There has been no program lending or budgetary support by the Asian Development Bank (ADB) to Pakistan during the current fiscal year 2011-12, while discussions with the government regarding the prevailing issue of circular debt are going on.
Werner Liepach, ADB's Country Director to Pakistan, categorically told Business Recorder here on Tuesday that there had been no program lending to Pakistan during the current fiscal year as Pakistan government had not succeeded in getting the Letter of Comfort (LoC) from the International Monetary Fund (IMF). The issue of circular debt is under discussions with the government, he added. "We have not yet reached a final conclusion so far", Liepach said while talking to a group of journalists.
Liepach had categorically stated in September that there would be no further program lending to Pakistan unless it brought down macroeconomic stability through implementation of reforms, or got a Letter of Comfort (LoC) from the International Monetary Fund (IMF).
Liepach said that there were 22 ongoing ADB-financed projects in Pakistan. "No project in Pakistan has been halted, or suspended, during the current calendar year", Dr Liepach added.
"For the current calendar year, ADB's original disbursement projections to Pakistan were $450 million, but we have disbursed $502 million and this amount would increase to$520 million by December 31, and we would be required to disburse $1 billion in 2012 for those projects that are in the pipeline", Liepach said.
Rune Stroem, former Country Director present on the occasion, said that Diamer Bhasha dam project is led by the government of Pakistan, and Wapda is its executing agency. "We are going to sign a Memorandum of Understanding (MoU) with the government in the near future and discuss the way forward regarding the responsibilities of the government and ADB during the project. The draft of the said MoU would be reviewed by the government and our management this week", Rune Stroem said.
The Diamer-Bhasha Dam, with storage capacity of about eight million acre-feet and electricity generation of 4,500 mw would be built on River Indus, about 300 km upstream of Tarbela Dam and about 40 km downstream of Chilas Town, headquarters of the Diamer district of Gilgit Baltistan. The dam is expected to be completed in eight years and will cost over $12 billion. ADB has pledged that it would act as the government's investment banker in raising the money from international capital markets.
Stroem said that revenue sharing issues between the governments of Gilgit-Baltistan and Khyber Pakhtunkhwa (KP) must be resolved. He added that environment issues and social safeguards with respect to resettlement are extremely critical for successful completion of the Diamer-Bhasha dam.
"ADB has to perform 3 major roles during the project, namely (i) to act as a senior lender, (ii) co-financer and (iii) financial advisor to the government ", Rune said. Diamer-Bhasha was originally meant to be completed by 2017, but now is likely to be finished in 2021.
He said that if the government proceeds on fast track basis Diamer Bhasha could be completed within the time frame. Rune added that international financers, export credit financers and commercial financers are the main sources of financing for any project this size.
The boundary dispute between Gilgit-Baltistan and KP threatens to derail the Diamer-Bhasha dam project. In order to resolve the issues of resettlement, Prime Minister Yousaf Raza Gilani has already signed an out-of-court settlement with approximately 28,650 people in 31 villages likely to be affected by the construction of the Diamer -Bhasha dam and offered Rs 40 billion in compensation. However, residents of Kohistan district in KP have started protesting at what they perceive to be a low compensation rate in exchange for moving from the dam's proposed flood plain. Following this protest, Wapda has agreed to increase their amount from Rs 92 million to Rs 262 million.
KP has already decided to file a constitutional petition seeking Supreme Court direction on Diamer Bhasha Dam's territorial jurisdiction dispute after the Gilgit Baltistan Legislative Assembly passed a unanimous resolution against KP's claim over part of the dam last month.