Pakistan - Resource crunch may stall dam progress: ADB
The Asian Development Bank (ADB) has said that Pakistan’s limited financial resources may affect progress on Diamer-Bhasha Dam even if the international lending agencies extend the assistance for completion of the multi-billion-dollar project.
The issue of counterpart rupee funding against the external loans was raised by Klaus Gerhaeuser, the director general for Central and West Asia department of the ADB during a meeting with finance minister Dr Abdul Hafeez Shaikh on Thursday, said the sources.
Against the foreign assistance, the government has to provide Pak rupees to the equivalent amount as the dollars remain at the central bank. The initial estimate of the project is Rs834.2 billion.
This also includes Rs313 billion external loan, which is even higher than outgoing fiscal year’s total federal development budget.
As the civil works on the project is going on at very slow pace, the government has allocated only Rs6 billion for the project for the next financial year.
However, unlike the World Bank that has refused to finance the project,
the ADB remained committed for becoming the lead-financer of the dam, estimated to generate 4,500 megawatts of electricity besides storing water for agriculture on completion.
“The resources mobilisation issue is legitimate, but Pakistan has a history of completing mega projects successfully,” said finance minister Hafeez Shaikh. Downplaying any serious concern regarding project financing, Shaikh said that during the completion period there would be many turns and twists, but more importantly, the ADB was committed to the project.
The ADB was expected to become the lead financer in the project, but it has not yet announced the exact funding it would provide for the project.
The authorities were expecting $4 billion to $4.5 billion funds from the ADB.
To pacify the ADB’s concerns the government has increased the land acquisition cost to Rs116 billion against initial estimates of Rs40 billion, as the ADB wants to avoid litigation during the construction of the dam.
A finance ministry official said that the ADB urged Pakistan to give clear signal to the world that the construction of the dam was its topmost priority in order to attract more assistance.
Pakistan was also expecting $200 million assistance from the United States in the initial phase.
Klaus Gerhaeusser also held a meeting with the federal minister for water and power, Chaudhry Ahmad Mukhtar. An official of the ministry said that Mukhtar asked the visiting delegation to formally announce its decision to become the lead financer in the project besides completing other formalities.
Mukhtar also briefed the delegation on current power scenario and the steps being taken by the government to resolve the energy crises. The minister discussed financial and technical assistance for mega water and power sector projects.
According to an official handout, the ADB assured to support the mega water sector projects including the Diamer Bhasha Dam. The delegation also stated that the bank has provided $1.5 billion for various energy sector projects and would continue its financial and technical support for other projects.
Published in The Express Tribune, June 29th, 2012.
Resource crunch may stall dam progress: ADB – The Express Tribune