Mobilising investment for growth, job creation, and prosperity
Khyber Pakhtunkhwa (KP) has been recovering from the effects of a 30-year conflict across the border in Afghanistan that began with the Soviet invasion and evolved into the global war on terror. During this time, KP welcomed millions of Afghan refugees and internally displaced people without much federal assistance. The recent withdrawal of US troops from Afghanistan has introduced another wave of instability. These conflicts, along with frequent climate-induced natural disasters in the province, have limited public and private investment in the province and weighed down growth below its potential.
Geographically, KP is ideally located to benefit from regional connectivity, has a large and growing young workforce, and untapped natural resources – including immense renewable energy potential. But the province must overcome growing climate threats, lagging business environment, inadequate infrastructure and narrow fiscal base to reap the benefits of its natural economic advantages.
The Project/what we are doing about this challenge:
The Sustainable Energy and Economic Development (SEED) programme has been working with the Government of Khyber Pakhtunkhwa (GoKP) since 2020, with support from the Foreign Commonwealth and Development Office (FCDO,) to promote both public and private investment, with a strong emphasis on climate finance. SEED develops evidence-based policy solutions grounded in international best practices to improve public investment efficiency and achieve fiscal savings to make more funds available for productive public investment, especially in climate-resilient infrastructure. SEED has also introduced policy reforms to enable private investment and provides downstream support to investment projects – especially Public Private Partnerships – to close the infrastructure investment gap in critical sectors including roads, tourism and energy. Now, in its final year of implementation SEED is working to consolidate gains and ensure sustainability of interventions.
What the project has achieved so far / intends to achieve:
- Filled gaps in KP’s policy and institutional regime for Public-Private Partnerships in the province. SEED has developed rules and activated structures that enable the GoKP to partner with private investors for executing PPP projects in critical sectors. A total of 19 commercially viable PPP projects are currently in the pipeline.
- Helped negotiate and close one transaction worth $143m i.e. Swat Motorway-II which will potentially serve over 5 million commuters annually.
- Providing ongoing transaction advisory support for five priority investment projects in tourism and transport.
- Carbon market inventories under development for:
- Energy (estimated $48.5m over 30 years): Eligible projects for Verra (8), Gold Standard (13), GCC (13) and I-RECS (52)
- Forests (estimated $1.3b over 25 years): Potential of over 13 million carbon credits annually
- Helped the GoKP introduce landmark pension reforms:
- Legacy pension reforms will yield PKR 148 billion in fiscal savings over 11 years.
- The first contributory pension scheme in the country for provincial civil servants that is estimated to save roughly PKR 700 billion over the next 30 years
- Helped the GoKP improve its score on the IMF’s Public Investment Management and Assessment (PIMA) framework from 4.33 in 2021 to 4.6 in 2023, based on assessments commissioned by SEED. Th program’s support resulted in improved project appraisal, alternative infrastructure financing and project implementation which delivered 63% of the improvement in GoKP’s PIMA score.
