ISLAMABAD – The financially-strapped government has been rendered incapable of establishing an infrastructure bank to meet the ever-rising financial needs because of its commitment with International Monetary Fund (IMF), Secretary Finance Waqar Masood Khan informed the Senate Standing Committee on Finance on Wednesday.
He was replying to complaints by the senators that the rolling back development finance institutions (DFIs) was a major impediment in the country’s industrialization.
The government, he said, was actively considering the setting up of a new DFI in which equity will be injected. However, he added, not a lot could be done because of IMF’s desire to control monetary expansion and independency.
He said the State Bank of Pakistan (SBP) has an export oriented financing facility but the amount was limited to Rs 15 billion, which was very low considering the Rs 5 billion assets of the banking sector. He said DFIs were very successful till mid 1990’s as international financial institutions (IFIs) also provided financial assistance but resources had dried up now.
On the capital market, he said, the government wants to lower the treasury bills denominations so that small investors can also participate. Similarly he said PPIB for tenure of 30 years were under consideration, adding that debenture markets can also be developed.
Stressing the need for depth of the local stock markets, he said, listing of shares of the public sector enterprises during the last decade have helped and inclusion of more companies especially from the power sector will assist the cause. However, he said at present private sector has more capital than the public sector.
Senator Ishaq Dar said that in 1990s DFIs had helped promote industrialization in the country and that had increased the revenue collection from Rs 300 billion to Rs 1300 billion in recent years. Since the commercial banks lack expertise to finance industrial projects, he proposed either the SBP or the National Bank of Pakistan to develop the expertise. He suggested that the central bank should make it mandatory for the commercial banks to finance industrial projects.
Chairman SECP Muhammad Ali Ghulam Muhammad informed the committee that the stock markets were at present driven only by the share trade and there was need to attract new players and introduce debt market. He assured the Senators that a new incentive policy will be devised to attract the most profitable local cellular operators to the stock markets.
IMF strapping financial expansion, secretary tells Senate
