IFC chief says $2bn annual investment in Pakistan not hard target

• IFC doubling down on Pakistan, eyeing large infrastructure financing. 
• Focus on investment in infrastructure, agri, digital, financial sectors.
• Says country needs investment in projects like airports, energy, ports.

After holding key meetings with Finance Division officials, the chief of the International Finance Corporation (IFC) said on Thursday that a $2 billion annual investment "is not a large number" for Pakistan, which needs infrastructure development in airports, energy, water, and ports.

The IFC Managing Director & Executive Vice President Makhtar Diop's maiden visit to Pakistan follows the World Bank's plans to allocate up to $20 billion for Pakistan under a Country Partnership Framework (CPF) announced in January, with the IFC also slotted to invest the same amount.

"Between now and maybe October we will be able to progress enough on a couple of transactions that will signal that this is a country ready to receive large-scale financing for critical and important infrastructure," Diop told Reuters in an exclusive talk.

Pakistan, which narrowly averted a sovereign debt default, is currently under a $7 billion International Monetary Fund bailout programme and navigating a tricky path to recovery.

With foreign exchange reserves not sufficient enough to meet a month's worth of controlled imports, the country desperately needs external funding for development projects.

The IFC had an exposure of $2.1 billion in Pakistan during the fiscal year 2024, ending in June, marking its record investment in the country's $350 billion economy, which grew by a meagre 0.92% in the first quarter of the fiscal year.

Diop said the IFC was looking into agriculture, infrastructure, the "very important" financial sector, and the digital sector.

The government is looking to generate revenue by speeding up a privatisation push, but efforts to privatise the national flag carrier, Pakistan International Airlines, and outsourcing the capital's airport have fallen flat.

In line with the IFC's global push, Diop said equity-based transactions were to be expected in Pakistan too.

"Debt will still be a very important part in our business, but our equity will increase in the world, but also in Pakistan. It means we are believing really in Pakistan because we can take equity for a long, long time," he said.

Earlier in the day, the IFC delegation led by Diop met Finance Division officials to discuss policies to spur industry-driven growth, particularly via export-led expansion.

“IFC is committed to working closely with Pakistan and providing support in key areas such as green energy, data centres, agricultural supply chain improvements, the telecom sector, and digitisation,” Diop said in a high-level meeting at the Ministry of Finance.

During the meeting with Finance Minister Mohammad Aurangzeb and his team, Diop commended Pakistan’s CPF agreement with the World Bank, calling it a global best practice.

Speaking to The News a day earlier, Executive Director (Pakistan) World Bank Group, Dr Syed Tauqeer Hussain Shah, said that the recently approved $40 billion country partnership framework for the next decade was a huge expression of confidence by the group in Pakistan’s reform agenda and economic consolidation during last two years, and MD IFC visit almost after a decade was further endorsement of this confidence.

Shah further said IFC had a very strong investment pipeline for Pakistan, but it remains subject to continued economic and political stability in the country.

Last month, the World Bank, which has currently committed about $17 billion to Pakistan for 106 projects, said that policy and institutional reforms to boost private sector growth and expand fiscal space for government investment in crucial areas would also be key.

Since 1950, the World Bank has provided over $60 billion in financing to Pakistan; however, the new programme represents a longer-term strategy compared to previous agreements, which typically spanned four to six years.