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Business Recorder
24-07-2025
- Business
- Business Recorder
Development 2.0: the case for PPPs in Pakistan
Over the past few years, policymakers and academics have shown renewed interest in Public-Private Partnerships (PPPs) as a way of addressing fiscal limitations and speeding up infrastructure construction and the provision of increased yet sustainable public services. Similar to other developing nations, according to Dr Shamshad Akhtar, who was former finance minister of Pakistan, Pakistan will be facing an estimated USD 124 billion infrastructure financing gap by 2040, along with public debt nearing 66.3% of GDP and is projected to rise to 71.4 percent in FY2025, making traditional government-led-financed development increasingly unsustainable. These gaps have forced government to explore other forms of financing vehicles like PPPs to facilitate funding of desirable public infrastructure development using money raised from the private sector. However, PPPs have largely been promoted only as an alternative mode of financing whereas they might actually be an enabling tool to deliver greater efficiencies, innovation and value for money-normally referred in Pakistan as a game changer. The prime minister, Shehbaz Sharif, has recognised the successful implementation of PSDP under the leadership and oversight of the federal minister for planning, development and special initiatives, Professor Ahsan Iqbal. He gave this credit due to the fact that PSDP is being strategically used for ensuring development of much-needed infrastructure but also serving to provide a clear vision of development priorities and growth path of the country. It is commendable, however this should be supplemented or complemented in the PSDP with addition of new models of financing for PPP that will extend the frontiers of fiscal efficiency even more, crowd in additional private funding and lead to institutional reform. A detailed report of 2023 published by the Pakistan Institute of Development Economics (PIDE), Reforming the Federal Public Sector Development Programme, presented a strong case of an urgent reform was established. The report promoted a portfolio cleaning strategy, which advised a reduction of the size of PSDP by 20 to 25 percent and the removal of almost half of all projects underway in this regard. The study indicated that many of such projects are either not backed by institutions or have become low-priority schemes that involve subjecting of the national funds on them without receiving a corresponding reward. PSDP resources are often spread thin over too many unviable projects, thus limiting impact and leading to cost and time overruns. Now this lack of efficiency has crippled the argument in favor of seeking alternative forms of developmental financing only. Beyond financing, frame-work has to be energized and implemented quickly. The greatest of them is the Public-Private Partnership (PPP) model that provides a practical and performance-oriented system of project delivery. PPPs, by utilising the privately raised funds, technical excellence, and creativity can aid Pakistan to make important infrastructure, enhance social amenities, even bring in Foreign Direct Investment as a complement and decrease the pressure on the exchequer. The federal government, to its credit, has achieved certain success in institutionalizing the PPP model with the setting up of the Public-Private Partnership Authority (P3A) across provinces and federal government. Since its inception, P3A has developed a project pipeline of PKR 2.5 trillion. Its priorities however are limited to federal infrastructure projects such as roads, bridges and transportation corridors. To make PPPs a real pillar of the national development, the model has to develop both vertically and horizontally, expanding to provinces and sectors like education, health, and housing as well. Sindh's PPP-based Education Node where private firms operate public schools has shown success in underserved areas. The mixed model has produced the following positive results such as better administration, provision, and education achievement, especially in underdeveloped and remote regions. The Sindh experience shows that when well-designed PPPs are implemented with transparency and accountability they result in marked improvement in the quality of public service delivery. Similarly, even in Pakistan, thought leaders have been promoting a paradigm shift for public investment. One of the notable economists and Vice Chancellor of PIDE Dr Nadeem Javaid has stressed on how Pakistan should no longer focus at using public money as a crutch, but should instead reinvent PPPs as a means of managing risks, corporate efficiency, and innovation. He suggested radical reforms: such as the use of inflation-linked bonds, blended finance, and revenue-sharing arrangements so that PPPs could be scaled up and made more marketable. More importantly, he pointed out to the necessity of institutional reforms and better governance in order to have sustainable ecosystem of the collaboration of the private sector. This is what is also embedded in the URAAN Pakistan transformation plan. Around the world, countries like the UK, India, Brazil, and Chile have used PPPs to bridge public service gaps most effectively. The Private Finance Initiative in the UK has been quite revolutionary in the modernisation of hospitals and transport schemes, whereas in Chile there has been a larger access to clean water due