Pakistan to ask for US financing of Diamer Bhasha

Government hopes for allocation from Kerry-Lugar funds.

ISLAMABAD:

Pakistan has requested the United States to finance the multi-billion dollar Diamer Basha dam, the ground breaking for which is facing delays due to a lack of money.

An official of the economic affairs division in the finance ministry told The Express Tribune that the United States might take up the financing request for the fiscal year ending June 30, 2012. Pakistan has sought the funding out of the money allocated by the US government under the Kerry-Lugar-Brahman Act, which promises $7.5 billion aid over five years.

The total cost of the Diamer Basha project is $11.6 billion (Rs 997 billion). The dam will generate 4,500 megawatts of electricity at significantly cheaper rates than hydrocarbon-based energy. It is expected to have a storage capacity of 6.4 million acres feet (MAF) of water. The construction of the Bhasha Dam is also expected to extend the life of the Tarbela Dam, the largest mud-filled damn in the world, by about 35 years.

Pakistan is facing severe energy crisis. During the fiscal year ending June 30, 2010, the energy shortage shaved 2.5 per cent off the growth rate in the country’s gross domestic product, according to the Economic Survey of Pakistan, an annual finance ministry review of the economy.

Finance ministry sources say that Pakistan forwarded a list of 40 projects to the Obama Administration, including Diamer Basha, amounting to $23.6 billion to be financed under the Kerry Lugar Act. The Obama Administration would use its discretion to decide which projects it would finance. According to the source, even a few hundred million dollars allocated towards the Diamer Basha dam would be a positive signal to private sector global financiers, helping the government raise the rest of the financing from international capital markets.

Since 2009 the United States has disbursed only $359 million in aid through the government channel. Out of that, $174 million had been given during the last financial year and the remaining $185 million during first eight months of the current financial year, said the official.

The US government has pledged to provide half of the commitments through government channels. For the current financial year the US will spend almost $874 million out of $1.5 billion annual disbursements under the Kerry-Lugar Act.

Finance ministry officials say the government is in talks with the Asian Development Bank for financing the dam. The ADB wants to delay the dam ground-breaking until end of 2012 while Islamabad wants to do it at the end of 2011. Pakistan has sought up to $5 billion in loans from the Manila-based financial institution.

Published in The Express Tribune, March 4^th, 2011.