ISLAMABAD: The Asian Infrastructure Investment Bank (AIIB) on Thursday said it was considering to invest over $1 billion in Pakistan’s critical infrastructure projects in the transport, urban and rural water and energy sectors.
This would expand AIIB’s total portfolio in Pakistan to $1.462bn including two projects currently under implementation. It has so far approved up to a total of $7.5bn in investments in 13 countries for 35 projects.
“Our focus on Pakistan demonstrates that during times of macroeconomic uncertainty, multilateral development banks (MDBs) such as AIIB can help reinforce sound public infrastructure investment,” said Dr Jang Ping Thia, Principal Economist, at a news conference here.
Talking about the projects, Thia said the AIIB was currently processing investments in four key projects which included $100 million for the Karachi Bus Rapid Transit, $402m for Rawalpindi Ring Road Project, $400m for Lahore Water and Wastewater Management Project and $160m for Karachi Water and Sewer Services Project.
AIIB’s Head of Communications Laurel Ostfield said Pakistan was very important for the still new multilateral bank and in alignment with its strategic priorities of sustainable infrastructure, cross-border connectivity and mobilizing private capital, it had already approved $100m for the National Motorway M-4 (Faisalabad-Multan section) Project and $300m for Tarbela-5th Hydropower Extension Project of 1400MW.
“We are working to identify projects with high levels of readiness and that help address the needs associated with ageing water and transmission infrastructure,” she said, adding the “focus will also remain on projects that can be carried out on a sound economic basis and contribute towards the country’s long-term economic development.”
The inaugural Asian Infrastructure Finance report said there continued to be significant infrastructure investment opportunities across Asia, including Pakistan, despite current market uncertainty and short-term challenges.
It noted that an increase in borrowing costs was expected in the next 12 months due to interest rate pressure and monetary policy announcements by the State Bank of Pakistan, adding the currency volatility could also affect project financing.
The report noted that as the governments grapple with the need for macroeconomic stabilisation and sustaining a high level of infrastructure investment to meet growing demands, AIIB was developing strategies to help members respond to short and long-term challenges in infrastructure development.
Responding to a question, Ms Ostfield said the Beijing-based bank did not provide funds for balance of payment or budgetary support like other multilaterals but was focusing only on project financing with priority on infrastructure development.
She said the government bond market in Pakistan was sizable but corporate issuances were still limited and the AIIB could also participate in them to support infrastructure development, adding that financing for infrastructure development was generally denominated in the rupee except for China-Pakistan Economic Corridor and power and renewables, in which case debt financing was typically in hard currencies.
The report said the cost of construction in Pakistan was likely to rise in line with the projected depreciation of the rupee. Road construction could, however, be less affected by currency uncertainty as the raw materials needed for highway projects were mainly sourced domestically; only machinery needs to be imported.
Published in Dawn, February 1st, 2019