Road Finance

The basic challenge in road financing, as in financing any transportation mode, is to have funding at a sufficient level to keep road assets in a stable condition and to find ways to finance necessary extensions of the road network..

Some recent trends and developments with impacts on road finance can be summarised as follows:

  • Over the past two decades the view about the economic nature of roads has evolved. In the past roads have generally been considered as public goods, financed through public budget like any other social service. This view has changed, leading to a more commercial approach to roads and to the idea that recovering the costs of road development and maintenance should be based more on the user pay principle.
  • Linked to this, reforms of public services in the 1990s and 2000s have led to a restructuring of the road sector in many countries.
  • Furthermore, growing concerns about climate change and negative environmental impacts of roads have stimulated the debate about recovering the costs of externalities of road transport, like congestion, pollution, noise and accidents.

Read more in the gTKP Finance & Economics Topic Information Sheet on Road Finance.

Key Documents

  • (Book:) Robinson, R., Restructuring Road Institutions, Finance and Management, Volume 1: Concepts and Principles, University of Birmingham & gTKP, United Kingdom, 2008.
    This book provides useful basic principles, concepts and mechanisms on a wide variety of topics related to the management of road networks. Chapters 3 and 4 are dedicated to Road Finance and give an overview of the transition from traditional public financing of roads to more innovative approaches, including the accompanying transitions for government institutions.
  • Abelson, P., Financing transport infrastructure: Public Finance issues, Macquarie University, Sydney, Australia.
    This paper addresses the topic of financing infrastructure from the public finance point of view and distinguishes between the raising of finance for infrastructure investment and the servicing/repayment of the capital invested. It also elaborates on the implications of different financing arrangements for the ownership, organisation and management of infrastructure.
  • Amonya, F., Financing the Road Network in Sub-Saharan Africa: Deconstructing History and Exploring the Future, Transportation Research Board Annual Meeting 2009 Paper #09-0715, 2009.
    This paper explores the institutional challenges Sub-Saharan African countries face to attract private finance for the management of transport infrastructure assets and provides a model for the requisite institutional changes.
  • Foster, V., Butterfield, W. and Chen, C., Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa, Trends and Policy Options Paper Series No. 5, World Bank/PPIAF, 2009. (version Francais)
    China is by far the largest player when it comes to emerging economies that play a role in financing infrastructure in Sub-Saharan Africa. Both bilateral trade and Chinese FDI in Africa grew about fourfold between 2001 and 2005, as well as official economic assistance. The sectors benefiting most are power and transport. The report provides an overview of these activities, in terms of number and analysis.