mind, especially as a lot many countries are nowhere close to their net zero targets, said Neil Parekh, partner and head of Asia, Australia and New Zealand, Tikehau Capital. The investment gap in infrastructure financing for emerging markets is $10 billion. Parekh emphasized the need to have local bond markets. He pointed out that China has achieved this to some extent, but India still has a long way to go. “In India, we have struggled for two decades on deepening bond markets,” said Leo Puri, chairman, South and South-East Asia for JP Morgan Chase Bank, who was also moderating the panel.

India’s private domestic credit market, at 55% of the GDP in 2020, was the lowest compared to 182% for China and 154% for Vietnam.

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