The government of Pakistan has received a much-needed boost in liquidity, as the Saudi Fund for Development (SFD) is providing a US$240 million financing to finance a major hydropower complex in the northwest region of the country, projected to have a significant impact on Pakistan’s energy and water sectors.
The Mohmand Multipurpose Dam Project, which is co-financed by the SFD, OPEC, the IsDB and the Kuwait Fund for Arab Economic Development, is expected to contribute to Pakistan’s energy security, increase sustainable water supply for agriculture and human consumption and improve resilience to floods.
“This loan represents a strong partnership between Saudi Arabia and Pakistan in promoting sustainable development and achieving the SDGs,” the SFD said in a news release announcing the signing of the agreement, adding that the project aligns with SDG 2 (Food Security), SDG 6 (Clean Water) and SDG 7 (Clean Energy) and embodies SDG 17 (Partnerships for the Goals).
According to the SFD, the project will generate 800 MW of electricity production capacity, contributing to Pakistan’s energy security. In addition, the storage of 1.6 million m3 of water will support sustainable agricultural practices, enable irrigation of 6,773 hectares of new land and increase the total cropping area from 1,517 hectares to 9,227 hectares in the Khyber Pakhtunkhwa province, facilitating agricultural activities.
Sultan Abdulrahman Al-Marshad, CEO of the SFD, emphasized that this initiative is an extension of the SFD’s continued support for development projects and programs in Pakistan since its inception.
To date, the SFD has financed around 41 development projects and programs in Pakistan, amounting to approximately US$1.4 billion. In addition, the SFD has financed oil derivatives worth more than US$5.4 billion between 2019 and 2023 to support building a sustainable economy for Pakistan.
The SFD was established in 1974 to provide support in the form of soft loans to finance development projects in developing countries. Since its establishment, the SFD has supported 33 development projects and programs in African countries, 42 projects and programs in Asian countries and one project in Latin America.
It is worth noting that Moody’s Investors Service had in February slashed Pakistan’s sovereign credit rating by two more notches to ‘Caa3’ — the lowest in three decades — amid international loan negotiations, saying the country’s increasingly fragile liquidity “significantly raises default risks”.
However, the rating agency changed the outlook from negative to stable.
To alleviate the default risks, the government of Pakistan was said to have been in talks with the IMF to secure a US$1 billion loan as part of a bailout package.