SAARC Development Fund to be mobilized in infrastructure sector

SAARC Finance Ministers Meeting

KATHMANDU, Aug 21: South Asia Association of Regional Cooperation (SAARC) member countries have agreed to extend assistance in economic and infrastructure sector of member countries by mobilizing SAARC Development Fund (SDF).

The funding was limited to social sector so far.

The seventh meeting of the SAARC Finance Ministers, which concluded in Kathmandu on Thursday, also decided to appoint a fund manager to collect funds and conduct credit rating SDF.

SDF has around US$ 350 million at present.

"A unanimous decision has been made among finance ministers to improve performance of SDF," Minister for Finance Ram Sharan Mahat said at a press meet organized after the concluding ceremony.

Responding to a query on whether there was any progress in formation of SAARC Development Bank, Mahat said the bank won't be formed anytime soon. "It will be premature to establish such institution at a time when SDF has been failing to run in a full-fledged manner," he added.

The plan to form SAARC Development Bank was floated in the 18th SAARC Summit held in Kathmandu. But the idea has been deferred taking into account the formation of regional infrastructure banks like Asian Infrastructure Investment Bank and BRICS Development Bank.

Madhu Marasini, chief of International Economic Cooperation Division under the Ministry of Finance said experts' group will devise necessary strategies within six months to address the need for fund for non-infrastructure economic projects and infrastructure projects. If required, branch offices of Thimpu-based SDF will be extended if needed, he added.

Nine different projects of social sector are in implementation in SAARC member countries with grant fund of SDF, according to information posted on SDF's website.

The meeting also revised the charter of SDF. Now onwards, member countries have their own projects. Earlier only the projects of common importance run simultaneously by at least three member countries were qualified for the grant.

The region which lags behind in infrastructure development front and connectivity for economic and financial integration will utilize the fund primarily for projects in areas such as energy, power, transportation, telecommunications, environment, and tourism, among others, according to finance ministry officials.

Mahat said the meeting focused on building financial integration among member countries.

Removing non-tariff barriers as well as trimming the sensitive list to boost intra-regional trade were the other issues discussed in the meeting, officials said.

The regional body also has plans to use local currency in trading and financial transactions among member countries. The finance ministers also held extensive discussion on currency swap agreement to boost regional trade. The next meeting of finance ministers is expected to take decision on currency swap agreement.

The meeting recommended that the forthcoming eighth meeting of the Inter-Governmental Expert Group on financial issues may examine the proposal and make its recommendations.

All finance ministers of the member countries of the regional body except India, Bhutan and Sri Lanka had taken part in the meeting. India was represented in the meeting by Minister of State for Finance, while Bhutan sent its finance secretary to attend the meeting. Similarly, Sri Lankan Ambassador to Nepal represented his country in the meeting.

The next SAARC Finance Minister's meeting will be held in Pakistan next year.

Inaugurating the meeting on Thursday, Prime Minister Sushil Koirala had stressed on flow of financial capital and intra-regional long-term investment as well as currency swap arrangements and promotion and protection of investment.