Power projects: Donors reluctant to release pledged funds
At a time when the country is facing severe energy shortage, multilateral and bilateral donors are reluctant to release pledged funds owing to the suspended International Monetary Fund (IMF) loan.
Pakistan has not received a single penny from donors to finance 35 power sector projects during the first quarter of financial year 2012, document available with The Express Tribune reveal.
Majority of the projects are being financed by Asian Development Bank (ADB) and World Bank (WB). Germany, France, Japan, Korea, Kuwait and Abu Dhabi Fund have also pledged funds for some of the projects.
Multilateral donors have vowed to disburse Rs13.3 billion for the power sector projects during the ongoing financial year.
The IMF has criticised the government for its patchy implementation of fiscal reforms and has held back the sixth tranche of an $11 billion loan since August last year. Pakistan is due to start repaying the loan and its interest from early next year.
Sources told The Express Tribune that Pakistan is mulling over ending the remaining IMF programme, a move that may deter the bilateral donors even further.
For hydropower related projects, Pakistan has received a nominal sum of Rs250 million so far from the total pledged amount of Rs86.3 billion for the ongoing financial year. China stands as the major financer for water-related projects.
The amount was released for the Gomal Zam dam being built on the Gomal river in South Waziristan at a cost of Rs10.4 billion. The dam will generate 17.4MW electricity and irrigate 163,000 acres of land.
The major ongoing project in the power sector is Neelum Jhelum Hydropower project in Azad Jammu and Kashmir (AJK) which is being financed by Saudi Arabia.
The holdup in funding for the Rs84.5 billion project may create major problems for Pakistan as any delay in completion will deprive Pakistan of water rights over Neelum-Jhelum River.
The government did not handle the case properly in International Court against India’s construction of Kishenganga dam, Former Indus Water Commissioner Jamaat Ali Shah told The Express Tribune. He said that authorities should have obtained a stay order in the first hearing in The Hague on February 14, 2011. Pakistani authorities stating that no stay order was required got the case moving in the wrong direction, he added.
Other projects in the power sector relate to power distribution, transmission enhancement, rural electrification and upgradation projects.
Published in The Express Tribune, September 23rd, 2011.
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its been a long time since our country was created , i would have thought we could have a least sorted electricity issues out by now? - oops were to busy killing each other in the name of religion
Project finance comes either as aid or loan. Loans require credit worthiness, fiscal decipline, and certain degree of rule of law and continuity in policy structures.
Aid is either sympathetic, altruistic or transactional which requires good relations- malice to none good-will to all policy.
PAK has done poorly in both fronts- domestically and internationally.
The audited SBP balance sheet does not look good in terms of public debt and without the stalled fiscal and tax reform it is doubtful, if PAK can repay the outstanding loans which is due in coming years.
With liquidity crisis, creditors are cautious. The recent US-PAK bellicose stand will not help PAK either.
Devaluation of PAK currency may be a solution to the temporary problem.
@Meekal Ahmed: Donors do give loans based on what the IMF has to say. The IMF has to issue what is called a "letter of comfort" saying that Pakistanis are being good boys and following IMF's orders. Only then do the donors give money. The reason is that the IMF usually imposes conditions that maximize the likelihood that Pakistan will repay them. The donors seek similar conditions because they too are worried about the credit worthiness of Pakistan.
Now that we have left the IMF program our govt. need no longer make even the slightest attempt at fiscal discipline. So yes GoP will print money to finance the budget deficit and that will lead to hellish inflation and increased poverty.
Donor's do not link PROJECT assistance to IMF programs. It is the programme assistance for the budget and balance of payments that is affected and will not come in creating unfilled "financing gaps" that have to be filled somehow -- hopefully not by printing more money.