One of the pivotal concerns in the developing world is finite spending capabilities of governments to bridge the infrastructure financing gap, said Securities and Exchange Commission of Pakistan (SECP) Chairman Aamir Khan.
Speaking at a session titled ‘Financing Infrastructure via Capital Markets’ on Friday, he said that this was the reason why attracting private investment was critical to ensure the sustainable management of infrastructure.
He gave examples of nations that issued both sovereign and non-sovereign bonds to finance infrastructure projects such as Metro Manila Flood Management project in the Philippines, Mumbai urban transport project in India and Izmir metro expansion project in Turkey.
“All of these projects have directly impacted and improved the lives of the masses and contributed to the development of their respective bond markets,” he added.
In Pakistan, public and private infrastructure development has made some progress over the last decade. Consequently, significant investments have taken place in road networks, urban transportation and telecommunication sectors.
This progress has not only improved the mobility and connectivity of the general public but also helped those at the bottom of the pyramid to improve their livelihoods.
Furthermore, he explained that development also accompanied financial inclusion for the under and unserved and created employment opportunities for the female population.
“All this was achieved by investing a very small percentage of GDP,” he said. “It should be a matter of concern for all of us that Pakistan’s infrastructure spending is one of the lowest in the region and well below investment requirements of 8-10 % of GDP, when we consider past and future demands.”
He added that this problem exacerbated every year as the infrastructure projects were financed either directly by the government or by commercial banks against government guarantees.
Given the limitation of financing from these sources, the investment gap shall continue to grow.
“Accordingly, all stakeholders need to sit together and map the obstacles that we face in adopting financing alternatives through the capital markets,” he said.
The SECP chairman expressed firm opinion that Pakistan’s capital markets provided an untapped opportunity and offered the most viable solution in bridging the gap in infrastructure financing needs.
Published in The Express Tribune, March 26th, 2022.
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