ISLAMABAD:
Azerbaijan has offered over $1 billion loan in cash deposit in response to Pakistan’s request for funding the $1.2 billion Sukkur-Hyderabad motorway amid a disagreement among various government departments over the mode of lending.
Prime Minister Shehbaz Sharif had requested the Azerbaijani government to fund two infrastructure projects totaling $1.8 billion during his recent visit to the Central Asian state. These include $1.2 billion Sukkur-Hyderabad motorway (M-6), and a new Hyderabad-Karachi motorway (M-9), to be constructed on a new route at a minimum cost of $600 million.
The government of Azerbaijan has proposed two options in response to Pakistan’s request to fund the motorways, according to the National Highway Authority officials.
It has proposed that the State Oil Fund of the Republic of Azerbaijan may place a term cash deposit with the State Bank of Pakistan and the federal government then can lend the money onwards to the National Highway Authority for construction of motorways, they added.
The second option is that Azerbaijan in collaboration with the Islamic Development Bank may directly fund the Sukkur-Hyderabad motorwaythe missing link on the south-north national motorway link, said the officials.
Azerbaijan had earlier indicated making a $2 billion investment in Pakistan but the Pakistani authorities could not provide firmed-up projects for the investment.
The Sukkur-Hyderabad motorway has a minimum estimated cost of $1.2 billion and the government has recently engaged the American firm, AT Kearney, for preparing the feasibility study of the motorway.
In addition to the Sukkur-Hyderabad motorway, Pakistan has also offered Azerbaijan to finance another motorway Hyderabad-Karachi M-9, which it wants to build on a new route, away from the existing route.
The estimated cost of the new Hyderabad-Karachi motorway is $600 million, excluding the cost of land, according to the NHA authorities.
Four countriesChina, Saudi Arabia, the United Arab Emirates and Kuwaithave already cumulatively placed $12.7 billion in cash deposits with the central bank to support the thin foreign exchange reserves of Pakistan. Islamabad is paying interest rates on these deposits, which are rolled over every year due to the inability to return the debts.
The sources said that there was no consensus among the various Pakistani departments about Azerbaijan’s offer.
Deputy Prime Minister Ishaq Dar also this week chaired another round of inter-ministerial meetings on investment project proposals with Azerbaijan.
Dar directed that proposals for investment in infrastructure, petroleum, trade and information technology services may be finalized by 3rd April, according to an announcement by his office.
The sources said that the Finance Ministry was not in favour of taking the $1 billion cash deposit for constructing a road project and servicing it from the budget. The Finance Ministry is of the view that the NHA should directly borrow the money from Azerbaijan instead of routing the money through a cash deposit route.
According to the feasibility study carried out by M/s AT Kearney, the Sukkur-Hyderabad project is divided into five sections. Project Qualification Proposal of the project has been approved by the Public Private Partnership Authority Working Party last month for subsequent approval by its board.
After approval of Project Proposal by P3A, bidding process for the first phase of Hyderabad-Tando Adam and second phase: Tando Adam-Nawabshah will be initiated on the public private partnership mode. The IDB has indicated to fund these two sections but the final decision will be taken by the bank after a visit by its appraisal mission next month, said the officials.
Azerbaijan indicated to fund the remaining three sections as part of its second option.
In case the government constructs the M-6 motorway under the public-private partnership mode, it will take two-and-a-half years’ time for completion. But if the project is funded from the Public Sector Development Programme, the timeframe will be much longer than this due to limited fiscal space, according to the NHA authorities.
The federal government a few days ago decided to finance a Punjab-centric new motorway at a cost of Rs436 billion by ignoring the Sukkur-Hyderabad motorway.
The NHA officials said that the government also wanted to develop a new six-lane M-9 Motorway to enhance connectivity between Karachi and Hyderabad, while integrating Pakistan’s trade corridors.
This project aims to reduce travel time, improve road safety, and support industrial and commercial growth. It will provide uninterrupted fast access between Karachi and Hyderabad, they added.
The M-9, which is the Hyderabad-Karachi motorway, will cost more than $600 million. The NHA has hired the services of consultant, M/s NESPAK, for undertaking the feasibility study and detailed design on a fast-track basis.
The government has not been able to bring any new foreign investment in Pakistan due to unstable political, security and economic conditions.
