Centre refuses to promise repayment of Gilgit-Baltistan loans

Published: August 28, 2013
One hydropower project is of 26 megawatts that will be developed in Shagharthang, Skardu and another is of 4MW to be constructed in Thack, Chilas.

One hydropower project is of 26 megawatts that will be developed in Shagharthang, Skardu and another is of 4MW to be constructed in Thack, Chilas.


The federal government has refused to take on the responsibility for repaying foreign loans being sought by Gilgit-Baltistan for energy projects, raising the spectre of a halt to international lending to the autonomous region.

The issue was highlighted in a meeting of the Economic Coordination Committee (ECC) held in mid-August, according to sources.

In an earlier meeting with the Asian Development Bank (ADB) for financing two hydroelectric power projects, approved by the Executive Committee of the National Economic Council (Ecnec), the matter of relending and repayment of loans by the Gilgit-Baltistan government also came up for discussion.

One project is of 26 megawatts that will be developed in Shagharthang, Skardu and another is of 4MW to be constructed in Thack, Chilas.

Gilgit-Baltistan is extremely rich in hydro resources, but electricity generation there is well below the potential. Hydropower projects with foreign financing are a necessity for the region.

Meeting participants told the ECC that the Gilgit-Baltistan government was not in a position to repay foreign loans for the two projects and other foreign-funded projects in the future. Therefore, the government of Pakistan should take on such loans and pave the way for implementation of projects.

They said the region had no financial resources and solely relied on the annual federal grant to finance its development plans and meet non-development expenditures. Gilgit-Baltistan neither has any taxation outlay nor gets any share from the National Finance Commission (NFC) Award.

The revenue from sale of electricity is also meagre because of consumers being mostly domestic, absence of industry and lack of any income-generating activity in the area. The region is also not connected to the national grid.

However, it is developing micro and small hydropower projects to meet its energy needs from the annual grant provided by the federal government.

Gilgit-Baltistan is not a province as per the Constitution of Pakistan. It has been given administrative autonomy through the Self-empowerment and Governance Order (SEGO) 2009.

To resolve the loan issue, government officials approached the Finance Division and Economic Affairs Division for their views, the ECC was told.

According to sources, though the Finance Division had not yet come up with its views, the Economic Affairs Division replied that the two hydropower projects would apparently be a property of Gilgit-Baltistan and they were expected to generate revenues. Consequently, the region should be able to pay off the debt being taken for the construction of the projects.

It would, therefore, be appropriate that the loans were forwarded to the entity that would be operating the projects as per the policy in vogue, it said.

However, in the event that the projects did not, for any reason, produce the required revenues, the government of Pakistan should consider picking up the liability, it said.

It was proposed that these projects should be exempted from the condition of relending. The ECC did not approve it.

Published in The Express Tribune, August 28th, 2013.

Like Business on Facebookfollow @TribuneBiz on Twitter to stay informed and join in the conversation.

Facebook Conversations

Reader Comments (21)

  • neil
    Aug 28, 2013 - 2:35AM

    Pakistan can’t pay it’s loans how is it going to pay for GB ???…India should help – we will finance projects and help them like we are helping Nepal/Bhutan and Bangladesh……OH wait zaid Hamid/ Hamid Gul and the ghairat brigade won’t allow that now will they …too bad …time to invest in candles …lol


  • Aug 28, 2013 - 4:59AM

    Does it not show the pathetic situation of Gilgit Baltistan who is unable to raise loan from foreign / domestic lenders as the Federal government refuses to assure ( extends guarantee) for repayment of infrastructure projects ( like hydro power ).


  • Uzair Malik
    Aug 28, 2013 - 6:33AM

    @Neil: According to a recent BBC documentary on channel 4, 800 million out of 1.2 bn i.e. 66% of the total are not short of electricity but OUT of electricity. I’m not saying anything, it’s the BBC guys @neil:


  • ModiFied
    Aug 28, 2013 - 8:21AM

    Shouldn’t India be helping GB as its an integral part of India ?


