Govt wants private sector investment in infrastructure financing: Iqbal

ISLAMABAD: Federal Minister for Planning, Development and Special Initiatives Ahsan Iqbal has said that the government would introduce measures in the upcoming budget to encourage and promote private sector investment in infrastructure financing.

“Government wants private sector support to address fiscal constraints and to promote financing Public Private Partnerships (PPPs).

For this, under the direction of the prime minister, we have established two committees. The committees comprise key stakeholders in PPPs under Public Private Partnership Authority (PPPA). These committees are tasked with advising the government on introducing measures in the upcoming budget aimed at increasing private sector investment in infrastructure financing,“ the minister expressed these views while chairing the inaugural meeting of the committees a here on Thursday.

Addressing the committees’ stakeholders, Federal Minister for Planning Ahsan Iqbal highlighted economic challenges faced by Pakistan, emphasising the urgency of addressing fiscal constraints. He said: “Pakistan is working hard to overcome its economic challenges, but we are currently facing serious fiscal constraints.”

The planning minister urged private sector stakeholders for their continued support and feedback to develop robust PPP policies creating a successful and sustainable public-private partnership model in Pakistan.

The terms of reference for the Financial Committee include recommending incentives to catalyse 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 bank-ability 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 FY24-25, 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.

He said that the government has successfully implemented several highway projects through PPPs. He said that countries such as China, India, and Bangladesh have effectively utilised PPPs for infrastructure, and Pakistan must follow suit. “A collaborative approach between the government and private sector is essential for this success,” he said.

“To address these challenges, we must restructure our tax system to boost revenue and explore innovative financing methods for development projects. This is where the PPPs play a crucial role. By providing the right incentives, we can attract private investment for infrastructure projects with commercial potential, while the government can cover any market gaps,” the minister said.

Citing example from 2018, he said that the development budget was about Rs1,000 billion back then. “Today, this budget is Rs950 billion; less than what it was five years ago. For a population of 240 million, this reduction severely impacts our infrastructure and human resource development, compromising the future of the nation.”

He said that currently, the federal government’s net income is Rs7,000 billion after provincial allocations. “However, the debt servicing liability alone is Rs8,000 billion, forcing us to borrow an additional Rs1,000 billion to meet these obligations. Operational costs are about Rs700 billion, pensions Rs800 billion, subsidies Rs1,200 billion, defence Rs1,800 billion, and development only PKR 950 million. This kind of balance sheet is unsustainable,” the minister shared these facts during the meeting with investors.

Copyright Business Recorder, 2024