There are circumstances where both public and private finance will be needed

The following is a short summary of some of the areas where governments can support private finance in infrastructure in addition to any support available from MLIs. Issues related more to policy and approach are covered in Chapter 3.6. Instead, this section focuses on instances where states might be contributing directly to financing alongside private finance or where they can provide direct contractual provisions that facilitate private finance.

Table 1: Multilateral lending by country: Top 10 in 2009

Source: Taken from the PFI 2009 League Tables in PFI, 2010.
Note: This lending was dominated by an LNG project in Papua New Guinea.

As with the MLIs, the government's primary role concerns market capacity and affordability. The main routes for this support are:

•  co-lending or lending alongside commercial banks on the same terms as the commercial banks;

•  underpinning a proportion of the commercial debt by providing guarantees on the repayment of debt should the project or enterprise fail; and

•  contributing to the costs (typically these are capital costs of new assets) through indirect investment such as the provision of land or direct financial contributions such as grants.

During the current credit crisis there have been a number of examples where governments have stepped up their direct support. An example is the UK government's Treasury Infrastructure Finance Unit (see Case in Point 1).4 Although the UK government has made a number of direct loans since the establishment of this unit, there is anecdotal evidence that just the availability of this funding has given commercial lenders confidence in the government's support for private finance initiative (PFI) projects, and so they have been able to provide all of the financing needed.