The World Bank has approved an additional $1 billion loan for the Dasu hydropower project, despite significant challenges facing Pakistan’s energy sector, including an $18 billion circular debt that threatens future investments. This new funding, confirmed by the World Bank’s board of executive directors, is crucial for ensuring the continuation of a project that has been underway for over a decade and has faced multiple delays and security threats, including attacks on Chinese construction workers
The financing package includes a mix of loans: a $435 million short-term loan, a $365 million IDA Scale-Up Window loan, and a $200 million IBRD loan component. With this latest injection, the World Bank’s total financial commitment to the Dasu project now stands at 45% of its total cost
The Dasu hydropower project, located on the Indus River, aims to provide an installed capacity of between 4,320 to 5,400 MW, with the first stage targeting 2,160 MW. The project is being constructed by the China Gezhouba Group Company (CGGC) and is considered one of the best hydropower sites globally, potentially transforming Pakistan’s energy landscape
To accommodate ongoing work, the World Bank has also extended the project’s closing date to December 31, 2028. This extension will allow for the completion of various activities and enable WAPDA (Water and Power Development Authority) to leverage remaining financial guarantees to secure additional commercial financing
The World Bank has expressed concerns regarding the current state of Pakistan’s energy sector, which faces numerous obstacles in achieving affordable, reliable, and sustainable energy. Najy Benhassine, the World Bank Country Director for Pakistan, emphasized the urgent need for robust fiscal and economic reforms to stabilize the economy and facilitate future investment
The approval of this loan highlights the critical importance of international support for infrastructure projects in Pakistan, particularly in light of the country’s ongoing economic challenges.