Do countries ever raise sovereign debt for a specific infrastructure project?

[Dots1982]

So I think I’ll need to explain a little more…if a country wishes to build a huge under sea tunnel or any such large scale infrastructure do they issue sovereign debt bonds while identifying the purpose.

Is it something done in developing countries or not? Or is it in fact done in developed countries?

Do countries try to raise it from their own people when it’s something seen as needed by the entirety of a country’s population?

 

[Protocol]

Maybe, I'm not sure.

What might happen is the State creates a company in charge of the large project, and then that company issues debt for a specific project.

The bonds might be guaranteed by the State.

 

[Protocol]

The Irish State issue "green" bonds:

https://www.ntma.ie/uploads/general/Green-Bonds-IP-Sept-2018.pdf

But they are not tied to a specific project.

 

[jpd]

The Eurotunnel fiasco comes to mind

 

[Dr Strangelove]

It doesn't make much sense for Ireland to borrow specifically on the debt markets for a capital project like Metrolink. Lenders would insist on a state guarantee which when you think about it just makes it like any other kind of sovereign debt. Timing also might be difficult. Suppose Metrolink issues a €1bn Metrolink bond on 1 January but encounters some kind of planning delay that means it can't be spent until 1 July. They are paying interest for six months on funds that can't be used. If it's normal government debt it just gets pooled and spent on other things with a delay to normal debt issuance schedule.

It's more common to receive funding for a specific project like this from a multilateral lender like the World Bank or European Investment Bank. The funding can be a bit cheaper and there is often technical assistance linked to it which can help. Also more opportunities for ribbon-cutting by politicians if I am to be quite honest.

 

[MrEarl]

Ireland should just borrow directly from the EIB, for infrastructure projects, such as Metrolink.

No need for any silly stuff, like we've done in the past signing up to badly written PPP deals, so someone can collect a brown envelope, or whatever...

Borrow the money, build the rail link, charge for its use, and use the revenue generated to repay the associated debt. Keep it ring fenced, be honest, and it's simple!

 

[Dr Strangelove]

Ireland should just borrow directly from the EIB, for infrastructure projects, such as Metrolink.

This will almost certainly happen, but no multilateral lender will fund anything except a minority of its cost.

Borrow the money, build the rail link, charge for its use, and use the revenue generated to repay the associated debt.

Metros do well to cover running costs alone, never mind capital costs. There will be no pot of revenue to ringfence!