Islamabad May 23 2024: In a bid to address fiscal constraints and promote public-private partnerships (PPPs), the Pakistan government has established two committees comprising key stakeholders.
These committees are tasked with advising the government on introducing measures in the upcoming Budget 2024-25 aimed at increasing private sector investment in infrastructure financing, said a news release.
The inaugural meeting of the committees was held under the chairmanship of Federal Minister for Planning, Development and Special Initiatives Prof Ahsan Iqbal. Following the directives issued by the Prime Minister Shehbaz Sharif, two committees comprising key stakeholders in public-private partnerships (PPP) are established under Public Private Partnership Authority.
Addressing the committees’ stakeholders, Ahsan Iqbal highlighted economic challenges faced by Pakistan, emphasizing the urgency of addressing fiscal constraints. Ahsan Iqbal said: “Pakistan is working hard to overcome its economic challenges, but we are currently facing serious fiscal constraints. Siting the 2018 example, he said that development budget was about Rs1,000 billion. Today, this budget is Rs950 billion less than 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 currently, the federal government’s net income is Rs 7,000 billion after provincial allocations. However, the debt servicing liability alone is Rs 8,000 billion, forcing us to borrow an additional Rs 1,000 billion to meet these obligations. 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 added.
Ahsan Iqbal 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 public-private partnerships (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 added.
He said the government has successfully implemented several highway projects through PPPs. Countries like China, India, and Bangladesh have effectively utilized PPPs for infrastructure, and Pakistan must follow suit. The 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.
He said the terms of reference for the Financial Committee 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 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 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, he added.
