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World Bank Approves $1 Billion Loan for Pakistan’s Dasu Hydropower Project

The World Bank has approved an additional loan of USD 1 billion to Pakistan to support the China-backed Dasu hydropower project in Khyber Pakhtunkhwa province.

This marks the third major financing installment from the global lender for this project, which previously secured USD 588.4 million for preparatory works and an additional USD 700 million for constructing the transmission line.

Strengthening Pakistan’s Energy Sector

Situated about 300 km north of Islamabad, the Dasu hydropower project is being developed by China Gezhouba Group Company (CGGC) and has faced significant challenges, including two deadly terrorist attacks targeting Chinese nationals involved in its construction.

Despite these setbacks, the World Bank remains committed to the project, viewing it as a crucial element in Pakistan’s efforts to improve its energy sector.

In a press release, the World Bank emphasized the importance of the USD 1 billion additional financing for the DASU Hydropower Stage I (DHP I) Project.

“This financing will support the expansion of hydropower electricity supply, improve access to socio-economic services for local communities, and build the Water and Power Development Authority’s (WAPDA) capacity to prepare future hydropower projects,” the statement read.

Najy Benhassine, World Bank Country Director for Pakistan, highlighted the multiple challenges facing the country’s energy sector in achieving affordable, reliable, and sustainable energy. He described the Dasu Hydropower Project site as “one of the best hydropower sites in the world and a game changer for the Pakistan energy sector.”

With a minimal environmental footprint, the project is expected to significantly contribute to ‘greening’ Pakistan’s energy sector and lowering electricity costs.

Economic and Environmental Impact

The Dasu hydropower plant, upon completion, will boast an installed capacity of 4,320–5,400 MW, positioning it as a key player in Pakistan’s transition towards renewable energy. Rikard Liden, Task Team Leader for the project, underscored the project’s critical role in helping Pakistan reduce its dependence on fossil fuels and achieve its target of 60 percent renewable energy by 2031.

The additional financing will not only expand electricity supply but also potentially save Pakistan an estimated USD 1.8 billion annually by replacing imported fuels. Furthermore, the project is expected to offset around 5 million tons of carbon dioxide, contributing to global efforts to combat climate change.

“The annual economic return of DHP-I is estimated to be around 28 percent,” Liden added, illustrating the significant economic benefits anticipated from the project.

However, the project has not been without its challenges. In March, a suicide attack claimed the lives of five Chinese engineers and their Pakistani driver at the project site. This followed a previous attack in July 2021, where ten Chinese nationals were killed and 26 others injured in a suicide attack on a bus en route to the Dasu Hydropower Project.

In response, Pakistan provided USD 11.6 million in compensation to the Chinese nationals affected by these terrorist incidents, underscoring the high stakes and persistent security risks associated with the project.

A Step Towards Energy Independence

For Pakistan, the Dasu Hydropower Project represents more than just a significant source of renewable energy; it is a step towards energy independence.

The country urgently needs cheaper electricity resources to reduce its reliance on expensive, imported fuel-based power generation. High electricity costs have led households, factories, mosques, and hospitals to turn to solar power, further straining those still connected to the national grid.

The approval of the additional USD 1 billion loan from the World Bank reflects the international community’s recognition of the importance of the Dasu Hydropower Project. It also signifies confidence in Pakistan’s potential to harness its natural resources for sustainable energy production.

As the project progresses, it is expected to bring not only economic but also social benefits to the region, providing a more stable and sustainable energy future for Pakistan.

The Dasu Hydropower Project stands as a beacon of hope for Pakistan’s energy sector, promising a shift towards greener, more affordable, and reliable electricity.

Despite the challenges and risks, the continued support from the World Bank and the commitment from the Pakistani government and CGGC highlight a determined effort to overcome obstacles and secure a brighter, energy-independent future for the nation.

 

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