Saudi Arabia To Provide $240 Million Loan For Pakistan Hydropower Project

By Michael Kern - Apr 07, 2023

Saudi Arabia announced on Friday that it would be providing a $240 million loan to co-finance the construction of Mohmand Dam in Pakistan. 

The hydropower complex, located in the northwest of the country, is seen as an essential project for Pakistan’s energy security as well as being critical for sustainable water supply for agriculture and human consumption, and flood resilience.

The Mohmand Dam is a multi-purpose project that will provide 800 megawatts of renewable electricity capacity, and enable the irrigation of 6,773 hectares of land. 

The project will increase the cropping area in the region from 1,517 hectares to 9,227 hectares, helping Pakistan's food security.

Pakistan is facing a crisis that has pressured its foreign exchange reserves. 

The loan, co-financed with the assistance of the Organization of the Petroleum Exporting Countries (OPEC), the Islamic Development Bank (IDB), and the Kuwait Fund for Arab Economic Development, will help the nation to address financial challenges by providing a much-needed injection of foreign currency into the country. 

The Saudi Fund for Development (SFD) has been a key partner for Pakistan and has financed 41 development projects and programs in the country, amounting to approximately $1.4 billion in total. 

Furthermore, the SFD has provided oil derivatives worth more than $5.4 billion between 2019 and 2023 to support Pakistan's economy.

Pakistan currently has a mix of mostly thermal and hydropower generation capacity. 

In theory, this is sufficient. However, a lack of funds has meant that the country has been unable to use the full capacity of its energy sources. 

Consequently, there have been prolonged blackouts, particularly during the summer when energy demand is high. 

The Mohmand Dam project will help Pakistan to alleviate this problem

The Mohmand Dam is an essential project for Pakistan. It will aid the country's energy security, provide sustainable water supplies for agriculture and human consumption, and improve resilience to floods. 

The loan from Saudi Arabia, together with the support of other international organizations, will help ensure that this critical infrastructure project succeeds.

By Michael Kern for Oilprice.com