Badly managed money

When both sides of a transaction fail to fulfill their commitments there is something seriously wrong systemically

When both sides of a transaction manage to fail to fulfill their commitments there is something seriously wrong systemically. It is now almost four years since the Asian Development Bank agreed a $900 million loan to Pakistan. Today, less than $10 million have been disbursed, or 1.1 per cent, against the construction of a 660MW coal-fired power plant at Jamshoro, and replacing an existing oil-based plant with one that utilises what is being called ‘supercritical’ coal technology. Adding to the sting is the fact that Pakistan is paying 0.15 per cent commitment charges on undisbursed monies — paying for money that sits doing nothing. There has been little or no progress on the scheme and it is unlikely to be operational by the target date of April 2019.

Of all the sectors where Pakistan needs to be on an uptick power generation is at or close to the top of the list. In this instance both the lender and the borrower are mired in encumbrances of their own making. Project contracts have yet to be awarded and both the government and the ADB have been footdragging in finalising the bid documents. With the ADB still in the process of technically evaluating the bids for the installation of the ‘supercritical’ coal-fired power producers, there is a perfect storm of failure to deliver on all sides.

Pakistan in order to facilitate the loan in the first place had lifted a ban on the import of coal-fired power plants, the intention being that this would ultimately be of benefit in terms of the consumption of Thar coal. With most of the world, including China, moving away from coal-fired power generation investing in the poor-quality watery Thar coal is anyway of doubtful long-term value. Pakistan could find itself penalised as its currently negligible carbon footprint expands; and it has to be questioned whether the ADB had really done its homework regarding the viability of a coal-based project against the run of global play in energy generation. Factor in the laggardly approach on all sides and the entire project is starting to look like a slow-motion train-wreck. And who carries the can? Why nobody, of course.

Published in The Express Tribune, September 20^th, 2017.

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