  • Faisal
    Aug 28, 2013 - 9:03AM

    GB should raise its own revenue. All provinces raise revenue and contribute towards the center. The center has no income except that generated through the provinces. Thats the federal structure. GB is also an aspiring profit. Making it totally tax-free, its income is dependent on the federal govt hand outs. Thats not the right solution. Why should money of other provinces be spent on GB when it can develop its own taxation system. Pakistan has already done lotso f development in that tax free zone. Its time they shouldered some of thier reponsibilitie rather then raising the bogey of India each time to scare us into coughing up more money.


  • Mirza
    Aug 28, 2013 - 10:03AM

    Why GB govt does not declare complete autonomy and neighboring countries would rush there for investment.


  • someone
    Aug 28, 2013 - 10:49AM

    You need to work on your millions and billions. BTW, 1000 millions make 1 billion and by your calculation, Indian population would be 4.8 billion.


  • Sajjad
    Aug 28, 2013 - 12:08PM

    @Neil: With the dwindling forex reserves India would soon be looking for foreign aid, let alone investing in other countries. Don’t worry about Gilgit Baltistan and Pakistan. We will sort out our problems.


  • Aug 28, 2013 - 4:34PM

    @Faisal: – it is the duty of the Federal government to make investment in the autonomous area or its provinces, develop infrastructure, roads provide inputs for revenue generation. If Federal government is unable and or unwilling to provide the requisite support Gilgit Baltistan can not develop means its people will remain in backward environment and do not have equal opportunity to any skill development. This will lead to perpetual state of darkness and unaceptable. Roads, bridges, power projects, encouragement for cropping, horticulture, Education and healthcare are the responsibilities of Federal government.Recommend

  • Faisal
    Aug 29, 2013 - 1:40AM

    @whitesky. The fed govt is funding GB since 1947. It is also providing free defence. There r no taxes either. People r treated free in army hospitals. The PIA flights to GB r subsidised. Now GB says they wanna be a province. So they should raise some revenue too. A dfed govt consists of a group of provinces and all the provinces fund themselves and fund te center too. The center is dependent on that. Fed govt doesnt get money out of thin air. They have to tax the components of the federation. Also GB is quite well developed as compared to many districts of punjab n sindh


  • Pradhan
    Aug 29, 2013 - 10:18AM

    Gilgit-Baltistan is not a province as per the Constitution of Pakistan.

    My previous comment was not published so, Is there any Pakistani can explain that Please??


  • Pradhan
    Aug 29, 2013 - 11:21AM

    I don’t understand, when you say GB says then who actually is saying here?? the politicians??? well the politician represent Pakistan’s Political parties and the election you guys conducted is by .7 million registered voters against 1.8 million population.

    So, who is it saying by the way ??

    about your funding ?? you have all your hydro projects which is being managed by Pakistanis, you sold their land to chinese, do you pay royalty to them for KKH ?? you are consuming their natural resources like yours and now you been saying that you were funding GB as if you were doing a favor??


  • Sajjad
    Aug 29, 2013 - 12:37PM

    @Pradhan: Gilgit-Baltistan is part of former State of Jammu & Kashmir which was liberated by the local people in an uprising against the Dogra rulers in 1947. The principled position of Pakistan is that only the people of that State can determine their future through a plebiscite held under United Nations. Hence Pakistan has as yet not made it a province, and its status is of an autonomous region.


  • Sajjad
    Aug 29, 2013 - 12:53PM

    @Faisal: The federal Govt is not doing a favour to GB by providing free defence. The area was liberated by local people who invited Pakistan to send its forces. Had the area been still a part of Kashmir, we would not have had any access to China. And how did we return the favour? For 60 years people of the area were deprived of any fundamental rights. They did not have any say in the way they were ruled from Islamabad. It was only in the last five years that they have been given the status of a sort of autonomous region. Please visit the area before comparing it to Punjab and Sindh. Even a district here had more budget than GB.


