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Plans and projects

The News, Wednesday, May 28, 2014 From Print Edition 

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Pre-budget noises from Islamabad suggest the PML-N government is serious about delivering on itspre-election energy-related promises. Among the few dozen development projects personally selectedby PM Nawaz Sharif for FY 15 are the construction of the 4,500 MW Diamer-Basha Dam and the 2,610MW Dasu hydropower project. Besides these, PSDP funds are also to be diverted to the construction oftransmission lines for the Gaddani power project, the solar power project in Bahawalpur, the Neelum-Jhelum hydropower project as well as the construction of the nuclear power plants K3 and K4 nearKarachi. The PM is said to have selected the projects based on their visibility as well as their impact.But the big question will – as usual – be that of funding. So far, the amount earmarked for PSDPprojects in FY15 is in the vicinity of Rs525 billion. While this is a Rs100-billion jump from last year’srevised allocation, that’s not saying much. In times of fiscal stress, the development budget is the first

to be slashed. And with it will go the “millions of jobs” and improved living standards Sharif iscurrently pushing for.

It doesn’t help that most of the projects selected are big-ticket items. While the funds for landacquisition for Diamer-Basha are slated to come from the PSDP, the government is hoping the IFIs – primarily the ADB and the World Bank – will pick up the cheque for the huge costs of construction.However, there’s still a question mark over both their willingness to do so and the amount of moneythey’ll commit. (In 2012, ADB and the World Bank had begged off, saying that the site is controversial

and that Islamabad should seek an NoC from India before asking for funding. In August last year,however, Finance Minister Ishaq Dar said he’d managed to convince them, a fact yet to be announcedby either.) The Dasu project too is to be funded by the World Bank, which has yet to commit to aspecific amount. Also high on the priority list are the Pak-China Economic Corridor, the Karachi-LahoreMotorway, the Faisalabad-Khanewal Motorway and the Rawalpindi-Islamabad Metro Bus Project. Andbetween all these, the $1.6 billion Lahore Metro Rail has come up and kick-started, almost out of the

blue. ?While choosing a few important projects is a sound strategy, the big fear is a fiscal squeeze.Given its commitment to the IMF to keep the size of the fiscal deficit low, the government will be hardpressed to deliver on all its promises unless it uses the Saudi $1.5 billion grant as well as anyadditional money it can mobilise. And a crackdown on tax evaders would be the best place to start;the cyclical domestic-borrowing-to-repay-foreign-loans and vice versa can’t continue for too long.