It is fascinating to read Prof. Mankiw’s opinion on an IMF study suggesting that debt-financed infrastructure spending is good for IMF in the long run. Prof Mankiw believes that it is too naive to think that this will work out although it is theoretically possible.

I think Prof. Mankiw is a bit too harsh on IMF there. The fact is without improvement in infrastructure, it is hardly possible for a poor country to grow its economy and improve its people’s lives. In many developing countries, infrastructure is one of the main bottlenecks. If the place often has “power outages, insufficient water supply, and decrepit roads…[ it will definitely] adversely affect people’s quality of life and present significantly barriers to the operation of firms” (Adiad, Furceri, and Topalova). In other words, if IMF really wants its money back, it has to help poor countries to build their infrastructure first. In the long run, the money will be worth it for sure.

References:

http://gregmankiw.blogspot.ca/

http://www.imf.org/external/pubs/ft/survey/so/2014/res093014a.htm