ISLAMABAD: A generous Saudi contribution of $1.5 billion to Pakistan remains unutilised after almost 30 months because of bureaucratic snags and difficulties in finding an equity partner.
The Pakistan Development Fund was set up with Saudi Arabia’s assistance in early 2014. The government has not even appointed a full-time chief executive officer (CEO) for the company set up to channel the funds, The Express Tribune has learnt from sources in the finance ministry.
Finance Minister Ishaq Dar is the chairman of the Pakistan Development Fund Limited (PDFL) while Finance Secretary Dr Waqar Masood is the interim CEO of the company.
Saudi Arabia had ‘gifted’ $1.5 billion to Pakistan in 2014 to help Islamabad in its time of economic distress. The government did not disclose the purpose of the gift and instead stashed away the money in the PDFL, announcing the firm will act as an independent development finance institution (DFI) and operate on commercial basis.
So far, the PDFL has existed only on paper and has not financed any projects. Instead of utilising the $1.5 billion, the government has contracted commercial loans for financing megaprojects over the past two years.
The finance minister has chaired a couple of PDFL meetings but things are still on paper only, the sources said. They added the government has every intention to utilise the funds for financing development projects but some procedural formalities have yet to be completed.
In June, Ishaq Dar had invited the Asian Development Bank to join the PDF as an equity partner, according to a finance ministry handout.
Early this month, the sources said, the ADB sent a mission to Pakistan to review the possibility of becoming an equity partner in the PDFL. They said the ADB delegation’s initial observations termed it riskier to become an equity partner, but it was willing to provide loans for the PDF on sovereign guarantees.
The ADB also offered its technical expertise in the development of a commercial business plan with strategies and timeliness to run the PDFL, said the sources. The ADB was willing to provide financing for the PDF but the form of financing has yet to be decided and the ADB discussions with the government, but the specific form of investment has yet to be determined as further due diligence is required,” said Werner Liepach, the ADB Pakistan director, while talking to The Express Tribune.
Meanwhile, the government has also engaged the International Finance Corporation (IFC) of the World Bank and the Export-Import Bank of China to become equity partners in the company, the officials said. The IFC delegation would visit Pakistan this week to review the possibility of investing in the PDFL.
But the reason for the government’s decision to seek interest of the international lending agencies is not known, particularly when the amount has remained unused for the past two and a half years.
The availability of $1.5 billion funding was a key distinction between the PDFL and Infrastructure Project Development Facility (IPDF) – another body working under the finance ministry.
The stated purposes of the IPDF and the PDFL were the same, which also raises questions why the government did not put the money into IPDF.
A senior finance official hoped the company would soon start financing the projects and the remaining issues will be resolved.