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Framework agreement signed: Denmark to provide interest-free loans in four sectors

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ISLAMABAD: Pakistan has signed an intergovernmental framework agreement with the government of Denmark for interest-free loans in the sectors of renewable energy, energy efficiency, water supply and wastewater treatment.

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, which would also facilitate the transfer of technology and know-how from Denmark to Pakistan. .

Interest-free loans after the signature of this framework agreement will have a concessional element of 35% covering the interest on the loan, the export premium, the bank margin and an initial subsidy if these expenses do not reach 35% of the contract amount.

Muhammad Humair Karim, Secretary of the Ministry of Economic Affairs and Lis Rosenholm, Danish Ambassador to Pakistan, signed the Intergovernmental Framework Agreement between the governments of Pakistan and Denmark.

The Federal Cabinet approved the signing of the Framework Agreement with Denmark on August 4, 2022.

This framework agreement is a breakthrough in bilateral and economic relations between Pakistan and Denmark, partners in successful development cooperation since 1969, but there has been no active budgetary financial support from Denmark since 2017.

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Efforts to revive bilateral economic and development cooperation between the two countries have borne fruit, with Denmark agreeing to provide budget support to the Pakistani government through this intergovernmental framework agreement.

This framework agreement would serve as a framework agreement for potential sectoral development projects that would emanate from it, mainly in the renewable energy, energy efficiency, water supply and sanitation sectors. Each project will have its own funding agreement, which will be negotiated with the Danish side on a case-by-case basis in consultation with all stakeholders.

Currently, sewage treatment projects in Faisalabad and Lahore are in the pipeline, which are to be negotiated under this framework agreement.

Rosenholm also had a meeting with Economic Affairs Minister Sardar Ayaz Sadiq in his office. He informed the Ambassador that Pakistan and Denmark enjoy friendly and cordial relations and there is great potential to improve relations between the two nations.

He further said that efforts to revive bilateral economic and development cooperation between the two countries have borne fruit, with Denmark agreeing to provide budget support to the Pakistani government through this framework agreement. intergovernmental and the focus on sewage treatment projects in Faisalabad. and Lahore is immensely appreciated.

Copyright Business Recorder, 2022