ISLAMABAD: The caretaker government plans to get going Pakistan Development Fund Ltd (PDFL) — a $1.5 billion state-owned shell entity — to provide an alternative financing source to public sector development projects through divestment of government stakes in public sector and public-private partnerships (PPP).

The entity was created in June 2014 with inflows of $1.5bn financial support from Saudi Arabia amid then prevailing foreign exchange challenges but remained almost in the cold storage of the Ministry of Finance for almost a decade now as most of the time its board of directors comprised ex-officio members.

The foreign funds so received were claimed to have been used for setting up of two LNG-based power plants — Balloki and Haveli Bahadur Shah — of over 1,220MW through National Power Parks Management Company Ltd (NPPCL) — a subsidiary of the Power Division.

Although a public limited company led by the Ministry of Finance, the company was also granted a non-banking financing company (NBFC) status to facilitate innovative financing sources for development projects and engage in “investment finance services, asset management services, corporate finance services, money market activities and capital market activities.

State-owned company will provide another funding source for projects

The finance ministry has now started the process of hiring a chief executive officer for PDFL to steer the entity towards formal operations and facilitate foreign investment, particularly from friendly countries, in selected high-worth projects and businesses in the country. The CEO would be hired initially for three years, extendable, to lead the development and implementation of PDFL corporate strategy, business plan and operational strategies besides overseeing the preparation of policy for project selections and credit approvals leading to project monitoring and evaluation.

The finance ministry expected the hiring process completed before the caretaker government transfers power to the elected government so that the entity is ready to take off immediately and provide a platform to all stakeholders including international lenders and the private sector and streamline initiatives relating to infrastructure financing and public-private partnerships.

The CEO-to-be would be responsible for regular interactions with multilateral and bilateral agencies, export credit agencies and other local and foreign financiers and investors and subsequently manage and administer business assets and services besides tapping funding sources.

The government last week notified guidelines on Fiscal Commitments and Contingent Liabilities (FCCL) for federal PPP projects to improve the quality and cost-effectiveness of public infrastructure.

According to the finance ministry, the FCCL guidelines primarily focus on managing long-term fiscal costs in PPPs, including direct and contingent liabilities extending throughout the project lifespan including highway tolls, health facilities and other infrastructure ventures where managing fiscal costs and contingent liabilities remain crucial for sustainable implementation while providing clarity of roadmap and financial picture.

The objective is to optimise the advantages of private sector participation while maintaining fiscal sustainability and achieving long-term infrastructure development goals.

Published in Dawn, January 9th, 2024