ISLAMABAD: The International Finance Corporation of the World Bank Group may inject $500 million in Pakistan Development Fund Limited (PDFL) – a company set up with a generous Saudi contribution of $1.5 billion – as the government has offered it 20% equity stake.
The government has decided to keep control of the company in its hands and therefore, offered only 20% equity stake to the International Finance Corporation (IFC) of the World Bank Group, said sources in the Ministry of Finance.
The IFC wanted majority stakes in the company, which the government did not agree to, said the sources. The IFC also wanted the position of the Chief Executive Officer (CEO) of the PDFL. However, the government did not want to give up control of the company, they added.
The negotiations between IFC and the Finance Ministry have been taking place for almost six months. It was not immediately clear whether the IFC accepted the government’s offer.
The spokesman for the Finance Ministry, Dr Shujat Ali, was not available for comments.
However, unlike the Asian Development Bank (ADB), the World Bank is, in principle, willing to become equity partner in the PDFL. The sources said that the government has informed the IFC that it would retain 40% stake in the company while 40% may be given to other stakeholders. They said that the government was also in negotiations with China Development Bank. A Qatari company was also interested in the venture, they added.
Even if the IFC agrees to 20% shareholding, it will still need other partners to fill the remaining 40% stake. The sources said that the IFC and the Finance Ministry have yet to resolve the issues regarding the structure of the company and administrative affairs. The company cannot become operational in the near future due to these issues, the sources added.
Due to non-resolution of administrative and financial issues, the $1.5 billion Saudi gift remains unutilised even after almost three years. 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.
Later on, it started finding an equity partner, although $1.5 billion was sufficient to start various projects. 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 mega projects over the past two and a half years.
The government has not even appointed a full-time CEO for the company set up to channel the funds. Finance Minister Ishaq Dar is the Chairman of the PDFL while Finance Secretary Dr Waqar Masood is the interim CEO of the company.
The Finance Minister has chaired a couple of PDFL meetings but things exist only on paper, 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, Dar invited the ADB to join the PDFL as an equity partner, according to a finance ministry handout. However, the ADB termed it a riskier venture and instead offered to provide loans for the PDFL 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 IFC was also in contact with the ADB, convincing it to acquire stake in the company, said the sources.