To qualify for $300m, ECC approves infrastructure finance policy
Govt moves to fulfil one of the remaining conditions of the World Bank loan
Govt moves to fulfil one of the remaining conditions of the World Bank loan. PHOTO: INP/FILE
ISLAMABAD:
The government on Tuesday approved a new infrastructure finance policy to attract private investment in the public sector, fulfilling one of the remaining conditions the World Bank imposed on Pakistan for approval of $300 million loan.
Headed by Finance Minister Ishaq Dar, the Economic Coordination Committee (ECC) of the Cabinet approved the policy aimed at getting the $300 million loan by March this year. The ECC meeting had been especially called to clear the infrastructure finance policy, showing the government’s eagerness to get the loan, which will be used for budget financing and meeting external account needs.
New Partnerships, new opportunities
Pakistan’s external account has started to come under pressure due to underperformance of exports slowing down of remittances and growing import bill, according to a recent Monetary Policy Statement of the central bank.
The $300 million loan, which the World Bank would release in a single tranche after the approval from its Board, will help meet the external account financing needs. The government is trying to fulfil all prior actions within this week that the World Bank has attached to send the case for approval.
It will be the third Development Policy Credit that the World Bank would approve in the name of Competitiveness and Growth Development Policy Financing.
The Washington-based lender has already given $1 billion for promoting economic growth and competitiveness in two equal tranches. This time again, the finance ministry had sought $500 million but the World Bank initially offered $150 million and then jacked up the figure to $300 million by diverting commitments from the social sector, said sources in the finance ministry.
In June last year, the World Bank Board had approved the second tranche of $500 million loan for the Competitiveness and Growth Development Policy Financing.
While approving the loan, World Bank directors took note of the risks involved in this operation and in this regard urged close monitoring of the agreed prior actions to ensure they are attained in a timely manner, according to the World Bank documents. The World Bank directors had called on the bank to continue to provide technical assistance and advisory services to monitor Pakistan’s performance.
ECC allows tax breaks for two CPEC projects
The Policy
The ECC has approved the Infrastructure Finance Policy Pakistan 2017, according to an official handout of the Ministry of Finance. Under the said policy, a sound and long-term infrastructure finance framework has been provided that caters to both the demand and supply sides of finance and designed to attract Foreign Direct Investment and mobilise private financing for public infrastructure.
Currently, in absence of private infrastructure investment policy, all the infrastructure projects in the public sector are funded through the Public Sector Development Programme (PSDP).
Due to huge infrastructure financing needs, the other sectors have faced financial constraints. The health, education, water and climate sectors have particularly suffered during the past three years due to huge allocations for the energy and road infrastructure.
The Ministry of Planning and Development has provided critical input in formulation of the new policy, although still more work needs to be done to make it a comprehensive policy framework.
The finance ministry said that the policy envisages phase-wise intervention to increase the quantum of infrastructure financing flows. The four main pillars of the new policy will be efficient policy framework for infrastructure finance, good practices infrastructure projects initiation framework, enhanced financial intermediation for infrastructure investment and strengthening of development finance framework.
The officials said that half a dozen Development Financial Institutions (DFIs) were already working with government money but all of them have become victim of nepotism and inefficiency. These institutions had been set up with equity partnership of other countries.
The finance ministry said that the new policy is intended to have particular focus on infrastructure sub-sectors more suited to private sector investment and finance namely transportation facilities (including but not limited to ports, terminals, airports, railways, water-ways and toll roads), energy (oil and gas, thermal, hydro and other renewable power infrastructure) and telecommunications.
The finance minister hoped that the approval of the policy would help the government increase infrastructure investments. It would facilitate and increase the role of the private sector in the infrastructure development structure, he added.
Published in The Express Tribune, February 1st, 2017.
The government on Tuesday approved a new infrastructure finance policy to attract private investment in the public sector, fulfilling one of the remaining conditions the World Bank imposed on Pakistan for approval of $300 million loan.
Headed by Finance Minister Ishaq Dar, the Economic Coordination Committee (ECC) of the Cabinet approved the policy aimed at getting the $300 million loan by March this year. The ECC meeting had been especially called to clear the infrastructure finance policy, showing the government’s eagerness to get the loan, which will be used for budget financing and meeting external account needs.
New Partnerships, new opportunities
Pakistan’s external account has started to come under pressure due to underperformance of exports slowing down of remittances and growing import bill, according to a recent Monetary Policy Statement of the central bank.
The $300 million loan, which the World Bank would release in a single tranche after the approval from its Board, will help meet the external account financing needs. The government is trying to fulfil all prior actions within this week that the World Bank has attached to send the case for approval.
It will be the third Development Policy Credit that the World Bank would approve in the name of Competitiveness and Growth Development Policy Financing.
The Washington-based lender has already given $1 billion for promoting economic growth and competitiveness in two equal tranches. This time again, the finance ministry had sought $500 million but the World Bank initially offered $150 million and then jacked up the figure to $300 million by diverting commitments from the social sector, said sources in the finance ministry.
In June last year, the World Bank Board had approved the second tranche of $500 million loan for the Competitiveness and Growth Development Policy Financing.
While approving the loan, World Bank directors took note of the risks involved in this operation and in this regard urged close monitoring of the agreed prior actions to ensure they are attained in a timely manner, according to the World Bank documents. The World Bank directors had called on the bank to continue to provide technical assistance and advisory services to monitor Pakistan’s performance.
ECC allows tax breaks for two CPEC projects
The Policy
The ECC has approved the Infrastructure Finance Policy Pakistan 2017, according to an official handout of the Ministry of Finance. Under the said policy, a sound and long-term infrastructure finance framework has been provided that caters to both the demand and supply sides of finance and designed to attract Foreign Direct Investment and mobilise private financing for public infrastructure.
Currently, in absence of private infrastructure investment policy, all the infrastructure projects in the public sector are funded through the Public Sector Development Programme (PSDP).
Due to huge infrastructure financing needs, the other sectors have faced financial constraints. The health, education, water and climate sectors have particularly suffered during the past three years due to huge allocations for the energy and road infrastructure.
The Ministry of Planning and Development has provided critical input in formulation of the new policy, although still more work needs to be done to make it a comprehensive policy framework.
The finance ministry said that the policy envisages phase-wise intervention to increase the quantum of infrastructure financing flows. The four main pillars of the new policy will be efficient policy framework for infrastructure finance, good practices infrastructure projects initiation framework, enhanced financial intermediation for infrastructure investment and strengthening of development finance framework.
The officials said that half a dozen Development Financial Institutions (DFIs) were already working with government money but all of them have become victim of nepotism and inefficiency. These institutions had been set up with equity partnership of other countries.
The finance ministry said that the new policy is intended to have particular focus on infrastructure sub-sectors more suited to private sector investment and finance namely transportation facilities (including but not limited to ports, terminals, airports, railways, water-ways and toll roads), energy (oil and gas, thermal, hydro and other renewable power infrastructure) and telecommunications.
The finance minister hoped that the approval of the policy would help the government increase infrastructure investments. It would facilitate and increase the role of the private sector in the infrastructure development structure, he added.
Published in The Express Tribune, February 1st, 2017.