to the water and sanitation PPPs. These success stories emphasize that PPPs are not mere financial tools, they are development tools that can transform service delivery and governance. In addition to infrastructure, the scope of PPPs to revolutionize service delivery in the sectors of human development is huge. As it has been reported in Housing Finance Pakistan Report, 2024, Pakistan requires developing 2 million housing units annually to accommodate its growth requirements, which is a situation that cannot be achieved without the involvement of the private sector. PPPs can also help expand healthcare access, digital platforms, and affordable housing. Whether these projects can succeed or not will however be based on the capacity of the government to design transparent contracts, establish accountability and earn the confidence of the people. It is also a change that needs the redefinition of the role of the state. The government should stop acting as the only financier and project implementer but an enabler-designing the rules, tracking the performance, and achieving the results. It has to develop the capacity of PPP design and management, simplify the procedures of procurement, and integrate transparency throughout the project cycle. Procurement procedures need to be sanitized and made corruption free. This matter is most important, particularly after Pakistan has been ranked 135th out of 180 countries by the Transparency International Corruption Perceptions Index One of the priorities, in this case, should be to decentralize the PPP system into the provinces and local governments. Local governments are in a position to determine contextual demands and have a project that deals with shortages of public services at the community level. The establishment of facilitating legal and regulatory framework of subnational PPPs, coupled with technical assistance and even financial de-risking, will do a lot to stimulating development at the grassroots. The government of Pakistan needs to wade through its development problems with insufficient resources and a huge scope of the problem. Although the PSDP is important, it cannot be used as the single point through which infrastructure and service delivery aspiration is realized in the country. A gap, where vision and performance split, can be narrowed with the help of Public-Private Partnerships provided that they were well thought of and clearly performed. The time to institutionalize PPPs is now — anything less risks repeating past inefficiencies. (Dr Ahmad Fraz is Assistant Professor and Dr Mahmood Khalid is Senior Research Economist at the Pakistan Institute of Development Economics (PIDE)) Copyright Business Recorder, 2025
Express Tribune
17-04-2025
- Business
- Express Tribune
PSX, Malaysia to boost Islamic finance
A delegation of Malaysian Shariah scholars and professionals visited the Pakistan Stock Exchange (PSX), where they emphasised their shared commitment to advancing Islamic finance and fostering cross-border collaboration between Shariah-compliant capital markets. A gong ceremony was held to welcome the foreign guests. Speaking on the occasion, PSX Chairperson Dr Shamshad Akhtar expressed hope for greater collaboration between the Islamic finance sectors of Malaysia and Pakistan, adding that Pakistan was also witnessing a growing demand for Shariah-compliant investment avenues. With over 50% of listed companies on the exchange being Shariah-compliant, the PSX offers a compelling platform for faith-based investments, including equities, Sukuk, Islamic mutual funds and exchange-traded funds (ETFs). Since launching its first Ijarah-based Sukuk in 2008, Pakistan has issued Ijarah Sukuk worth over Rs6.5 trillion by August 2024. The continued expansion of Islamic finance institutions, diversified asset classes and investor-friendly regulatory frameworks are contributing to the sector's momentum. Securities and Exchange Commission of Pakistan (SECP) Head of Islamic Finance Tariq Naseem provided an in-depth briefing to the delegation on the progress and advancements in Islamic finance within Pakistan's capital markets and non-bank financial sectors. He highlighted the significant accomplishments in regulatory reforms and the developments in the Islamic financial services industry to cater to both local and international market needs. The discussion also covered the potential for enhanced collaboration between Malaysia and Pakistan in promoting Islamic finance on a global platform. PSX Managing Director and CEO Farrukh H Sabzwari expressed his aspiration to benefit from Malaysia's expertise in Islamic finance for the advancement of Pakistan's capital market. He pointed out that only 0.14% of Pakistan's population constituted the investor base in the capital market, compared to 1% in Bangladesh, underscoring the significant potential for growth. He noted that the regulators had recently been working diligently to digitise market processes, thereby creating increased opportunities for investor participation. Sabzwari provided an overview of Pakistan's economy and the PSX operations, during which he revealed that approximately 80% of daily transactions at PSX were Shariah-compliant. Key stakeholders of the capital market – Badiuddin Akber, CEO of Central Depository Company, Imran Ahmed Khan, Deputy CEO of National Clearing Company and Farrukh Ansari, Chairman of Pakistan Mercantile Exchange – also addressed the gathering, highlighting the essential roles their institutions played in the overall ecosystem.
