Islamabad to create a $8 billion development fund

ISLAMABAD — Pakistan government plans to create a multi-billion dollar infrastructure development fund in the next budget to spend about $8 billion under a phased development programme, says Dr Salman Shah, adviser to the prime minister on finance and revenue.

By From Our Correspondent

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Published: Sat 9 Apr 2005, 10:41 AM

Last updated: Thu 2 Apr 2015, 3:59 PM

Speaking at the concluding session of a seminar on public-private partnership, organised by the World Bank and the Planning Commission, he said that the government would have to augment resources for infrastructure development. He said the public sector development programme would be around Rs240 billion ($4 billion) next year but this would have to be doubled through public-private partnership.

He said that preparatory work had been completed about the development fund that would be raised through the capital markets. The fund, he said, would be utilised for schemes like water, sanitation, roads, highways and infrastructure development under local, provincial and federal governments.

He said Pakistan lost around Rs17 billion under the Long-Term Credit Fund that was established under a loan programme from the World Bank to launch independent power producers in the 1990s — Pakistan's first experiment in Public-Private Partnership. He said another Rs13 billion of the LTCF were still outstanding.

Mr Shah said that the loss was because of a lack of risk mitigation and due diligence because the government lacked the required fund management expertise at that time.

The management of LTCF was given to the National Development Finance Corporation, which instead of analysing risk management relied on recommendations of the Private Power and Infrastructure Board.

Some participants of the seminar warned policy makers not to "over-sell" the concept for infrastructure development and whatever could be done from public resources should not be done through private resources. They said that reasons for the failure of IPPs and some highways and motorway should be looked into before going for the Public-Private Partnership. Representatives of the Planning Commission said that the government planned to develop model contract agreements through creation of a World Bank-funded unit comprising law experts and engineers and hand them over to the provincial governments and line ministries for tendering and contract signing. The World Bank proposed a lasting policy or framework so that the partnership deals made economic sense in terms of delivering both outcomes and commercial returns. The policy would ensure that good partnerships involved optimal risk allocation, demonstrable value for money, clarity of affordability and certainty of public sector payment obligations.

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