ISLAMABAD, June 20: The World Bank has declined to finance large dams because of its financial constraints and unresolved environmental and resettlement issues attached to them.

Informed sources told Dawn on Wednesday that the bank wanted the government to achieve political consensus on Kalabagh Dam and resolve environmental and habitat issues relating to other large hydro power projects before formally seeking any funding from international donor agencies.

The bank estimated that each big dam could cost $6-8 billion and it was becoming difficult for it to arrange funding for them. It said it needed to form a consortium of banks and other lending agencies to arrange funding for large dams in Pakistan.

World Bank's officials, however, maintained that other banks and lending agencies, when recently invited to take part in the construction of large dams, suspected about their economic rate of return. They asked the World Bank to first ensure the completion of exhaustive feasibility studies about large dams covering all environmental and habitat issues to avoid criticism by human right groups and non-governmental organisations abroad.

The sources said that the World Bank was of the view that at present it could arrange a maximum of $500 to $1 billion funding from its sources which was not sufficient to finance any large dam. The government was advised to make adequate financial provisions for big hydro power projects especially about the much-publicised Kalabagh, Bahsha, Munda, Kurrum Tangi and Akhori dams.

“World Bank officials continue to argue whether large dams could generate enough money to pay back foreign loans,” a source said adding that the Bank praised China for arranging itself all major funding for its large hydro power projects.