Following directives from the prime minister, the Public-Private Partnership Authority has established two committees comprising key stakeholders to advise the government on increasing private-sector investment in infrastructure financing.
These committees held their inaugural meeting today in Islamabad, chaired by Federal Minister for Planning Ahsan Iqbal.
Addressing the stakeholders, the minister highlighted Pakistan’s economic challenges, emphasizing the urgency of addressing fiscal constraints. He noted that in 2018, the development budget was about Rs. 1,000 billion, but today it is Rs. 950 billion less than it was five years ago. For a population of 240 million, this reduction severely impacts infrastructure and human resource development.
He explained that the federal government’s net income is Rs. 7,000 billion after provincial allocations, yet debt servicing alone costs Rs. 8,000 billion, necessitating an additional Rs. 1,000 billion in borrowing. Operational costs are about Rs. 700 billion, pensions Rs. 800 billion, subsidies Rs. 1,200 billion, defense Rs. 1,800 billion, and development only Rs. 950 million. “This kind of balance sheet is unsustainable,” he stated.
To address these challenges, the minister emphasized the need to restructure the tax system to boost revenue and explore innovative financing methods for development projects. He highlighted the crucial role of public-private partnerships (PPPs) in attracting private investment for infrastructure projects with commercial potential, while the government can cover any market gaps.
The minister noted the government’s success in implementing several highway projects through PPPs and cited examples from countries like China, India, and Bangladesh, which have effectively utilized PPPs for infrastructure. He stressed that Pakistan must follow this model and that a collaborative approach between the government and private sector is essential for success.
He urged private sector stakeholders to provide continued support and feedback to develop robust PPP policies, creating a successful and sustainable public-private partnership model in Pakistan.
The financial committee’s terms of reference include recommending incentives to catalyze PPP investments and financing for inclusion in the Budget FY 24-25, providing an outlook on the current state of infrastructure financing in Pakistan, suggesting measures to improve bankability prospects and lenders’ acceptance of commercial structures for infrastructure projects, and proposing processes/tools to broaden financial and capital markets for infrastructure financing.
The General PPP Experts Committee is tasked with recommending incentives to catalyze PPP investments and financing for inclusion in the Budget FY 24-25, providing feedback and suggesting improvements in the legal and regulatory framework for PPPs, suggesting improvements in transaction structuring and risk allocation processes for PPP projects, and proposing measures to make PPPs market attractive to investors.
