Dawn, April 4, 2011
By Khaleeq Kiani
ISLAMABAD: The United States has agreed to provide more than $500
million for the construction of Diamer-Bhasha dam to encourage
multilateral institutions like the World Bank to become part of the
lenders' consortium taking up the multi-billion-dollar project.
A senior Wapda official said the discussions between the US and
Pakistani authorities had already begun to finalise the size of the
financing and the mode of US participation in project development.
He said the US assistance for the project would be a combination of
investment and grant financing it had committed to under the
The Diamer-Bhasha dam has already been delayed by more than five years
and its cost has more than doubled.
The project was taken in hand as part of the five mega dams proposed by
former president Pervez Musharraf and it was to be completed in 2016.
The dam's cost was put at $6.4 billion (Rs400 billion) at the time.
The cost has now been revised to $11.2 billion (Rs953 billion) and its
completion date extended to 2021, which may be extended further as
economic indicators change during the course of project implementation.
An official of the USAID confirmed to Dawn that the US authorities were
currently studying the Diamer-Bhasha dam documents provided by Wapda
chairman Shakil Durrani and an exchange of additional information was
taking place with the economic affairs division.
"We have been told that the US would support the Bhasha dam project in a
big way," the USAID official said.
The official did not agree with the contention that Wapda had sought
about $1 billion for the project, saying Wapda chairman had been
reasonable in expecting US funding which could be anywhere between $400
million and $750 million. Normally, a US contractor has to become part
of any project in Pakistan to provide funding, he said.
But more than the size of the funding, the US participation and support
for the project would be crucial because it would send a positive signal
to other multilaterals, most importantly the World Bank, to open a
financing line to a project critical for Pakistan's energy and water needs.
The World Bank had earlier declined to fund the project because of its
location and some unresolved constitutional interpretations.
"When the US is funding a development project, the World Bank can hardly
stay away," an official said, adding the US energy department and other
relevant quarters had given a go-ahead.
Pakistan has been seeking US support and investment for the $11.2
billion dam in order to encourage international lenders to finance the
A part of the financing could be channelled through energy development
fund (EDF) that the US has been trying to create with the cooperation of
bilateral and multilateral lenders as part of the Friends of Democratic
The Diamer-Bhasha dam will have a designed live water storage capacity
of about 5.8 million acre feet (MAF) and power generation capacity of
4,500MW. The government wants an investment of about $3.7 billion in
foreign exchange for the project.With Pakistan reaching the threshold of
water-scarce countries, the government has already finalised a Rs40
billion out-of-court agreement with 30,000 families to be affected by
the proposed dam.
Pakistan's per capita water availability, which was more than 5,000
cusecs in 1950, has come down to 1,000 cusecs per day because the nation
has not been able to build a dam in almost four decades, according to a
senior Wapda official.
In January this year, the Economic Coordination Committee of the cabinet
allowed Wapda to raise Rs20 billion through term-finance certificates
(TFCs) and Islamic Sukuk bonds for the dam to establish housing colonies
and access roads to the project site and related infrastructure.
The Asian Development Bank had already agreed to provide long-term loan
to help the government meet the foreign exchange component of the
project but exact size of the funding is yet to be finalised.
The project seems to be viable and could offer up to 18 per cent return
on investment, which means that all the investors and lenders could
recover their investments within five years after completion.
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