Canada plans to have its infrastructure bank, a key initiative set up to facilitate private financing for infrastructure projects, open for business by the end of the year, Finance Minister Bill Morneau said in his federal budget on Wednesday.
However, Morneau’s budget contained few other new details on the new agency, which the Liberal government committed to set up last year to provide access to $35 billion (US$26.25 billion) to help fund major projects that might not otherwise get built. It plans to supplement public investment with funding from private investors such as pension and sovereign wealth funds.
Infrastructure spending was a big part of the ruling Liberals’ successful election campaign in 2015. The government acknowledged in Wednesday’s budget, however, that the infrastructure and other stimulus measures laid out so far are now estimated to lift economic growth by 0.4 percent in the first year of implementation. That is slightly lower than the 0.5 percent it had expected in last year’s budget.
The government said on Wednesday it would invest the $35 billion over 11 years using loans, loan guarantees and equity investments with a focus on projects such as regional transit plans, transportation networks and electricity grid connections.
No new information was provided on how large a role private investors would play or on specific projects that would be financed through the bank.
A government advisory panel recommended last year it could target $4 to $5 of private funding for every $1 provided by taxpayers to fund projects.
The government said it would propose legislation soon for establishing the bank and would begin a process of identifying the bank’s chief executive and chairperson of the board of directors, with a goal of having it operational in late 2017.
Doug Porter, chief economist at BMO, said there were still more questions than answers on how it would be executed.
“I think it is going to be difficult to do,” he said. “I think it speaks to the point of how complex an undertaking we’re talking about. I would not be shocked if it takes longer than what they’re expecting.”
The budget showed that over the 11 years, $15 billion for the planned Canada Infrastructure Bank will come from money provided for public transit, green infrastructure and trade and transportation in the $81.2 billion long-term infrastructure plan, but not from money provided for social infrastructure.
By Leah Schnurr
(Additional reporting by Matt Scuffham in Toronto; Editing by Matthew Lewis)
Photo courtesy of Reuters/Chris Wattie