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| 23 February 2004 | Monday | 02 Muharram 1425 |
WB offers $10bn soft loan
ISLAMABAD, Feb 22: The World Bank has offered up to $10 billion in soft loans for water and power sectors over the next few years, a source said.
President Gen Pervez Musharraf has, however, indicated that Pakistan was willing to accept a loan of $3-4 billion over the medium term period provided it was lent under the international development assistance (IDA) terms.
The bank's delegation, led by its South Asia vice-president Praful C. Patel, "was on a specific assignment to persuade Pakistan to apply for loans amounting up to $10 billion since its loans in the pipeline are now drying up", said a senior government official who attended the meeting between the president and the WB delegation last week.
The official said the World Bank was re-thinking its lending strategy for Pakistan from commercial lending to concessional loan programmes in view of the improving macroeconomic situation and the drying up of its credit line.
The source quoted the World Bank vice-president as assuring President Musharraf "as for any amount I (the bank VP) will get it approved from the (World Bank) board on soft terms".
Pakistan has, however, told the bank that it was not ready to consider loans other than under the IDA which carries upto 0.7 per cent service charges, he said.
Pakistan did not seek any new loan programme from the bank since it launched Ghazi Barotha Hydropower Project in the early 1990s and was in the process of repaying its expensive debt ahead of schedule.
A meeting of the power sector policy committee, which is led by the minister for water and power with members from all economic ministries, has been scheduled for Tuesday in Islamabad to consider the bank's offer besides other related matters, the official said.
The government is expected to decide about its overall funding requirements within 15-20 days so as to present it before the Pakistan Development Forum (PDF) conference to be held next month.
The official said Wapda's power sector alone required up to Rs500 billion over the next 10 years to generate up to 10,000-mw of additional electricity in view of the rising demand in the industrial growth.
Wapda sources said the utility's peak demand was currently increasing at the rate of 1,000-mw per year following improvement in the macroeconomic situation. So up to $1 billion loan could be acquired for the power sector. In the short term Rs15-20 billion was required for system augmentation over the five-year period to reduce Wapda line losses.
The bank's delegation also referred to the proposals of commercialization and corporatization of the power sector and recommended that electricity be provided to the consumers on the cost of service basis which meant removal of cross subsidies.
The bank, appeared concerned over the delay in dividing Wapda into 13 entities, but did not press the point too much because its position has reversed from a reluctant lender to a lender eager to lend to Pakistan.
The sources said the bank was also expected to extend funding programme to Pakistan for Kalabagh Dam project or any other big storage project if the government so desired.
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