ISLAMABAD - Pakistan and Kuwait on Thursday signed additional loan agreement of $32 million for the Neelum Jhelum Hydro Power Project, as the project would generate 969 MW of electricity on completion.
Secretary Economic Affairs Division (EAD), Saleem Sethi and Deputy DG Kuwait Fund, Hamad Al-Omar signed the agreement on behalf of their respective governments in the presence of Finance Minister, Ishaq Dar and Ambassador of Kuwait, Nawaf Abdul Aziz Alenezi.
Finance Minister welcomed signing of the agreement saying, it adds another chapter to Pak-Kuwait economic cooperation. Ishaq Dar on behalf of the Prime Minister and people of Pakistan, thanked the leadership and people of Kuwait for their continued support to Pakistan
Deputy DG Kuwait Fund said it was a pleasure for him to sign this agreement on behalf of government of Kuwait. Kuwait fund has undertaken a number of development projects in Pakistan and would continue its support, he said. The hydroelectric project is being constructed near Muzaffarabad, Azad Kashmir, which would add 969MW electricity to the national grid. The project has a total cost of Rs 275 billion with a planned foreign funding of $1585 million. In this regard $1110 million have been committed by various donors including IDB, Saudi Fund, OPEC Fund, Kuwait Fund and China Exim Bank.
Pakistan is already facing  severe financial constraints for 969MW Neelum-Jhelum Hydropower Project, as the project still faces a $475 million financing gap, threatening its timely execution. The government is seeking funds from various sources to complete the project on time.
“The project was due to complete in 2015, but it is not possible because of a shortage of funds; so it will definitely be completed by 2016,” project director Neelum-Jhelum hydropower project Lieutenant General (Retd) Muhammad Zubair told the parliamentary committee last week.
Sources informed that negotiations with the Export-Import Bank of China are going on for an additional inflow of $200-300 million Neelum-Jhelum Hydropower Project. The Bank has already provided a $448 million loan for the scheme. Talks with the United States Agency for International Development, Islamic Development Bank and the World Bank for getting finances were also under way, they added. A $32-million loan from the Kuwait Fund for Arab Economic Development is also part of the government’s efforts for arranging funds for the project.
Meanwhile, authorities have started negotiations with the local banks are ongoing to get the required funds for the completion of the project.
The project was originally estimated to cost Rs130 billion in 2007, which went up to Rs275b in 2012 - due to a change in project design, alleged involvement of kickbacks in procurement of tunnel-boring machines and delay in work. The project had so far achieved 69 per cent physical progress, while its most crucial component - tunnel excavation - had reached 80 percent at a cost of Rs166 billion so far.
He said Prime Minister Nawaz Sharif had directed that the project be completed within the current year when he visited the project site in June 2013. However, the project is unlikely to be completed on time due to the funds shortage.