Setback for Pakistan as WB ‘refuses’ to fund Diamer-Bhasha

Discussion in 'Pakistan' started by Ray, May 3, 2014.

  1. Ray

    Ray The Chairman Defence Professionals Moderator

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    Setback for Pakistan as WB ‘refuses’ to fund Diamer-Bhasha

    * Bank approves $12 billion five-year assistance package, but no financing for dam
    * Loans to be repaid in 30 years, with 2% mark-up


    [​IMG]

    SLAMABAD: The World Bank (WB) Group has now approved a package of assistance worth $1 billion to support Pakistan’s economic reforms, besides giving it $11 billion under a five-year Country Partnership Strategy.

    However, it has declined to finance the much-needed 4,500MW Diamer-Bhasha Dam during the next fiver years (2015-2019).
    The assistance package, which was approved by the WB Board of Directors on Thursday, consists of two Development Policy Credits (DPCs) to support the Pakistani government’s efforts to improve the power sector, and reinvigorate growth and investment for reducing poverty and creating shared prosperity. However, Pakistan faced a serious setback, as the WB’s CPS 2015-2019 did not include financing of the Diamer-Bhasha Dam that has the capacity to produce 4,500MW electricity to bridge the widening demand and supply gap of electricity.

    Addressing a press conference through a video link from Washington, World Bank Country Director for Pakistan Rachid Benmessaoud said the government should give independence to NEPRA towards determining power tariff, and that there was no connection between the approval of the loan and the increasing power tariff.

    He also said poverty trend in Pakistan was on the declining side, as the government had initiated several programmes for poverty eradication.

    “Helping Pakistan in deepening multi-sectoral policy reforms and performance-based investments in the social and human development sectors has guided the bank group’s assistance strategy in Pakistan over the last few years,” said Rachid Benmessaoud, adding, “In formulating the new Country Partnership Strategy, a wide range of stakeholders, including civil society, media, youth, parliamentarians, and federal and provincial governments, were consulted.” He also said the new strategy was structured to help the country tackle the most difficult, but potentially transformational, areas to reach the twin goals of poverty reduction and shared prosperity.

    Benmessaoud also said the WBG’s Pakistan Country Partnership Strategy was anchored in the government’s framework of 4Es – energy, economy, extremism and education – and the initial priorities of the incoming Vision 2025.
    Enough flexibility has also been built into the strategy to allow for quick reallocation of resources in case of unforeseen needs or emergencies.

    Giving details of the assistance, the World Bank country director said that the WBG had approved a package of assistance worth $1 billion to support Pakistan’s economic reforms. Talking about the assistance of $1 billion, the country director said that $600 million (with additional co-financing support of the Asian Development Bank and the Japan International Credit Agency) supports Pakistan’s goal of developing an efficient and consumer-oriented electric power system that meets the needs of its people and economy, sustainably and affordably.

    The two credits are financed by the International Development Association (IDA), and would be on standard IDA terms, with a maturity of 25 years, including a grace period of 5 years.

    Meanwhile, the Finance Ministry released a handout stating that the World Bank loans were purely concessionary in nature with repayment schedule spanning over a period of 30 years, including a five-year grace period, and the interest rate would be nominal at the rate of 2% per annum.

    It is expected that $1 billion would be transferred to Pakistan during the next week, and it will increase Pakistan’s forex reserves substantially. The WB loan will incur 2% interest per annum and the Government of Pakistan would be saving net 10.5% in payment of interest on Rs 100 billion. Resultantly, there will be no net increase in the overall public debt.

    Setback for Pakistan as WB ‘refuses’ to fund Diamer-Bhasha

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    It is good that the World Bank is giving money to Pakistan, which is rather badly cash strapped.

    The only issue is the repayment. It will be a burden on Pakistan and can lead to defaulting on repayment.

    Is that the reason why the WB did not want to finance the Diamer-Bhasha Dam that has the capacity to produce 4,500MW electricity to bridge the widening demand and supply gap of electricity?

    But then hasn't a 5 year grace period also been built in? It is good that Pakistan is getting this huge amount at a throwaway interest rate of 2%.

    That is unfortunate since Pakistan is reeling in massive power cuts that reduces her standing with her people and with the world that Pakistan is a modern developing nation.

    However, it is good that enough flexibility has also been built into the strategy to allow for quick reallocation of resources in case of unforeseen needs or emergencies since Pakistan has in the past had repeated unforeseen needs and emergencies.

    Pakistan’s goal of developing an efficient and consumer-oriented electric power system that meets the needs of its people and economy, sustainably and affordably is laudable, but the issue is, which has been identified by the WB, how can those in poverty pay competitive rates so as to make the power sector sustainable?
     
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  3. Illusive

    Illusive Senior Member Senior Member

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    I feel for the common sane pakistani's who have to deal with daily power cuts because their govt refuse to cut spending and use all the aid money on defence and maintaining nuclear weapon stockpile and production.
     
  4. Ray

    Ray The Chairman Defence Professionals Moderator

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    This is how they are doing it

     
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  5. Illusive

    Illusive Senior Member Senior Member

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    Strange, how does the power situation improve in Ramzan, do they borrow from some other country.
     
  6. sob

    sob Moderator Moderator

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    By shutting off electricity to industry and villages.
     
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  7. jmj_overlord

    jmj_overlord Regular Member

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    10 hour load shedding is too much......maybe pakis should look for other sources to generate power....
     
  8. Compersion

    Compersion Senior Member Senior Member

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    it would be a good idea for india to offer loans to Pakistan - the collateral and also guarantee can be explored also in imaginative ways in case the pakis are not able to pay on time and pay at all and in case of terrorist attacks. india is able to get insurance due to its financial structure and performance where pakis would face trouble. the pakis common man is facing problems because of the silly and mindless policies and behavior of the paki leadership.
     
  9. Yusuf

    Yusuf GUARDIAN Administrator

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    I thought they announced they wing be taking any loans.

    What happened to Islamic banking without interest? No problem with interest payments to Satan's bank?

    I think Pak will now ask China to make this dam.
     
  10. thakur_ritesh

    thakur_ritesh Administrator Administrator

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    China could be very interested. Any previous negotiations between Pakistan and China on this?
     
  11. Yusuf

    Yusuf GUARDIAN Administrator

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    China is already involved in Pak hydro-electric projects IIRC. I think WB not sanctioning them funds could be due to pressure from India.

    I don't know if China will be willing to pump in $10-15 billion in this project. Depends on how they think. India should keep up the pressure to not allow any work in Gilgit Baltistan
     
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  12. Virendra

    Virendra Moderator Moderator

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    10 hour power cut in the scorching heat of May-June !!
    That is going to fry many heads.
     
  13. Hari Sud

    Hari Sud Senior Member Senior Member

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    World Bank is an American owned with its fancy name. In addition it has outside US directors. It's bureaucracy is also half and half with all top jobs held by American citizens or sympathies in Europe.

    When the World Bank signals unhappiness of any project, it is the unhappiness of the US government.

    In case of Basha Dam, US has been telling Pakistan that it is non feasible project.

    For Pakistan, if you think US is wrong, then build it with Chinese money. Buy less of guns, fighters and submarines from them. Instead use the money to build this dam.
     
  14. Ray

    Ray The Chairman Defence Professionals Moderator

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    I think the WB should help Pakistan to understand what they must do to conserve water, generate electricity, and yet at the same time, not build dams that regenerates areas but at the same time, denies water to the lower parts of the dam and make them a desert.
     

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