How Government Officials Decide What Projects to Finance?

Governments invest in infrastructure projects to create long-lasting benefits for citizens and for small communities. This is why if ever https://tarpera.lt/mb-steigimas/ is to request for funding, their chances of getting an approval is high.

This is done by financing the construction of new roads, bridges, airports and other facilities. Governments assess whether a project is a good investment based on three principles:

  • Financially sound
  • Positive impact on society
  • Meet its medium-term objectives

Be Financially Sound

The first principle that governs politicians’ decisions on what infrastructure projects to finance is that the project should be financially sound.

This means that the project should generate enough revenue to cover the costs of building and operating it. Governments typically finance infrastructure projects by issuing long-term bonds. Investors are interested in buying government bonds because the interest rates exceed what they would earn if they invested in other assets.

Governments use the revenues from infrastructure projects to service the debt they issue to finance construction.

Have a Positive Societal Impact

This is measured based on the number of people who stand to benefit from the project. The larger the number of people who benefit from a project, the better the project score.

A positive societal impact can be achieved by improving people’s quality of life, protecting the environment, and strengthening the economy.

For example, building a new bridge over a river is likely to improve the quality of life for people who live nearby by shortening their drive to work and school. Building a new airport is likely to protect the environment by reducing the number of airplanes that fly over heavily populated areas. Building a new power plant is likely to strengthen the economy by providing an additional source of energy.

Meeting Medium-Term Objectives

These objectives include strengthening the economy, improving people’s quality of life, protecting the environment, and meeting government priorities. For example, building a new highway connecting two major cities helps strengthen the economy by reducing the cost of transporting goods between those cities.

Building a new sewage treatment facility helps improve people’s quality of life by reducing the risk of water contamination.

Building a new airport runway helps protect the environment by reducing the number of airplanes that fly over heavily populated areas.

So long as these principles are met when requesting government funding, there is a high chance to get approval for your desired project. The process may take a little while but once approved, it’ll all be worth it.

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