Energy boost: ADB offers $4.5b for Diamer-Bhasha dam

Bank and Pakistan bridge differences, loan releases depend on pace of construction.

ISLAMABAD:

The Asian Development Bank (ADB) on Wednesday formally conveyed to Pakistan that the bank will give $4.5 billion for the construction of Diamer-Bhasha Dam to address the issue of water storage capacity and boost hydropower generation capacity.

The formal commitment was given by ADB’s Director General Central West Asian Department Juan Miranda at the conclusion of a two-day visit to Pakistan. He, along with his delegation, held meetings with economic managers, helping to ease tense relations due to the government’s handling of the flood-related $2 billion aid package offered by the bank.

Both the sides termed the visit “very productive” that bridged the differences that had emerged over the last 10 months.

The ADB delegation supported Pakistan in its efforts to construct Diamer-Bhasha Dam and agreed to take steps in this regard. Earlier, the bank had linked dam financing to a consensus resolution from parliament – a condition met by obtaining approval from the Council of Common Interests comprising representatives of both the federation and provinces.

The entire amount will not come in advance instead the releases will depend on the pace of construction. The government is expected to perform the groundbreaking ceremony of the dam very soon. It has allocated around Rs19 billion for the purchase of land in the next financial year.

The dam will have the capacity to store 8.1 million acre feet of water and generate 4,500 megawatts of electricity. The United States has also indicated that it may provide $250 million for the dam, a figure which is insignificant when compared to the total cost of $11 billion but is important to win financing from other international lenders.

$700m for refurbishment of tube wells

ADB, a Manila-based lending agency, has also in principle agreed to give $700 million for refurbishment of agriculture tube wells, a scheme which will run over three years and save 1,147 megawatts of electricity. Currently, there are 283,000 tube wells that need overhaul. The US is also giving money, out of the Kerry-Lugar aid package, for repairing 11,000 tube wells.

ADB has also agreed to disburse $200 million for the second generation capital market reforms before the close of the current financial year in June, but after completion of necessary formalities. The bank had withheld the money due to non-fulfillment of a condition regarding capital market reforms. The Securities and Exchange Commission has cleared amendments to the law that now requires final nod from the Council of Common Interests.

Both the sides agreed to fast-track loan disbursements and for that the government will have to amend Public Procurement Regulatory Authority rules.

They also discussed expansion of cooperation at the Central Asia Regional Economic Development Forum. Pakistan has tabled 13 projects for consideration of the forum in the upcoming meeting in Azerbaijan.

Published in The Express Tribune, May 26^th, 2011.