ISLAMABAD: The Economic Coordination Committee of the cabinet allowed the Water and Power Development Authority on Thursday to raise Rs20 billion through term finance certificates (TFCs) and Islamic Sukuk bonds for the $11 billion Diamer-Bhasha dam.
The committee, headed by Finance Minister Dr Abdul Hafeez Shaikh, decided to provide government guarantees for the purpose.
Wapda already raised Rs16 billion in 2006-07 for the dam which is estimated to generate 4,500MW of electricity and store 6.4 million acre feet (MAF) of water.
A senior government official said the Asian Development Bank had agreed to provide up to $4 billion long-term loan to help the government meet the foreign exchange component of the project. Another $1.8 billion needs to be arranged from foreign sources, either through international bonds or from friendly countries and institutions like Islamic Development Bank.
The official said that about Rs420 billion would have to be arranged locally in seven years through allocation from the Public Sector Development Programme and issuance of bonds in the domestic market. The government has already formed a `special purpose vehicle` to handle financial aspects of the project which will be formally activated when the government moves into the construction phase.
Currently, the government is in the process of acquiring land and building housing colonies for construction staff. Wapda says it will complete the paper work for the project construction bidding by early next year.
It may be mentioned that the World Bank and the United States have declined to provide financial support for the project. As part of the strategic dialogue a few months ago, Pakistan had sought US investments to provide a comfort level to international lenders.
The project`s cost, which was estimated at Rs895 billion at the time of the announcement of budget in June this year, has now been updated at Rs945 billion. The project, originally planned to be completed by 2016, is now delayed by about two years.
Officials said the government had decided to give top priority to the dam with maximum financial support, instead of spreading investment portfolio on several water sector projects to recoup the lost water storage capacity because of silting in the existing reservoirs and a shift in reliance from thermal to hydropower production.
This has become all the more important because Pakistan is reaching the threshold of water scarce countries with its per capita water availability dropping to about 1,000 cusecs per day from 5,300 cusecs in 1950. The country has not been able to build a dam in almost four decades.