After a meeting between the Middle East lenders, Ishaq Dar, and Abid Sher Ali, the Middle East lenders have agreed to resume funding for the 969 megawatts Neelum Jhelum hydropower project. The lenders had stopped the project financing due to the increase in cost completion.
The lenders were to loan $433 million, but stopped payment because of the rising cost and Pakistan wasn’t keen to seek performance guarantees from the contractor. Pakistan was afraid that the contractor, a Chinese firm, may file a legal case against them. Pakistan has agreed to seek performance guarantee up to the extent of the variation order. The Chinese firm has already submitted Rs 47 billion performance guarantees, and now will submit an additional performance guarantee of Rs 74 billion.
The government is also trying to finalize a loan agreement of $576 million with China, and Rs 100 billion loan from the National Bank. It is already charging electricity users 10 paisa surcharge per unit to fund for the project. The government is keen to finish the project by 2017.