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Pakistan to get $1.4bn WB loan, ADB to give $810m

* $1bn WB loan to have 17% interest
* ADB funds for power projects

ISLAMABAD: The World Bank (WB) and the Asian Development Programme (ADP) will give Pakistan $1.4 billion and $810 million in loans, respectively.

The WB’s $1.4 billion lending programme will support development in various sectors during the current fiscal 2008-09 year, a senior official in the Economic Affairs Division told Daily Times on Wednesday. He said anonymously that the lending programme consisted of $1 billion loan under the International Bank for Reconstruction and Development (IBRD) and $400 million loan under the International Development Association’s (IDA) country assistance programme.

Interest: He said the $1 billion IBRD loan would be provided on market rate, elaborating that market rate loans had an interest rate of 17 percent. He added that the $400 million IDA loan would be a soft loan, which is likely to have one percent interest rate, and would be for technical assistance.

Sources in the Finance Ministry say Pakistan is facing problems to return WB loans as there is a condition that they will be returned in any currency (dollor or euro), which has a higher value.

The official said there was no money for mega power projects, such as Basha and Munda dams, in the lending programme.

A WB official said anonymously Pakistan was negotiating for mega power projects with the bank. The WB official said Pakistan had also asked the WB to finance three other reservoirs, including Tarbela-IV, Munda Dam and Kohala Dam, and that Pakistan would need $3 billion for these projects. The Water and Power Ministry held a meeting with a WB team in June in this regard. These projects will generate 3,000 megawatts of electricity daily.

He said that there was however an allocation for power distribution companies in the loan. He said the loan for power companies would bind Pakistan to end subsidy on electricity and that the WB had previously set December as the deadline to end electricity subsidy.

The official said the government was working to expand the Tarbela Dam under the name of Tarbela IV following WB’s suggestion it could be operational earlier than other big power projects.

The sources in the ministry said the visiting WB team was also informed that the construction of these new projects would reduce Pakistan’s dependency on oil imports.

Power projects: The ADB loan will be for power projects, and the inflows are expected to begin in September, an official told Reuters anonymously. “The facility to be implemented over the next 10 years has been negotiated with power distribution companies and the formal approval by the bank is expected in August,” the official said, adding that “disbursement is likely to start from September or October”. zafar bhutta/reuters

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