GoP planning to establish Infrastructure Bank

ISLAMABAD: The federal government is planning to establish Infrastructure Bank that will act as a long-term financing vehicle for ensuring long-term financing needs of the infrastructure development projects in the country.Industrial Development Bank of Pakistan (IDBP) has also been converted into a long-term project financing company and approval process has been completed and now it is awaiting operationalisation. For this purpose, a Presidential Ordinance would be required.International Finance Corporation would reportedly inject financing in this company and the federal government would match the financing requirements of Rs 3 billion needed to bridge the gap between its assets and liabilities.Secretary Finance, Dr Waqar Masood Khan and other officials informed the Senate Standing Committee on Finance on Wednesday, expressing serious concerns over non-existence of a single Development Financial Institution in the country. Senator Ishaq Dar, Senator Haroon Khan, Senator Ilyas Bilour were of the view that after abandoning of the DFIs like RDFC, IDBP and PICIC not a single institution is left in the country to provide long term financing.

They were also of the view that industrialization process in the country have stopped due to the non existence of the DFIs and government is taking no step to make available long term financing through establishment of DFI in the country. They were also of the view that few hands are manipulating stock market of the country and a handful of rich are making billions through trading alone and stock markets have failed to meet the long term financing needs in the country. Senator Ishaq Dar was of the view that government should equip the National Bank of Pakistan’s wing, which is managing the affairs of the NDFC for long term financing. The senators were of the view that companies should be encouraged for listing and some incentives should be announced in the budget 2011-12 through Finance Bill, 2011.Secretary Finance agreed with the Senators and said that actually source of long-term financing from all the international financial institutions (IFIs) for industrialisation have dried up totally and IFIs have stopped this mode of financing, due to which international injection of financing in local DFIs have vanished. He said that State Bank of Pakistan is at present managing two schemes of LTF and LTTF for meeting financing g needs of the export oriented sectors with cap on interest rate leading to predictability.Secretary Finance also informed the meeting that Finance Ministry is also floating Pakistan Investment Bonds (PIBs) for 3 years, 5 years, 7 years, 10 years and even for a maturity period of 30 years to arrange long-term financing for development purposes.

Secretary Finance informed the meeting that there would a major role of the stock market of the country in a new Privatisation Plan being finalised by the government. There is a vast scope of the listing of the major public sector players in the stock market. The listing of major public sector entities in the stock market would give new impetus to the stock market and would improve the depth of the market. Secretary also informed that during the last ten years depth of the stock market have improved due to the listing of the major public sector entities like PTCL, OGDCL, NBP, UBL and HBL in the stock market. There is a huge scope of fresh listing of big companies and new listings of major public sector entities like PEPCO’s companies and other entities would help improve further the market depth.He also informed the committee that in a recent meeting with business community at President House, private sector have demanded risk cover to the tune of $2 billion to $3 billion for long term financing. The government strongly feels that this kind of facility would not be feasible, as it would lead to a similar situation where the government had left with no option to freeze the foreign currency accounts in the past.After meeting while talking to reporters, the Secretary informed that financing needs for infrastructure development are huge. He said that an IMF mission is expected by end January 2011 to negotiate fresh performance benchmarks under extended SBP programme – Dailytimes