The World Bank (WB) is set to provide a fresh $1 billion loan for the first phase of the Dasu Hydropower Project after the approval of a revised PC-1 (Project Concept-1) with updated timelines for completion. The loan will support the first stage of the project, which is aimed at generating much-needed energy for Pakistan.
A senior official from Pakistan’s Economic Affairs Division (EAD) confirmed that the overall cost for the first stage of the project has surged by 190.1%, climbing to Rs1,700 billion from the originally projected Rs586 billion. Several factors have contributed to this increase, including delays in land acquisition, security concerns, and the significant appreciation of the US dollar, which has risen by 178%.
The Dasu Hydropower Project, situated on the Indus River in Kohistan (Upper), Khyber Pakhtunkhwa, is expected to generate 2,160 MW of electricity in its first stage. Upon the completion of the second stage, the total capacity will double to 4,320 MW, making it one of Pakistan’s largest energy-generation projects.
The project is being developed in two stages:
- Stage I will produce 2,160 MW with an annual output of 12,222 GWh. It is expected to be completed within five years.
- Stage II, once finished, will produce the full 4,320 MW and generate 21,445 GWh of energy annually.
The site is located approximately seven kilometers upstream of Dasu Town and is 74 kilometers downstream from the proposed Diamer Bhasha Dam site, around 345 kilometers from Islamabad.
To support the project’s escalating costs, the World Bank is lending $1 billion. The breakdown of the financing is as follows:
- $800 million from the International Development Association (IDA), with favourable terms,
- $200 million from the International Bank for Reconstruction and Development (IBRD).
From the IDA loan, $435 million will be provided at zero interest, while $365 million will be offered at an interest rate of 5.83%. The IBRD loan will carry an interest rate of 6.13%.
The initial land acquisition for the dam was expected to be completed by 2014, but due to various challenges, it wasn’t finalized until 2021-2022. Additionally, the depreciation of the Pakistani rupee against the US dollar has added further pressure to the project’s financials, making it more costly to implement.
Originally slated for completion by 2023-24, the new timeline now sets the expected completion date for 2027-28. Despite these delays, the Economic Affairs Division has played a key role in redirecting the bank’s funds to this critical infrastructure project. The World Bank has already extended loans to Pakistan in various sectors, but this repurposing of funds will ensure the timely execution of the Dasu project, which is considered essential for meeting the country’s growing energy demands.
With the revised financing package and formal approval from the Planning Commission imminent, officials from Pakistan’s Ministry of Water Resources confirmed that a final agreement between WAPDA and the World Bank will be signed in the coming days.