  • Pradhan
    Aug 29, 2013 - 3:08PM

    If what you are saying is correct, then who decides where the hydro projects to be established, who decides KKH should pass through GB and who/how it is decided if GB be a province of pakistan or they should go to elections or they should be given self governing rights for last 65 yrs ??


  • Sajjad
    Aug 29, 2013 - 5:17PM

    @Pradhan: Please see my reply to Faisal. This area has been directly ruled by Islamabad for 62 years and in 2008 it was given self rule. An elected assembly has now assumed some powers to rule locally. But defence, finance, communications and foreign affairs remain with Federal Govt. as is the case in all provinces of Pakistan, or for a matter of fact, in India where Centre has all these portfolios. Hence the major decisions are taken by Islamabad. So far no major Hydropower project has been constructed, although Basha dam is planned, but it may take some time to materialize.


  • Aug 29, 2013 - 10:13PM

    GB should start collecting transition charges for the vehicles moving from Pakistan to China and vice-versa by putting up toll plazas. If the centre refuses bluntly to provide funds for constructing a dam, then GB is at liberty to seek funds from India or any other country.


  • neil
    Aug 30, 2013 - 1:44AM

    @ Uzair…2 things first learn to count and when you say BBC – provide a link – now go light a candle …lol


  • Aug 30, 2013 - 4:07AM

    @Faisal: “The fed govt is funding GB since 1947” What funding has been made by the Federal governemnt since 1947 can you explain? How many schools , hospitals opened. Hydro power is generated there but GB remains in dark. It remained under the control of Islamabad from 1948 to the year 2008 but without any funding . what is the total amount spent by Islamabad
    ( Federal govt.) during last 60 years ? – less than one $billion on infrastructure and development of the area and the people.

    Faisal saheb on what basis you are claiming GB as well developed in comparison to some districts of Punjab & Sindh ? I am sure you have not visited GB ever.


  • Xubyr
    Aug 31, 2013 - 1:57AM

    Saying than GB has no sources of revenue generation will be a bit unjustified. But yes, it’s true that the revenue generated by or through GB goes directly to the center or federal Government. For example the revenue generated by Sust Dry Port has no share for GB, it’s a fact that ports comes under the federal government but there must be share of GB as well. Another biggest industry of our country was and up to some extent is tourism and almost 80% of the tourist comes to Pakistan because of GB, but the revenue directly goes to federal government. Other than that the currently proposed two mega hydro power projects, Diamer Basha Dam and Bunji Tunnel Power Project lies in the geographical boundary of GB. The whole power almost 12000MW again shall be utilized by all the provinces of Pakistan and these two small projects at Thak Chilas and Skardu have very important role in construction of these mega hydro projects. So the people of GB request the Government of Pakistan to review the decision of refusal of repayment of lone for these two projects of GB.


  • Faisal
    Sep 3, 2013 - 8:58AM

    Dear whitesky and all, My point was that the whole budget of GB is paid for by the federal govt. That includes everything, from roads and bridges to health, education, payment of salaries of all govt functionaries like police n other departments, subsidised flights and what not. And that has been going on since 1947. The place is tax-free and even the cars are non-custom paid. Stolen MEhran taxis ply all over in Gilgit. This cost does not include defence. That itself is a huge expenditure. And yes i have been to all over GB lots of times. I must have made 20-30 trips. And yes apart from the rwp-lhr belt, many districts of punjab like rajanpur are survivg on 1/10th the budget of GB and the living conditions are much poorer. So my request to the wonderful people of GB is to come out of victim mentality and shoulder more responsibility. Pay normal taxes and run ur place on ur funds. Someone mentioned tourism’s profits go tof ed govt? I dont see how, when most tourists use local hotels, transport, porters and thus contribute more to the local economy then fed ecenomy.


More in Business