Catalog

	Table of Contents
p. 31 of 74 BACK | NEXT I. Introduction II. Background III. The Economic Rationale of A Project IV. Macroeconomic and Sectoral Context V. An Integrated Approach To Economic Analysis VI. Identification and Quantification of Costs and Benefits VII. Valuation of Economic Costs and Benefits VIII. Large Projects, Linkages, and National Affordability IX. Least-Cost and Cost-Effective Analysis X. Investment Criteria: Economic Viability A. Project Decisions B. Choosing Between Alternatives When Benefits Are Not Valued C. Choosing Between Alternatives When Benefits Are Valued D. Testing The Economic Viability of The Best Alternative E. The Chosen Discount Rate F. Project Investments and The Budget XI. Discount Rate XII. Uncertainty: Sensitivity and Risk Analysis XIII. Sustainability of Project Effects XIV. Distribution of Project Effects XV. Projects and Policies XVI. Appendices XVII. Others

Guidelines for the Economic Analysis of Projects : X. Investment Criteria: Economic Viability

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F. Project Investments and the Budget

141. The Bank operates with an indicative program of lending for each country. These programs are, in part, determined by an assessment of absorptive capacity within the country, and what other external funds are being used. Some countries will operate under an investment budget constraint at the national or sector level. In addition, investments tend to be lumpy and not to fit easily within any constraint. Foreign borrowing relaxes such constraints on investment. When a country is faced with a budget constraint, implying more investment opportunities than it can implement, because of a shortage of investment funds or budget resources for counterpart funds, or a lack of appropriate personnel, then the appropriate response is to raise the discount rate for project and subproject selection above the 10-12 percent band usually adopted. When funds and resources are in short supply, it is even more important to look for viable projects with high rates of return.

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