Which instrument is used to finance infrastructure development?

The use of General Obligation Bonds for financing infrastructure development is well-established in public finance. These bonds are issued by municipalities and are backed by the full faith and credit of the issuing government. This means that they are supported by the government's power to levy taxes to repay bondholders. This type of bond is ideal for funding long-term projects like schools, roads, and bridges, as it allows municipalities to raise substantial capital at lower interest rates due to the reduced risk perceived by investors.

General Obligation Bonds are particularly advantageous for infrastructure projects because they typically cater specifically to public needs and are considered a stable investment due to their backing by government taxing power. In contrast, other instruments such as equity shares and corporate bonds are not primarily designed for public infrastructure financing. Equity shares pertain more to private companies and corporate growth, while corporate bonds are issued by companies without the public infrastructure focus. Municipal bonds, although somewhat similar, can be a broader category that includes various types of bonds issued for specific projects or revenue-generating ventures, not necessarily backed by taxation. Thus, General Obligation Bonds remain a core financing tool for essential infrastructure development at the municipal level.