ADB Paving Way for Karachi's Megacity Development

News Release | 3 February 2006

MANILA, PHILIPPINES - A US$10 million loan from ADB will help address the long-term and holistic development needs of the city of Karachi, Pakistan, contributing to a sustainable improvement in the quality of life of its residents.

Karachi, the capital of Sindh province, is home to more than 12 million people. As the commercial hub and gateway of Pakistan, it accounts for 95% of Pakistan's foreign trade and contributes 30% of Pakistan's industrial production.

But while the economy and population of Karachi have expanded significantly, few investments have been made in the city's urban infrastructure over the past two decades, resulting in haphazard development, a polluted urban environment, and, for many, a poor quality of life.

"Infrastructure and services that are inadequate and unreliable are adding to business and household costs, harming Karachi's urban and natural environments, and decreasing the city's global competitiveness compared with alternative Asian mega cities," says Gulfer Cezayirli, an ADB Senior Urban Development Specialist.

Given the magnitude of the city's investment requirements, the loan will support a series of integrated actions that together will act as a catalyst to speed up the development process in Karachi.

The project will provide resources for the City District Government of Karachi, the town municipal administrations, and utilities to improve their city planning, management, and financing, as well as in applying commercial principles in the provision of infrastructure and services.

It will then help prepare projects for expanding and improving the mega city's infrastructure and services that may be funded by ADB in its lending program for Karachi over the next four years. Priority projects to be prepared cover water, sewerage, and drainage; solid waste management; roads and transport; and upgrading of informal settlements.

Last, the project will establish an innovative financing vehicle for the mega city's infrastructure and services that will act as a means to channel development funds to the city, a catalyst for reforming the city agencies, and an agent to mobilize funds from nongovernment sources for large scale capital investment needs.

"There is increasing recognition that the growing gap between urban infrastructure demand and supply cannot be met through traditional government sources," says Ms. Cezayirli. "Alternative sources of financing and new ways of providing infrastructure are required."

ADB's loan will cover 75% of the project's total estimated cost of $13.33 million. The loan comes from ADB's concessional Asian Development Fund and carries a 32-year term, including a grace period of 8 years. Interest is to be charged at 1% per annum during the grace period and 1.5% per annum thereafter.

The Government will contribute the balance of $3.33 million equivalent. The Finance Department of the Government of Sindh is the executing agency for the project, which is due for completion in January 2010.