Pakistan and Kuwait sign $24 million loan agreement for 800 MW Mohmand Dam hydropower project

Pakistan and Kuwait have taken significant steps towards enhancing their bilateral relationship by signing a $24 million loan agreement to fund the construction of the 800 MW Mohmand Dam project.

The $24 million (PKR6.7 billion or KWD7.5 million) agreement was signed between the Government of Pakistan and the Kuwait Fund for Arab Economic Development (KFAED).

Pakistan’s Ambassador to Kuwait Malik Muhammad Farooq and Waleed Al-Bahar, acting director general of KFAED signed the agreement for financing of the 800 MW Mohmand Dam hydropower project in Kuwait on June 3, 2024.

“The project aims to support the economic and social development by enhancing national energy generation from the available hydro resources to meet the increasing electricity demand, improve the region’s resilience to flooding, provide sustainable water resources for agriculture and drinking water for the region of Khyber Pakhtunkhwa Province, and creating new job opportunities,” according to KFAED statement.

Pakistan and Kuwait Fund for Arab Economic Development (KFAED) sign $US24 million loan agreement
Pakistan and Kuwait Fund for Arab Economic Development (KFAED) signed $US24.4 million loan agreement to fund the Mohmand Hydropower Dam project. (Image Credit: KFAED)

Mohmand Dam hydropower project

The Mohman Dam project involves constructing a hydropower scheme on the Swat River, northeast of Pakistan, 200 km west of Islamabad. It features a 213-meter high, 718m long concrete-faced rockfill dam, creating a 56 km long reservoir with an area of 24 km² and a volume of 1.6 billion m³.

Key Features of Mohmad Dam

Type of DamConcrete Faced Rockfill dam
Height213 m (700 ft.)
Gross Storage1.239 million acre feet (MAF)
Live Storage0.676 MAF
Power Generation800 MW
Annual Energy Capacity2,862 GWh
Cultivable Area 16,737 Acres (Left side 9,017 Acres, Right side 7,720 acres)

The project includes a powerhouse with 4 turbine-generator units, with an installed capacity of generating 800 megawatts (MW) and producing 2,862 gigawatt-hours (GWh) annually. Additional components are flood protection, irrigation infrastructure, and an intake for future drinking water facilities, along with consultancy and project management services. The project is expected to be completed by the end of December 2025.

Hydropower project cost and loan term

The total cost of the project is estimated at PKR 322.8 billion (approximately 900.6 million Kuwaiti Dinars or US$3 billion).

  • The Kuwait Fund’s first loan of 7.5 million Kuwaiti Dinars KWD ($24.45 million) covers about 0.83% of the project costs.
  • Additional contributions include KWD56.3 million ($183.54 million) from the Islamic Development Bank.
  • The OPEC Fund for Development contributes KWD22.5 million ($73.35 million).
  • The Saudi Fund for Development contributes KWD75 million ($244.50 million).

The Pakistani government will cover the remaining costs and any potential increases.

The loan term is 25 years, with a 5-year grace period, amortized over 40 semi-annual installments starting after the grace period. The loan bears 2% annual interest plus a 0.5% administrative charge. This loan is the nineteenth provided by the Kuwait Fund to Pakistan, adding to the previous eighteen loans totaling around 129.788 million Kuwaiti Dinars across various sectors.

(Note: 1 Kuwaiti Dinar = US$3.26 = PKR 903.85 on June 4, 2024)

Pakistan-Kuwait Joint Ministerial Commission session in Kuwait

This agreement, to be formalized on June 3, was one of the key outcomes of the 5th Pakistan-Kuwait Joint Ministerial Commission (JMC) session held in Kuwait from May 28 to May 30, 2024, state media APP reported.

The session, chaired by Pakistan’s Minister for Privatization, Abdul Aleem Khan, and Kuwait’s Minister for Commerce and Industry, Omar Saud Al-Omar, underscored a shared commitment to enhancing collaboration across various sectors. The high-level Pakistani delegation included representatives from the ministries of Economic Affairs, Foreign Affairs, Commerce, Overseas Pakistanis and HRD, Interior, Board of Investment, Petroleum Division, and the Special Investment Facilitation Council (SIFC).

During the proceedings, the Kuwait Fund for Arab Economic Development expressed its willingness to engage the Arab Coordination Group in financing the Diamer Bhasha Dam and consider financing for the Kachhi Canal project. These initiatives highlight Kuwait’s support for Pakistan’s infrastructure development goals.

Key Agreements and MoUs

Several Memorandums of Understanding (MoUs) and agreements were signed, reflecting the diverse areas of collaboration. These include:

  • Industrial Cooperation and Engineering Councils: Agreements to foster industrial growth and enhance engineering capabilities.
  • News Exchange: Enhancing media collaboration between the two nations.
  • Agriculture, Maritime, and Ports: Formalizing cooperation in crucial sectors to boost economic ties.
  • Avoidance of Double Taxation: Ensuring smoother financial transactions and investments.
  • Quality and Safety Standards: Aligning regulatory standards to facilitate trade and investment.
  • Higher Education Commissions: Strengthening educational exchanges and research collaborations.

Pakistan and Kuwait Joint Working Groups and Investment Opportunities

Both nations agreed to establish Joint Working Groups (JWGs) to address trade, investment, visa, and consular affairs. Abdul Aleem Khan emphasized the importance of private sector engagement and urged Kuwait to streamline visa procedures for Pakistanis, enhancing economic partnerships and facilitating skilled workforce mobility. “The Visa on Arrival facility will be started soon in Pakistan for the Gulf Cooperation Council member countries,” Aleem Khan said.

He invited Kuwaiti investors to leverage opportunities under Pakistan’s SIFC, highlighting sectors such as pharmaceuticals, engineering, automotive, tourism, minerals, agriculture, food, textiles, and energy.

”Pakistan wants a long-term economic partnership with Kuwait for which special facilities can be provided under the banner of SIFC for businesses,” Aleem Khan said, adding that new investment opportunities were available in tourism, minerals, agriculture, food, textile and energy sectors in Pakistan.

The session also featured discussions on energy challenges and potential joint ventures, particularly in livestock and dairy exports. A consultative meeting with Kuwait’s well-known livestock organization “Al Muashi” was a highlight, focusing on encouraging the export of poultry and other dairy products from Pakistan to Kuwait.

🇵🇰-🇰🇼 Future commitments and collaboration

Abdul Aleem Khan, while expressing satisfaction with the session’s outcomes, announced the appointment of a Commercial Counselor of Pakistan in Kuwait and the introduction of a “Visa on Arrival” facility for Gulf Cooperation Council member countries. He underscored Pakistan’s commitment to a long-term economic partnership with Kuwait, with special facilities under the SIFC for Kuwaiti businesses.

Kuwait’s Minister of Commerce and Industry, Omar Saud Al-Omar, reaffirmed Kuwait’s support for Pakistan and expressed satisfaction with the progress made during the JMC session. He emphasized Kuwait’s commitment to implementing the discussed measures to foster a dynamic partnership.

The 5th session of the Pakistan-Kuwait JMC marked a significant milestone in bilateral relations, paving the way for enhanced cooperation and mutual prosperity. Both nations look forward to the 6th session, to be held in Islamabad, with high hopes for continued progress and collaboration in all areas of mutual interest.

Sana Jamal
Storyteller. Avid Reader. Learner to the core.

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