Muhammad Ijaz Afridi
PESHAWAR: The Khyber Pakhtunkhwa (KP) government has approved plans to borrow $438 million from the World Bank, multilateral development banks, and commercial banks to fund its energy projects. With this new borrowing, the province’s total debt will rise to nearly PKR 967 billion.
The fiscal year 2024-25 recorded KP’s total debt at PKR 679.54 billion. The government obtained PKR 43.49 billion in additional loans during that fiscal period. The province aims to acquire PKR 165.53 billion in new debt for 49 development projects which will raise total debt to about PKR 845 billion during the upcoming fiscal year 2025-26.
The majority of this debt comes from the World Bank which provides PKR 81 billion and the Asian Development Bank which provides PKR 72 billion.
The provincial cabinet’s standing committee has formally approved the additional $438 million (around PKR 122 billion) for two energy projects. This funding will come from external financial institutions and commercial banks.
KP has several hydroelectric projects under construction, including Gabral Kalam, Madain, Balakot, Lavi, and Gorkin/Matilitan. However, documents from the cabinet’s energy committee reveal financial and administrative challenges. The combined cost of five major projects is about $955.1 million, while the provincial government has only provided $132.9 million in initial equity. The total funding consists of three sources which include the World Bank funding of $215.6 million and commercial financing of $185 million and development banks which provide $253.3 million.
The 300 MW Balakot project has achieved 27% completion while the 69 MW Lavi project has reached 60% completion and the 84 MW Gorkin/Matilitan project has achieved 88% completion. The government plans to increase its borrowing for upcoming projects, although it faces delays and higher expenses which arise from both post-2022 flood design modifications and climate protection initiatives.
KP’s finance advisor, Amirzamal Aslam, clarified that the $438 million is not new borrowing but part of previously approved World Bank loans from 2020. He stated that the projects will generate enough revenue to repay their loans which means that no further provincial financial resources will be needed. He explained that the loans exist to support investment projects that focus on developing green energy solutions instead of funding government expenses.
The debt of KP has increased continuously since 2013 when it reached PKR 130 billion, to its current total of PKR 454.35 billion as of 2022-23. Last year, it reached PKR 679 billion and with the new loans, it will reach nearly PKR 967 billion.
The provincial government will borrow the new funds in stages as projects progress. This year, debt repayment will total around PKR 60 billion, or about PKR 5 billion per month.
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