ISLAMABAD, Feb 18: The World Bank and the Asian Development Bank (ADB) have urged Pakistan to spend $1.5-2 billion annually to urgently improve its what they termed "grossly inadequate" infrastructure which is constraining rapid economic growth and sizable local and foreign investment.

Informed sources told Dawn that both the donors had asked the government to improve its old and feeble infrastructure, particularly related to telecommunication, power, railways, air transport, ports, roads, waste management, information technology, cyber parks, and industrial estates.

The ADB in its policy discussion with the government held recently called for a need to develop infrastructure at a fast pace with a view to achieving eight per cent plus GDP growth rate.

Both the international donors believed that large fiscal deficit had limited the government's ability to meet growing infrastructure requirements that had emerged as a major constraint to the country's efforts to improve the investment climate.

The sources said that while the ADB had pledged to roughly extend $1 billion for improving the infrastructure, the World Bank could also be approached for additional funds for this purpose, in addition to $1 billion annual assistance announced recently.

The government is spending Rs63 billion during 2004-05 to improve the infrastructure. "But this amount is not adequate and the government needs to spend more on infrastructure to attract substantial investment in this part of the world," a source said and added that the government needed to encourage the private sector to go for infrastructure financing.

Opportunities for developing and financing public-private partnerships in Pakistan are considerable, he said, adding that there was a proven demand for new projects in water, waste water, solid waste and transportation sectors.

The public sector, the source said, had remained the main provider of basic infrastructure, but to augment limited public resources for infrastructure, private sector participation must be encouraged by creating the enabling environment for increased private sector investment.

He pointed out that private infrastructure projects had not materialized because reforms had not progressed as fast as anticipated, present governance structures were not suited to broad private sector participation envisaged in a liberalized environment, and there was no real public-private interaction.

Currently, he said, the ADB was processing a loan and equity investment for Pakistan's first private sector hydropower project, likely to be approved by the bank's board in April 2005. Also in process is a currency swap and financing project, a waste-water treatment plant, an oil pipeline and gas-fired power generation project.