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The Universal Service Fund (USF Pakistan), despite holding substantial funds on its books, is grappling with cash-flow challenges that hamper its operations, the Asian Development Bank (ADB) revealed in a recent report.
According to the ADB, USF Pakistan was established to bridge the viability gap in remote, hard-to-reach regions and plays a critical role in narrowing the country’s digital divide. Although mobile internet coverage extends to over 80 percent of the population, the remaining segment resides in geographically challenging areas where private investment is often unfeasible without support.
USF Pakistan was designed precisely to tackle this issue by financing infrastructure in underserved regions. However, the ADB pointed out that despite having sufficient funds recorded, the fund has run into cash-flow bottlenecks.
This situation is largely due to a regulatory framework introduced six years after the formation of the Universal Service Fund Company (USFCo), which requires all USF receipts to be deposited into Pakistan’s National Consolidated Fund. Consequently, USF must withdraw money from this central pool, often encountering delays and additional approval layers, leading to periodic shortages of readily available funds.
Lack of Demand-Side Programs Limits USF Pakistan’s Impact
The ADB also noted that USF Pakistan currently does not fund initiatives aimed at boosting demand, such as programs that encourage people to adopt digital services. By neglecting demand-creation efforts, the fund misses an opportunity to stimulate telecom operators to invest more heavily in underserved regions, which aligns with its core mission.
USF is primarily financed through obligatory contributions from licensed telecom operators, who pay 1.5 percent of their gross adjusted revenues. It receives no direct subsidies or funding from the government, relying entirely on these levies as mandated under licensing obligations.
In its report, the ADB recommended reforming USF Pakistan to better channel its resources in ways that attract investment into unserved areas. Suggestions included financing telecom infrastructure providers directly instead of service operators and supporting demand-side projects like the Smart Village initiative or smartphone distribution programs. Additionally, the Bank stressed that USF funds should prioritize extending fiber optic networks to all Union Councils, effectively enhancing rural connectivity.
