August 11, 2022: Pakistan has signed an inter-governmental framework agreement with the government of Denmark for interest-free loans worth €100 million in renewable energy, energy efficiency, water supply, and wastewater treatment sectors.
Muhammad Humair Karim, Secretary, Ministry of Economic Affairs, H.E. Ms. Lis Rosenholm, Ambassador of Denmark to Pakistan, signed an Inter-Governmental Framework Agreement between the Governments of Pakistan and Denmark.
H.E. Ms. Lis Rosenholm, the Ambassador of Denmark to Pakistan also had a brief meeting with the Minister for Economic Affairs, Sardar Ayaz Sadiq in his office. He apprised the Ambassador that Pakistan and Denmark enjoy a friendly and cordial relationship and a lot of potential exists to enhance the relationship between both nations. He further stated that the efforts to revive bilateral economic and development cooperation between the two countries paid off with Denmark agreeing to provide on-budget support to the Government of Pakistan through this Inter-Governmental Framework Agreement and the focus on Waste Water Treatment Projects in Faisalabad and Lahore is immensely appreciated.
The Federal Cabinet accorded approval to the signing of the framework agreement with Denmark on August 4th, 2022. This framework agreement is a breakthrough in the bilateral and economic relations between Pakistan and Demark, 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.
The efforts to revive bilateral economic and development cooperation between the two countries paid off with Denmark agreeing to provide on-budget support to the Government of Pakistan through this Inter-Governmental Framework Agreement.
This Framework Agreement would act as an umbrella agreement for potential development sector projects emanating from it mainly in the sectors of renewable energy, energy efficiency, water supply, and wastewater 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 are to be negotiated under the ambit of this framework agreement.
This Framework Agreement offers the Danida Sustainable Infrastructure Finance (DSIF) Facility by the Danish side which would provide interest-free but tied loans up to but not limited to €100 million and would also facilitate the transfer of technology and know-how from Denmark to Pakistan.
The interest-free loans after signing this framework agreement will 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.
Secretary Economic Affairs Division thanked H.E. the Ambassador of Denmark to Pakistan, The Danish International Development Agency (DANIDA), and the Danish Government for their support to Pakistan.