Infrastructure gap needs huge investment

KARACHI: Pakistan needs to invest around 10 per cent of GDP, from current 6pc, until 2020 to close its enormous infrastructure gap, the State Bank said on Friday.
In its ‘Quarterly Infrastructure Finance Review’ for Oct-Dec 2014, the SBP said the public sector has limited resources to fill this gap. By contrast, the private sector has vast opportunities as its “involvement in infrastructure is pinned on commercial returns. Therefore, appropriate incentives are required to lure the private sector investment.”
In Pakistan, banks and development finance institutions (DFIs) have remained a major source of funding to infrastructure investment in the private sector.
Cumulative disbursements as of December 2014 increased by 5.2pc on a quarterly basis, but fell by 1pc on a yearly basis. By end-December, Rs367 billion was disbursed to all infrastructure sectors, of which 60pc was in the power generation sector, followed by 17pc in the telecoms sector.
Disbursements during the Oct-Dec quarter amounted to Rs27.8bn, a boost of 77pc compared to the previous quarter. A significant increase was observed in disbursements made to power generation and RB&F (road, bridge and flyover) sectors during the quarter.
“Out of the 382 infrastructure projects financed, 196 were undertaken in the power generation sector, 48 in telecom, 16 in power transmission, 23 in petroleum, 21 in oil and gas, and 41 in RB&F sector,” said the report.
Amount outstanding against infrastructure sectors grew by Rs15.4bn (5.5pc) compared with the preceding quarter (Jul-Sept, 2014). This increase was largely due to the power generation, petroleum, RB&F, and oil and gas sectors, where combined outstanding amount rose by more than Rs17bn.
The growth in the RB&F sector came on the back of ‘Modernisation of Lahore Islamabad Motorway M2’ project, the report said. “The cost of the project is estimated to be Rs36.8bn and a syndicate of eight banks is funding the project.”
A sector-wise analysis shows that the major share in total outstanding infrastructure project financing remained with power generation (64pc) and telecoms (17pc) sectors. Strong demand and government-backed guarantees are the major reasons that power generation sector has witnessed tremendous growth over the years.
The share of power transmission sector was 1.4pc, while petroleum and oil and gas (exploration and distribution) sectors’ share was 3.6pc and 3.7pc, respectively, in the total outstanding amount.
The total amount outstanding, against infrastructure finance, at the end of December was Rs297.8bn compared with Rs282.4bn at the end of September, recording an increase of 5.5pc.
Power generation, petroleum, oil and gas, and RB&F sectors noticed a rise of 2.3pc, 27pc, 17pc and 178pc, respectively, while outstanding portfolio in telecoms sector declined by 1pc quarter-on-quarter.
“On a year-on-year basis, the amount outstanding against infrastructure increased by 16.7pc,” said the SBP report.