Under a public-private partnership, InfraZamin Pakistan Ltd will extend local-currency credit guarantees for infrastructure projects in Sindh.

Maheen Rahman, CEO of InfraZamin Pakistan, told Dawn on Tuesday that the company has signed a memorandum of understanding (MoU) with Sindh’s Public-Private Partnership Unit (PPPU), which will eliminate the need for bank collaterals by reducing the implied credit risk.

Bank loans and capital market institutions are sometimes used to finance infrastructure projects of the Sindh government. Sindh’s government often requires collateral or other kinds of assurances before banks lend to it, a practice that is consistent with global project and infrastructure financing norms.

Our guarantee will become the primary financial collateral when we extend the facility. It will free up some collateral that the Sindh government can use elsewhere,” said Ms Rahman.

It will permit the government to enhance its financial space while enabling a quicker financial close and project implementation by a private-sector player.

Through collaborations with private-sector stakeholders, the PPPU assists government departments in the preparation and execution of projects. Currently, it has delivered 58 billion rupees worth of projects. A portfolio of Rs700bn is currently managed by the company.

No bank takes “clean risk” on any institution when it comes to long-term infrastructure financing, even though governments and their associated departments are supposed to be risk-free borrowers. To protect themselves, banks always look for collateral or arrangements. In some ways, we’re a replacement for those services. Our guarantees make banks more comfortable lending to us,” she said.

Credit guarantees of up to Rs80 billion can currently be extended by InfraZamin Pakistan. As a result, we may be exposed to balance sheet risks. However, we also have international sponsors and partners who can help. “We have a good deal of financial muscle at our disposal,” she said.

It has already evaluated “two to three projects” put forward by the PPPU. Among these projects are the development of a state-of-the-art technology park and a water-recycling plant, according to Ms Rahman.

It was attended by Sindh Chief Minister’s Special Assistant for Investments and PPP Projects Syed Qassim Naveed Qamar and PPPU Director General Assad Zamin.