Islamabad – The Asian Development Bank (ADB) will enhance its funding towards Pakistan’s public-private partnership (PPP) investments in infrastructure development to meet growing demands of this sector currently estimated at $20 billion a year.
The government has made a block allocation of Rs100bn in the next year’s federal budget and expects tapping in additional resources from international development lenders to expand the portfolio.
The Asian Bank and the Government of Pakistan have “agreed to chart new ways to pursue more robust and inclusive ADB investments in Pakistan by scaling-up PPPs to tap the private sector resources and to meet the country’s rising infrastructure development needs”, the ADB said on Monday.
The ADB is currently in a three-day consultative session on its upcoming three-year country programming and PPPs in Pakistan. It said more than 100 delegates comprising senior government officials, leading economists, planners from federal and four provincial governments and ADB key staff were attending the session to discuss the development opportunities and pipeline of projects as part of the ADB’s Country Operation Business Plan for the period of 2019-21.
Xiaohong Yang, ADB country director to Pakistan and Takeo Koike ADB’s director of PPP, underscored ADB’s continued commitment to support Pakistan to achieve its key development goals as part of the country partnership strategy. Ms Yang urged for a closer coordination and consultation between ADB and partners to ensure better and smarter investment programmes to better respond to Pakistan’s evolving priorities.
“ADB re-engages its operation in education and health sectors in addition to investments in energy, transport, agriculture and institutional reforms,” the bank said. Patricia Seex, head of Economic Growth Group at UK’s Department for International Development (DFID), attended the inaugural session.
The bank said Pakistan’s public investment in infrastructure had historically fell short of the estimated annual investment need of 7.6 per cent of the country’s gross domestic product (GDP). The country needs to invest over $20 billion per year on the critical infrastructures.
The current surge in infrastructure spending reaching more than 67pc of the total development budget in the public sector requires effective fiscal consolidation measures and strategies to reduce the deficit and achieve higher level of efficiencies as PPPs carry fiscal risks that need to be mitigated.
The outstanding infrastructure financing from local commercial banks in 2016 was only about $4bn with 65pc of the local bank’s lending going into energy projects.
“Project financing in Pakistan is only offered by a few commercial banks, with little or no role of capital markets or other financial institutions. This leads to lack of sufficient financial depth and backing in the country’s domestic credit markets to accommodate the long-gestation of infrastructure projects. [In the] meantime, we are in short supply of well prepared and bankable PPP’s pipeline,” said Ms Yang.
The ADB country director welcomed efforts of the Sindh and Punjab government to develop their investment frameworks to provide an enabling environment for private sector to invest in infrastructure.