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Global Consortium to invest billions in Pakistan

Investing
15 Apr 2020
Global Consortium to invest billions in Pakistan

Global Consortium to invest billions in Pakistan

Another financing window is just about to open for Pakistan that may not be bigger than China Pakistan Economic Corridor (CPEC), but certainly equal to it as Global Investment Consortium (GIC) plans to invest billions of dollars in the country.

The Global Investment Consortium is considering to invest up to €50 billion on a public-private partnership basis in different mega projects like Naya Pakistan Housing Scheme, Reko Diq copper and gold project, Diamer-Bhasha Dam, and power projects at a time when the future of the global economy is not looking bright due to the fallout from COVID-19.

Global Investment Consortium

GIC is more than a 200-member consortium comprising hedge funds and investors pouring capital on the basis of engineering, procurement, and construction (EPS) and public-private partnership models in emerging markets for infrastructure development. According to the details, the consortium can raise around €30-50 billion in structured finance for development projects in Pakistan.

The details suggest that the consortium can finance not only major infrastructure projects but also social-sector schemes that are direly needed in these trying times when most of the world is locked down due to the COVID-19 pandemic. Speaking to the media, the GIC Regional Associate Muhammad Irfan Ali said, “We have been pretty much successful in convincing hedge funds to consider, in principle, raising enormous funds to channel into government projects in Pakistan.”

Talking about the details, he said the hedge funds they worked with, though duly regulated, were not typical ones as their associates worked on developing real sectors in emerging countries such as affordable housing, mining, hydroelectric power, pipelines, roads, railroads and so on. They also pump structured money into social development in areas of healthcare, education, ecology, tourism and access to information technology. In short, it is a comprehensive package that will touch most sectors of Pakistan – big and small – and help in uplifting the economy.

Irfan Ali also said that although a formal proposal has not yet been discussed with the Pakistan government GIC has given the green signal in this regard, to do so.

The funds could be structured in a customized model comprising public-private partnership projects for developing government infrastructure at a rapid pace that has never been witnessed in Pakistan before, and at a scale, which could be larger than CPEC if carried out properly.

The funding, subject to analysis, can be for 25 years at an interest rate of 1.5% per annum or so, with options, as well as concessions, to convert debt into equity in order to mitigate the debt burden of the country.

He added that innovation in structured finance was the key to the success of the ambitious program while taking cognizance of Pakistan’s particular set of economic, political, foreign policy and national security challenges. “The funding and investment can go up to €50 billion over several years,” he said.

“Whatever will be proposed to the government needs to be done with appropriate confidentiality as the regional and global requirement of large funds is very competitive and challenging, especially now with governments around the world trying to cope with the COVID-19 fallout,” he maintained.

It is somewhat akin to the US president proposing a $2-trillion package to refurbish the dilapidated US infrastructure as spending creates jobs and jump-starts economic activity.

However, the conundrum for Pakistan is the state of the economy, virtual junk rating of its debt, precarious situation of foreign currency reserves, uncertain political will, and ongoing bailout packages. 

The future for Pakistan’s economy looks bright as foreign investments continue to penetrate the country. This investment of GIC, if made, will generate more employment opportunities in the country and certainly play a bigger role in uplifting the infrastructure of the country to a great extent.

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