The Government recognizes the importance of improving and expanding infrastructure services for sustaining economic and social development in its Medium Term Development Framework(MDTF) 2005-2010. Pakistan's infrastructure needs are massive and its resources are limited. Not only is there limited fiscal space, there are also huge gaps in public sector capacity to build and operate infrastructure. Improved quality and service coverage in power and water supply, sewerage treatment, transport and logistics are vital for Pakistan's economy and the livelihood of its people. Tight fiscal constraints require innovative approaches, away from the traditional role of the Government as the service provider, to ensure that the massive investment needs are financed with the assistance of the private sector. The Government estimates that less than half of the infrastructure investment needs can be covered by public funds under the Medium Term Development Framework. A combination of policy reforms, institutional support, incentives and financing modalities is required to encourage private-sector participation in financing, constructing and managing infrastructure projects. In order to structure a comprehensive Public Private Partnership (PPP) program for Pakistan, the Government has looked at global best practice and sought the advice of multilaterals. Based on participant feedback and inline with global best practice, it was concluded that in order to have a successful PPP program, the country needs:

• commitment and participation at the highest levels within the Government;
  a conducive policy framework;
• an institutional set up containing core expertise to coordinate and promote PPP activities;
• a communication strategy;
• a policy on targeted subsidies; and
• availability of long term fixed rate financing in local currency.

As a follow-up to above, and with the assistance of the Asian Development Bank, the Government has structured a PPP program that includes;

1. Establishment of a PPP Task Force that is chaired by the Advisor to the Prime Minister on Finance and includes all key stakeholders. The purpose of the Task Force is to formulate a policy, regulatory and legislative structure that is conducive to creating a PPP market in Pakistan;
   
2. Establishment of the Infrastructure Project Development Facility that serves as the Secretariat to the Task Force, provides 'hands-on' technical assistance to implementing agencies at all tiers of government, builds their implementation capacity, and provides inputs financing, guarantees, subsidies etc.; and
   
3. Formulating a business plan to establish the Infrastructure Project Financing Facility (IPFF) to provide 'residual' long term fixed rate local currency financing.