By Moaaz Manzoor

Foreign commercial financing of Rs1.010 trillion constitutes the largest share of the Rs2.648 trillion funding plan for the Diamer Basha Dam project, according to official documents.

According to a Ministry of Water Resources document available with Wealth Pakistan, the financing plan combines Public Sector Development Programme (PSDP) grants, WAPDA equity, local and foreign commercial financing, and interest during construction.

The project is divided into two main components. The dam, reservoir and land acquisition component is estimated to cost Rs1.224 trillion, while the power generation component is estimated at Rs1.424 trillion.

The dam, reservoir and land acquisition works comprise Rs930 billion in local-currency expenditure and US$1.46 billion in foreign-currency requirements.

The power generation component includes Rs708 billion in local-currency expenditure and US$2.555 billion in foreign-currency requirements. Together, the two components bring the overall project cost to Rs2.648 trillion.

The document also details the proposed funding structure for the combined dam and power generation components.

Foreign commercial financing is projected at Rs1.010 trillion, equivalent to US$3.997 billion, making it the largest single funding component in the financing plan.

The PSDP grant is the second-largest component at Rs705 billion, equivalent to US$2.517 billion.

Interest during construction is estimated at Rs467 billion, or US$1.670 billion. WAPDA's equity contribution is placed at Rs236 billion, equivalent to US$844 million, while local commercial financing is estimated at Rs230 billion, or US$820 million.

The five rupee-denominated funding components add up to the total project cost of Rs2.648 trillion. Their corresponding foreign-currency values total US$9.848 billion, as reported in the ministry's document.

Foreign commercial financing accounts for approximately 38.14% of the total funding plan, followed by the PSDP grant at 26.62%. Interest during construction represents 17.64%, while WAPDA equity and local commercial financing account for 8.91% and 8.69%, respectively.

The document also identifies a total foreign financing requirement of US$4 billion.

Of this amount, US$500 million has been identified as available through a Green Eurobond already issued by WAPDA, while the remaining foreign financing requirement stands at US$3.5 billion.

The issued Green Eurobond therefore represents 12.5% of the identified foreign financing requirement, while the remaining 87.5% is yet to be arranged, according to the ministry's document.

The document does not identify the lenders expected to provide the remaining foreign financing. It also does not specify borrowing rates, repayment terms, maturity periods or the timeline for arranging the proposed financing.

The financing plan indicates that the Diamer Basha Dam project will be funded through a combination of foreign commercial financing, federal development support, WAPDA equity, local commercial financing and provisions for interest during construction.

Credit: INP-WealthPk