Oil and gas exploration gets less financing

KARACHI: The banking sector is providing insignificant financing to key areas in the infrastructure sector like oil and gas exploration and road construction, a top State Bank official said.

“Oil and gas exploration, petroleum and roads are not getting much financing and the performance of DFIs (development finance institutions) is very disappointing, with only two per cent share in overall portfolio,” said Deputy Governor State Bank of Pakistan, Muhammad Kamran Shehzad.

However, he pointed out that the banking sector, together with DFIs, has an outstanding portfolio of Rs284 billion in overall infrastructure sector, of which a staggering 68 per cent is in power sector alone.

He was speaking at a five-day training programme on ‘Frontiers in Infrastructure Finance’, organised jointly by the State Bank of Pakistan and World Bank at the SBP here on Tuesday.

This is a joint initiative of SBP’s Infrastructure and Housing Finance Department and the World Bank Group to address the issue of lack of expertise in the financial sector on project development and financing. Around 60 professionals associated with infrastructure development and financing from banks, DFIs and federal and provincial governments are participating in the training programme.

A study mentions that if a country wants to attain seven per cent economic growth, then it has to invest seven per cent of its gross domestic product (GDP) in infrastructure development, Shehzad said and added this scenario called for some concrete steps towards infrastructure development.

He said the importance of private sector is extremely critical for success of any policy initiative in the way of infrastructure development, adding public sector alone cannot fulfill the responsibility of removing infrastructure deficiency.

Shehzad said currently the role of private sector is limited to projects in the energy sector in the form of Independent Power Producers (IPPs) and the success of energy sector in attracting private capital was due to a policy of the federal government which provided sovereign guarantees that led to opening up of avenues for the private sector.

He said the SBP has formed an infrastructure task force inviting participation from key public and private sector stakeholders.

The task force has been mandated to identify obstacles in the way of infrastructure development in general and infrastructure finance in particular and propose viable ways for effective private sector participation, he said.

Published in The  Express Tribune, July 14^th, 2010.