Under the Wales Act, passed last year, ministers can borrow up to £500m.
But the Lib Dems said this should be doubled to bring Wales and Scotland into line.
The plans will form part of the Lib Dems' general election manifesto, due out later this month.
Chief Secretary to the Treasury Danny Alexander said: "This increase in power would mean Wales would be able to invest in projects that could help build a fairer society, such as building schools and hospitals.
"Our record in government shows that we are the party that will deliver further powers and fairer funding to create a stronger Wales."
Roger Williams, the deputy leader of the Welsh Liberal Democrats, added: "By doubling the amount of money Wales can invest on infrastructure projects, the Welsh Liberal Democrats would be delivering a significant step in securing a stronger Welsh economy.
"Increased borrowing powers means that Wales would have greater scope to stimulate the economy with investment in significant capital expenditure projects.  This is an announcement that would benefit all of Wales.
"This will allow Wales to catch up with the rest of the UK in terms of infrastructure and ensure that our nation is competitive in attracting jobs and investment."
The Welsh government is planning to use its existing borrowing powers to fund a new motorway to the south of Newport.

Archaeologists made the discovery at Tresness in Sanday while on a walk in poor weather on Monday.
The remains of 14 houses and stone tools, including knives, have been described as "one of the biggest complexes of Bronze Age settlement in the Scottish isles".
The finds on the beach could be more than 4,000 years old.
Archaeologists believe the houses were buried by sand dunes in the second millennium BC - but have recently been exposed by the actions of weather and the sea.
Prof Jane Downes and Christopher Gee, of the University of the Highlands and Islands, Prof Colin Richards, of the University of Manchester and Dr Vicki Cummings, of University of Central Lancashire, made the discovery.
They were on a sea shore walk to visit a known archaeological site when they spotted the remains of the houses and stone tools.
Prof Downes, who specialises in the Bronze Age, said: "This must be one of the biggest complexes of Bronze Age settlement in the Scottish isles, rivalling the spreads of hut circles in other parts of mainland Scotland."
The scale of the Sanday has been described as "unparalleled in Orkney". The islands are well-known for the Skara Brae Neolithic settlement.
Cath Parker, leader of the Sanday Archaeology Group, said: "This is incredibly exciting.
"The archaeological landscape concealed beneath Sanday's  shifting sands never ceases to amaze us.
"I'm sure the local community will relish the opportunity to be involved with any work which stems from this thrilling discovery."
Important Bronze Age discoveries have been made in recent years in other parts of Scotland.
Skeletal remains found at Drumnadrochit on the shores of Loch Ness were identified in February as dating back to the Early Bronze Age.
A wrist guard, for use with a bow and arrow, and shards of pottery were among remains found in a burial cist that was uncovered during work to build a new health centre.
Evidence of Bronze and Iron Age settlements were found at the site of the new Inverness Campus. The remains of timber-built roundhouses and crop marks were recorded at East Beechwood.

McDonald, 25, was on the transfer list at Sixfields and has agreed a two-year contract with the Sky Blues.
He is Coventry's third signing following relegation from League One, after striker Marc McNulty and midfielder Michael Doyle.
"He is a quick, strong and aggressive centre-half, who can also read the game well," boss Mark Robins said.
Liverpool-born McDonald started his career at Manchester City's academy before joining the youth set-up at Stoke City.
He later went on to Oldham, Colwyn Bay, Nantwich, Hereford United and AFC Telford United, joining Northampton in 2015 and making 37 appearances for the Cobblers.
Find all the latest football transfers on our dedicated page.
The Welsh government should be able to borrow up to £1bn to fund major new projects such as motorways or hospital buildings, the Liberal Democrats have said.
[NEXT_CONCEPT]
Shifting sands have revealed a significant complex of Bronze Age buildings in Orkney.
[NEXT_CONCEPT]
Coventry City have signed centre-back Rod McDonald from Northampton for an undisclosed fee.