On August 10, 2022, an inter-government framework agreement was signed between the governments of Pakistan and Denmark by Ministry of Economic Affairs Secretary Muhammad Humair Karim (L) and Danish Ambassador to Pakistan Lis Rosenholm. Sardar Ayaz Sadiq, the federal minister for economic affairs, is present for the signing event. — PID
According to a press release issued here, the agreement, which was signed by the secretary of the ministry of economic affairs, Muhammad Humair Karim, and the ambassador of Denmark, Lis Rosenholm, allowed for interest-free loans in the sectors of renewable energy, energy efficiency, water supply, and waste-water treatment.
The ambassador also held a brief discussion with Sardar Ayaz Sadiq, the minister of economic affairs, in his office. He explained to the ambassador that although relations between Pakistan and Denmark were amicable and cordial, there was still room for improvement.
He added that the Inter-Governmental Framework Agreement, which saw Denmark commit to support the government of Pakistan on-budget, was proof that attempts to reinvigorate bilateral economic and development cooperation had been successful. It was very appreciated that there was a focus on the waste water treatment projects in Lahore and Faisalabad.
On August 4 of this year, the federal cabinet gave its blessing to the signing of the framework agreement with Denmark. Since 1969, Pakistan and Denmark have successfully collaborated on development projects as partners. Prior to the signing of this framework agreement, however, Denmark had not actively provided on-budget financial support to Pakistan 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 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, waste water treatment projects in Faisalabad and Lahore are in the pipeline, which are to be negotiated under the ambit of this framework agreement.
In response to efforts to rekindle bilateral economic and development cooperation, Denmark agreed to support the Pakistani government within budget through this Inter-Governmental Framework Agreement.
This Framework Agreement would serve as an umbrella agreement for any prospective development sector initiatives that might come from it, namely in the areas of water supply, waste-water treatment, renewable energy, and energy efficiency. Each project will have a unique finance arrangement, which will be discussed with all parties involved and negotiated with the Danish side case by case. Waste water treatment projects in Lahore and Faisalabad are now being planned and will be discussed within the terms of this framework agreement.
By offering the Danida Sustainable Infrastructure Finance (DSIF) Facility, the Danish side of this agreement hopes to facilitate the transfer of technology and know-how from Denmark to Pakistan. This facility would offer interest-free but revolving loans up to but not limited to over €100 million.
After this agreement is signed, the interest-free loans will have a 35% concessional element that will cover the loan’s interest, the export premium, the bank margin, and an upfront gift if these costs don’t total 35% of the contract value.
The ambassador, the Danish International Development Agency (DANIDA), and the Danish government were thanked by the secretary of the Economic Affairs Division for their assistance to Pakistan.
