Govt prepares financing plan for Diamer Bhasha Dam

The government has prepared a $12.5 billion funding programme for Diamer Bhasha Dam with resources coming from internal and external sources including the Asian Development Bank, the United States and Islamic Development Bank, seemingly dealing a blow to India’s attempts to block foreign financing for what it calls a controversial project.
According to reports, the Indian lobby in Washington has been actively campaigning against Diamer Bhasha Dam, asking the US and other lenders to link their assistance for the project with a no-objection certificate from New Delhi, which claims that the dam is located in the disputed territory of Gilgit-Baltistan. Unfurling the financing plan, officials said the government had finalised an arrangement with the ADB that will result in a loan of $4 billion for Diamer Bhasha Dam. The ADB has also given the assurance that it will provide more if the need arises.
The other major donor will be the US Agency for International Development (USAID) that has pledged $2 billion over eight years – $250 million per year. “This financing is part of US strategy to cooperate with Pakistan to overcome the energy crisis,” an official of the Ministry of Water and Power said. Japan and EU countries have also consented to giving $1.5 billion for the dam under the supplier credit programme. In the programme, they will provide equipment and machinery for constructing the dam against financing of $1.5 billion. Repayment of these loans would start after 10 years, the ministry official said.
Islamic Development Bank (IDB) and other Middle Eastern lenders will lend $1.5 billion.
Besides tapping these foreign sources of financing, the Pakistan government will generate $1.5 billion by securitising assets of existing dams like Tarbela, Mangla and Ghazi Barotha.
The United States and other lenders have backed this financing plan, underlining the need for securitising assets of different dams in an effort to secure funds from the international community. The government is also banking on the recovery of huge unpaid bills by the Water and Power Development Authority (Wapda) from power consumers as the collected amount will go for building the dam. In this programme, Wapda is expected to generate $1 billion.
The central government will also release $1 billion from the Public Sector Development Programme (PSDP) to implement the project. “The government has already provided Rs15 billion from the PSDP and 12 contracts of different nature have been awarded for completing the dam,” the water and power ministry official said, adding more money would also be provided. German firm Lemhyer put the cost of the dam at $8.5 billion in 2008 compared to estimates of $6.5 billion in 2005. The cost has gone further up and estimates suggest that it now stands at $14 billion following years of delay as according to the plan construction should have started in 2009.