KFAED, Pakistan ink KD 7.5 million loan funding dam deal

Kuwait: The Kuwait Fund for Arab Economic Development (KFAED) and Pakistan on Monday signed a KD 7.5 million ($24.4 million) loan agreement to fund the Mohmand Hydropower Dam project. According to a KFAED statement, the loan agreement was signed by Malik Muhammed Farooq - Ambassador of the Islamic Republic of Pakistan to Kuwait - whereas Waleed Al-Bahar, Acting Director-General of the Kuwait Fund for Arab Economic Development, signed the loan agreement on behalf of the Fund.

“The project aims to support economic and social development by enhancing national energy generation from the available hydroelectric resources to meet the increasing electricity demand, improve the region’s resilience to flooding, provide sustainable water resources for agriculture and drinking water for the region of Khyber Pakhtunkhwa Province (KPP), and create new job opportunities.” The KFAED went on to say that the project consisted of the construction of a hydropower scheme on the Swat River, located in the northeast of Pakistan, about 200 km west of Islamabad.

“It comprises a concrete-faced rockfill dam with a height of about 213 meters and a length of about 718 meters, creating a reservoir with a total length of about 56 km, an area of about 24 km2, and a volume of about 1.6 billion m3. The scheme will include a powerhouse with four electricity-generating units with a total installed capacity of about 800 MW capable of producing about 2,862 GWh a year.” The project would include flood protection, irrigation infrastructure, and an intake for future drinking water facilities.

The project also includes consulting and project management services. The project is expected to be completed by December 31, 2025. The total cost of the project is estimated at about 322.8 billion Pakistani rupees, equivalent to approximately KD 900.6 million.

The first Kuwait fund’s loan covers about 0.83 percent of the project costs, in addition to the contribution of the Islamic Development Bank in an amount equivalent to about KD 56.3 million, the OPEC Fund for Development in an amount equivalent to about KD 22.5 million, and the Saudi Fund for Development in an amount equivalent to about KD 75 million, while the Pakistani government will cover the remaining costs or any other increase that may occur in the project costs.

The loan is made for a term of 25 years, including a period of grace of about 5 years, and will be amortized by 40 semi-annual installments, the first of which will be due on the first date on which interest or other charges on the loan shall fall due after the elapse of the grace period.

The loan will bear interest at two percent per annum in addition to a charge of 0.5 percent for meeting administrative costs and the expenses of the implementation of the loan agreement. The fund loan is the nineteenth loan provided by the KFAED to Pakistan, as the Fund had previously provided eighteen loans to Pakistan in various sectors, totaling approximately KD 129.788 million.