Assessment of Municipal Borrowing Policy Framework for Improved Infrastructure Financing

Abstract

Since the advent of democracy, there has been pressure to increase investments in public infrastructure. Municipalities are at the centre of socio-economic development and are best placed to redress historical infrastructure inequalities. This requires adequate budgets; however, the fiscal landscape has deteriorated significantly since the 2008 financial crisis. As a result, municipal budget allocations have been reduced. This has triggered a discourse on alternative municipal financing mechanisms. The purpose of this study was to determine the determinants of municipal borrowing and if the Municipal Borrowing Policy Framework has improved borrowing for infrastructure investment. The study elevates 15 determinants of municipal borrowing in the financial, socio-economic, political and governance, and institutional categories. The financial variables dominate the findings with a 60 percent prevalence rate. The top four determinants are poor municipal credit worthiness, poor municipal fiscal capacity and effort, overreliance on developmental funding and failure to crowd-in international funding, and non-payment of services