Arab News
17-04-2025
- Business
- Arab News
Pakistan Stock Exchange seeks Islamic finance expertise from Malaysia
KARACHI: The Pakistan Stock Exchange (PSX) on Thursday welcomed a delegation of Malaysian Shariah scholars and professionals as the country seeks to advance its Islamic finance sector and foster cross-border collaboration between Shariah-compliant capital markets. PSX and the Securities and Exchange Commission of Pakistan (SECP) have been striving in recent years to promote an Islamic capital market and create the enabling environment for the growth of Shariah-compliant investment. Shariah lays down certain principles with regard to financial contracts and the conduct of business and trading in general. In particular, Shariah prohibits any transaction that involves an element of interest (riba). In order to ensure Shariah compliance of a product or service, it must be free from such prohibited elements and conform to other requirements of Shariah. Various stock exchanges, including PSX, have designed and launched products and services that cater to the specific requirements of Shariah. PSX lists Shariah-compliant shares, sukuk (Islamic bonds), Islamic Exchange Traded Funds (Islamic ETFs), and Islamic Real Estate Investment Trusts (Islamic REITs). It is also deemed permissible as per Shariah for investors to subscribe to the Initial Public Offerings (IPOs) of Shariah-compliant securities. In addition, PSX offers Shariah-compliant indices comprised of shares of listed companies that meet certain predefined Shariah and technical screening criteria. A Shariah compliant facility to finance the purchase of shares is also available, through the National Clearing Company of Pakistan Limited (NCCPL), called Murabahah Share Finance. Welcoming the visiting delegation from Malaysia, PSX Chairperson Dr. Shamshad Akhtar expressed hope for greater collaboration between the Islamic finance sectors of the two countries. 'Pakistan is also witnessing a growing demand for Shariah-compliant investment avenues,' PSX quoted Akhtar as telling the delegation. 'With over 50% of listed companies on the exchange being Shariah-compliant, PSX offers a compelling platform for faith-based investments, including equities, sukuk, Islamic mutual funds, and ETFs.' Since launching its first Ijarah-based Sukuk in 2008, Pakistan has issued Ijarah sukuk worth over Rs6.5 trillion as of August 2024.% 'The continued expansion of Islamic finance institutions, diversified asset classes, and investor-friendly regulatory frameworks are contributing to the sector's momentum,' the PSX statement added. Tariq Naseem, Head of Islamic Finance at SECP, provided an in-depth briefing to the visiting dignitaries regarding the progress and advancements in Islamic finance within Pakistan's capital markets and non-banking financial sectors, particularly regulatory reforms and developments in the Islamic financial services industry undertaken to cater to both local and international market needs. The discussion also addressed the potential for enhanced collaboration between Malaysia and Pakistan in promoting Islamic finance on a global platform. Farrukh H. Sabzwari, Managing Director and CEO of the Pakistan Stock Exchange, expressed his aspiration to benefit from Malaysia's expertise in Islamic finance for the advancement of Pakistan's capital market. Sabzwari said only 0.14% of Pakistan's population constituted the investor base, compared to 1% in Bangladesh, underscoring the significant potential for growth. He said approximately 80% of daily transactions at PSX were Sharia-compliant. 'Concluding the event, PSX management reaffirmed the Exchange's dedication to building a robust Shariah-compliant capital market while highlighting the efforts of the PSX Shariah Focus Group — a multi-stakeholder platform comprising industry leaders, Shariah scholars, and financial experts — working collectively to foster an inclusive, faith-based financial system,' the PSX statement added. Pakistan's government has failed to achieve a target set by the central bank to increase the share of Islamic banking deposits in the country by 50% by January this year, according to official documents seen by Arab News this week, as Islamabad attempts to rid the country's banking system of interest. Pakistan's Federal Shariat Court (FSC) directed the government in April 2022 to eliminate interest by 2027. Following the order, the government and the State Bank of Pakistan have taken several measures ranging from changing laws in October 2024 to issuing sukuk bonds to replace interest-based treasury bills and investment bonds. According to a presentation shared by the SBP with bankers in August 2024, a copy of which Arab News has seen, the central bank set an 'indicative target' for the government to increase the share of Islamic banking deposits to 50% by January 2025, 65% by January 2026, 80% by January 2027 and 100% by December 2027. Pakistan, however, missed this target and was able to increase the market share of its Shariah-compliant banking deposits to only 24.9% by December 2024, the document stated.
