Overcoming the Urban Infrastructure Financing Gap: The Distinctive Roles of Public Financial Information Transparency and Certification

Cities can play a major role in the provision and financing of urban infrastructure by drawing a variety of internal and external sources of capital. We posit that public sector information transparency and certification are direct levers in the development of and access to urban infrastructure capital financing options. To inform the development of subnational capital markets, we use a sample of cities from high- and middle-income countries to empirically assess the association between city borrowing and national and city measures of financial information transparency and certification. We find that city borrowing is positively associated with national level revenue and debt transparency, auditing quality, review of audited data, and public inputs in audits; and negatively associated with spending transparency and audit independence. We also find that city-level financial information transparency is positively associated with city borrowing, while city-level certification mechanisms have an inverse association. These findings hold in a subsample of upper- and lower-middle income countries.