PDFL established to finance multi-billion dollar projects under PDSP

ISLAMABAD: In a bid to finance multi-billion dollar mega development projects such as construction of Bhasha and Dasu dams as well as $46 billion China-Pakistan Economic Corridor (CPEC) on pattern of Public Private Partnership (PPP), the government has established Pakistan Development Fund Limited (PDFL) under chairmanship of Minister for Finance Ishaq Dar and the fund would be made operational around coming budget.

In the wake of scarce resources for country’s Public Sector Development Programme (PSDP), the government, in a major development, established a company titled PDFL to kick-start PPP pattern in a big way to finance multi-billion dollar development schemes.

The board of directors of PDFL will include minister for finance as chairman while secretary Finance Division, secretary Planning, Development & Reforms Division and secretary Law & Justice Division as their directors. The PDFL will start its operations during the current financial year.

Minister for Finance Ishaq Dar spoke about government’s strategy to meet increased infrastructure requirements with allocation of meager resources for PSDP projects. The minister said that the government had decided to come up with innovative ideas to bridge this financing gap.

He said that the development and defence budget would be increased in double digit growth in the coming budget while current expenditure would be decreased.

The minister hinted that federal PSDP would be of about Rs655 billion for 2016-17 and a sum of Rs140-150 billion will be proposed for construction in South Waziristan Agency for Temporarily Displaced Persons (TDPs) as well as for PM’s different schemes such as loans and laptops.

“Around Rs185-200 billion will alone be meant for CPEC projects in the PSDP for next budget so resource constraints will hamper the country’s ability to bridge infrastructure gap,” said the official.

One top official of Finance Division told The News that Pakistan's infrastructure needs are massive and its resources are limited. There is limited fiscal space and there are also huge gaps in public sector capacity to build and operate infrastructure.

This deficiency needs to be removed by developing PPPs in a manner that they leverage maximum amount of private resources. To achieve the objective of Public Private Partnership, the Infrastructure Project Financing Facility (IPFF) was established in 2007 under Section 282 (A) of the Companies Ordinance 1984. IPFF was incorporated. However this institution did not come into operation and the company remained dormant. 

The whole issue was reviewed and it was felt that the IPFF be renamed as Pakistan Development Fund Limited Company. PDFL has been established with the approval of Prime Minister in June, 2014. The PDFL will provide complementary long-term project finance to PPP projects to encourage private sector participation.

The financing will be provided to only important public sector projects in the PSDP on such terms as may be determined. PDFL will build its capacity, will be independently run by a professional team with structure and business processes that would reflect sound financial practices. The company will also play the role of a catalyst to bring private sector investment into infrastructure, the top official of Finance Division said. 

Another top official of Planning Division said that the multilateral donors such as the World Bank and Asian Development Bank (ADB) were asking Islamabad for establishing such Fund with the purpose of financing projects through debt and equity but it should devise mechanism to ensure recoup of financial resources once it utilises funds on certain projects.

Another official who is working for promoting PPP concept told The News that there was need to promote BOT (Built-Operate-Transfer) basis in Pakistan for meeting massive infrastructure requirements as even water schemes in India were being built through this mechanism.