Issue bonds & build dams: Zafar Shaikh

Manzar Naqvi

KARACHI: Zafar Shaikh, former Director General Pakistan National Savings and former Advisor to SBP Governor on FX and Debt Management, has suggested that Pakistan Dam Infrastructure Bond (PDIB) should be issued to raise funding in addition to the initiative taken by the Supreme Court of collecting donations.

He said National Savings Schemes are a suitable source of long-term funding for government projects.

Talking to The Financial Daily, he quoted an example of June 2013 when National Savings raised around PKR 385 billion for the Government of Pakistan and the first time our investment portfolio crossed debt servicing. He said at the time of nuclear tests on May 28, 1998, Nawaz Sharif issued bonds yielding 18% to raise funds via National Savings and all those bonds came due in 2008 that we had to repay and then we replaced it with 11% therefore rolling over the investment. Bearing this example in mind, Zafar was of the view that National Savings has this potential to raise long-term funding for a demanding public project like the construction of a dam.

Zafar said these bonds can be issued in PKR or in USD while the tenure and repayment schedule can be replicated from the current Defence Certificate. National Savings can also specifically issue USD bonds for NRPs with a variety of coupon payment options such as repayment in PKR or in USD with differing coupon rates for each.

He highlighted that it would be of utmost importance to ensure that the proceeds of PDIB should be strictly used for the construction of dams and not co-mingled with other borrowings that are collected in the SBP accounts and are used for fiscal spending. Similar to the Supreme Court’s separate donation account, there should be an independent account for PDIB proceeds to be credited.

Going into further detail of the PDIB, he mentioned that a Special Purpose Vehicle can be created that will own the dam and be the primary debtor of the PDIB investors thereby synthetically segregating the project from other funding schemes and initiatives and providing investors the comfort that their investments are backed by a physical infrastructure that should earn Sharia Compliant income via hydro-electricity production – a green project that is also much cheaper than conventional fuel based power generation.

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