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ISLAMABAD, PAKISTAN - The Asian Development Bank (ADB) has released the first tranche of its new $400 million loan to the Government of Pakistan to help rebuild hundreds of thousands of homes lost in the October 2005 earthquake.

ADB is committed to helping the Government of Pakistan ensure that the coming winter is the last one in temporary shelter for many people displaced by the devastating earthquake.

The concessional loan, approved by the ADB Board of Directors in June, is part of ADB’s one billion dollar commitment of loans and grants to assist Pakistan in the reconstruction and rehabilitation of earthquake-affected areas. It is being released in two tranches of $200 million each.

The first tranche was transferred on July 17 to reimburse part of the Government’s already significant $621.5 million expenditure on housing reconstruction. The second tranche of $200 million will be released in six months, on completion of performance targets jointly agreed on by the Government of Pakistan and ADB.

The loan is intended to help the Government of Pakistan meet its deadline of May 2008 for completing the reconstruction of 585,000 rural homes, compliant with seismic safety requirements.

“The winter of 2007 will be the last for most displaced people before they move into new houses,” said Peter Fedon, Country Director of ADB’s Pakistan Resident Mission.

“For the 30,000 people who have been living in tents for almost two years, and the 3.5 million living in temporary or semi-permanent shelters while permanent houses are being built, the past two winters have been extremely difficult. Housing reconstruction is the most urgent of the overall needs in terms of minimizing the prolonged suffering of affected people.”

Loan proceeds will be directed via the Ministry of Finance to the Earthquake Reconstruction and Rehabilitation Authority (ERRA). ERRA will in turn provide bank payments to individual homeowners to buy materials and rebuild or repair their own homes, in accordance with approved earthquake-proof designs.

Families whose homes were destroyed are receiving 175,000 PKR in four installments; those whose homes were damaged are receiving 75,000 PKR in two installments; and those whose homes suffered minor damage are receiving a single payment of 25,000 PKR. About 6,000 households whose land was destroyed by quake-triggered landslides will receive 75,000 PKR to buy new land.

Around 96 percent of households have already received second installments.

“Housing in particular is a prerequisite for livelihood regeneration and subsequently economic recovery. Without addressing the shelter issue first, reconstruction and rehabilitation efforts would be ineffective,” Mr Fedon said.

Attached to the loan is a $2 million grant to train Pakistani institutions working in quake-affected areas in seismic construction, to strengthen financial and strategic management, and to support environmental and social protection.

The concessional $400 million loan carries a one percent per annum interest rate with a 40 year maturity and 10 year grace period.

ADB has been working in the earthquake-affected areas since late 2005 to restore power infrastructure, repair hundreds of kilometres of damaged roads and bridges, and fund the reconstruction of 465 schools, six hospitals and 29 rural health centres.

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