PAKISTAN: Support to PPP framework operationalization

While Pakistan is a lower- to middle-income country with a per capita GDP just shy of $1,500, it has ambitious development objectives that span clean energy, urban development, and social inclusion. To achieve these goals and also moderate growing aggregate demand pressures on the economy, Pakistan entered into an Extended Fund Facility (EFF) arrangement with the IMF in 2019. Though some sectors began to register growth, the onset of the COVID-19 pandemic in February 2020 brought economic activity to a near halt. In light of both the pandemic and rapid population growth, the government of Pakistan decided to invest in infrastructure to stimulate economic development. 
The prioritization of infrastructure is aptly highlighted in Pakistan’s recently released economic policy framework, Vision 2025, which features infrastructure provision as an integral part to empower people. Moreover, the World Bank report “Pakistan @100: Shaping the Future” further emphasizes the need for significant investment, including through PSP, to strengthen the country’s growth framework and to deliver on Vision 2025. 
In this context, the World Bank is implementing a $13.7 billion country portfolio in support of Pakistan’s development ambitions, which includes support for reforms that strengthen institutions, fiscal management, and human development. PPIAF funds are supporting the larger World Bank initiative by specifically addressing Pakistan’s request to assist in mobilizing private sector investments in infrastructure, particularly through PPPs.
Though Pakistan recently updated its PPP legislation in the PPP Authority Act of 2021 (P3A), the law has not been efficient in operationalizing the PPP framework, resulting in only a handful of projects being delivered via the PPP procurement method. Therefore, PPIAF support was utilized to aid in the development of a PPP pipeline that successfully attracted PSP to identify and develop government support mechanisms that will further promote private capital mobilization (PCM) and to provide advice on the development of a framework for managing FCCLs. 
In addition to these efforts, PPIAF prepared a high-level climate screening questionnaire and green financing report, which aims to improve the attractiveness and bankability of PPP projects by taking climate considerations into account. 
As a result of this support, a pipeline of 12 ready-to-market projects was developed along with 5 project briefs. Three of these projects were selected by P3A officials for accelerated development. A report on government support mechanisms was also produced, which recommended the establishment of a government-backed multi-window financing vehicle. The government of Pakistan endorsed the creation of the multi-window financing vehicle to support PCM, which will support PPP projects through the provision of project development funding, viability gap funding, partial credit guarantees, and refinancing risk support. 
The intervention was capped off by the provision of training on PPP pipeline screening, FCCLs, and climate considerations to build the capacity of P3A officials. 
Upon final completion of the PPIAF activity, follow-up support is already being planned in partnership with the GIF to help further the development of the multi-window financing vehicle, expand the PPP pipeline to include social infrastructure projects, and provide additional capacity-building support.

Approved date2021-01-22
SectorMulti-sector (i.e. for infrastructure in general)
RegionSouth Asia