To close infrastructure gap: country needs to invest 10 percent of GDP until 2020: SBP

Pakistan needs to invest around 10 percent of GDP until 2020 to close its enormous infrastructure gap whereas, infrastructure investment as percentage of GDP is currently averages at 6 percent only, said State Bank of Pakistan (SBP) Thursday.
According to SBP Infrastructure Finance Overview issued on March 26, 2015, the public sector has limited resources to fill financing gap, therefore private sector has vast investment opportunities in infrastructure sector.
"Infrastructure sector requires large upfront capital investment for benefits that spread over longer time. Unlike public sector, which takes into consideration the social benefits as well apart from commercial gains; private sector's involvement in infrastructure is pinned on commercial returns. Therefore, appropriate incentives are required to lure private sector investment in infrastructure sectors," it added.
According to SBP infrastructure financing portfolio of banks & DFIs has increased for the third consecutive quarter since December 2014 and this is a good sign for economic development. This trend needs to be continued for long-term growth with further increasing trend for sustainable development. Additionally there are other sectors like railway, aviation, social infrastructure and tourism where financing can be provided to commercially viable projects, it added.
In Pakistan, banks and Development Financial Institutions (DFIs) have remained a major source of funding to infrastructure investment in the private sector and data received from banks and DFIs for second quarter (Q2) of FY15 depicts that during October-December 2014, amount outstanding against infrastructure sectors witnessed growth of Rs 15.4 billion or 5.5 percent when compared with the preceding quarter (Jul-September 2014).
This increase was largely due to the power generation, petroleum, Road Bridge & Flyover (RB&F) and oil & gas (O&G) sectors, where combined outstanding amount grew by more than Rs 17 billion, it added.
The growth observed in RB&F sector is due to the "Modernisation of Lahore-Islamabad Motorway M2" project added during the second quarter FY15. The cost of the project is estimated to be Rs 36.8 billion and a syndicate of eight banks is funding the project.
The total amount outstanding, against infrastructure finance, at the end of December 2014 was Rs 297.8 billion when compared with Rs 282.4 billion at the end of September 2014, recording an increase of 5.5 percent. Power generation, petroleum, O&G and RB&F sectors noticed a rise of 2.3 percent, 27 percent, 17 percent & 178 percent, respectively while outstanding portfolio in telecom sector declined by one percent (QoQ basis).
On YoY basis, amount outstanding against infrastructure increased by 16.7 percent. Yearly growth was observed in telecom, power generation, O&G and RB&F sectors. The share of O&G and RB&F sector in total outstanding portfolio is 3.7 percent and 4.7 percent only.
Out of the 382 infrastructure projects financed, 196 were undertaken in power generation sector, 48 in telecom, 16 in power transmission, 23 in petroleum, 21 in O&G, and 41 in RB&F sector.
At the end of the period under review, the total amount sanctioned by banks & DFIs for infrastructure projects increased from Rs 551 billion to Rs 591 billion, recording a growth of 7 percent compared to previous quarter. Out of the total amount sanctioned during the quarter, share of PG stands at 53 percent, telecom 19 percent followed by petroleum with 7.2 percent and O&G sector 5.8 percent.