Denmark to give interest-free loans to Pakistan
August 10, 2022
- Pakistan, Denmark sign inter-governmental framework agreement.
- Agreement to enhance financial cooperation in energy, water sector.
- Each project will have a separate financing agreement.
ISLAMABAD: Pakistan and Denmark Wednesday signed an inter-governmental framework agreement for interest-free loans in renewable energy, energy efficiency, water supply and waste-water treatment sectors.
According to a statement issued in this regard, the agreement, signed by Ministry of Economic Affairs Secretary Muhammad Humair Karim and Danish Ambassador Lis Rosenholm, has been signed to enhance financial cooperation in the energy and water sector.
The federal cabinet accorded approval to the signing of the framework agreement with Denmark on August 4.
This framework is expected to act as an umbrella agreement for potential development sector projects emanating from it mainly in the renewable energy, energy efficiency, water supply and waste-water treatment sectors.
Each project will have its separate financing agreement, which will be negotiated with the Danish side case by case in consultation with all the stakeholders.
Currently, wastewater treatment projects in Faisalabad and Lahore are in the pipeline, which is to be negotiated under the ambit of this framework agreement.
Moreover, this agreement offers the Danida Sustainable Infrastructure Finance (DSIF) facility to provide interest-free, but tied loans up to but not limited to €100 million, and would also facilitate the transfer of technology from Denmark to Pakistan.
After signing this agreement the interest-free loans would have a 35% concessional element covering the interest on the loan, export premium, bank margin and an upfront grant if these expenses do not arrive at 35% of the contract amount.
It should be noted that this framework agreement is a breakthrough in the bilateral and economic relations between Pakistan and Denmark, who have been partners in successful development cooperation since 1969; however, there had been no active on-budget financial support extended by Denmark since 2017.
— Additional input from APP
