Beyond the Hype-Where Private Finance Works for Cities-And Where It Doesnt

Despite growing recognition of subnational finance's critical role in sustainable development—including in the FFD4 outcome document—financing gaps for urban infrastructure continue to widen. Annual investment needs in low- and middle-income countries are estimated at 2-4% of GDP, far exceeding current flows. While private capital is positioned as essential to complement constrained public resources, its actual contribution remains marginal: only 9-13% of total infrastructure investment over the past decade. This raises fundamental questions: Why has the development community's substantial effort failed to attract more private investment into subnational public infrastructure? What does limited public investment reveal about prospects for mobilizing private finance? What can realistically accelerate public infrastructure investment? ADB together with BMZ, UN-Habitat and the World Bank are convening this side event to critically examine the actual performance, limitations, and appropriate role of private capital in urban infrastructure and service delivery. The discussion will explore why certain sectors are more attractive to private investment, while others continue to experience persistent financing failures. It will also examine the preconditions required for cities to successfully mobilize private finance, including the relevance of municipal credit ratings, needed public subsidy levels and user-uptake requirements across different sectors. The session aims to shift discourse from aspirational rhetoric about crowding-in private finance toward realistic assessment of what cities genuinely need, where private finance is viable, and where public resources are ultimately most effective for infrastructure provision. Expected Outcomes • Understand the role of private capital in urban infrastructure and service delivery, clarifying its potential and limitations. • Identify conditions for mobilising private capital across different sectors. • Inform realistic project and fiscal design at the city level. • Clarify the key prerequisites and capacities for attracting private finance. • Define the roles of national governments and development partners. Following an opening by UN-Habitat, two keynote speakers will present contrasting perspectives on private infrastructure financing, highlighting both opportunities and challenges. A panel discussion with representatives from municipal government, ministry of finance, and financial institutions will follow.