The Japan Bank for International Cooperation (JBIC) has signed a loan agreement for up to ¥19.455bn (US$164mn) with the government of Pakistan for the Indus Highway Construction Project (III).


The loan will finance the construction of a two-lane carriageway of approximately 200km between Sehwan and Ratodero in central and northern Sindh. The new carriageway will form part of the Indus Highway, which links Karachi and Peshawar and is a key transport route between the northern and southern regions of Pakistan. The highway is expected to facilitate domestic and international trade and to promote economic development in Sindh’s rural villages, which will have improved access to Karachi.


JBIC has already extended six loans, totalling ¥60.1bn, for the construction of the Indus Highway. These have financed about 65% of the 1,200km length. The remaining sections have been financed by the Pakistani government and the Asian Development Bank.


The loan was signed in conjunction with a ¥3.702bn yen (US$31mn) loan agreement for the Dadu-Khuzdar Transmission System Project, which will extend the electricity supply in the region of Balochistan.


Pakistan has seen strong economic growth in recent years, in spite of the earthquake of October 2005, with real GDP growth at 6.6% in fiscal year 2005. With a gross national income per capita of US$690 in 2005, Pakistan is still classified as a low-income country, however. Infrastructure development of the type facilitated by this loan will play a key role in achieving the sustained economic growth planned by the Pakistani government in its Ten-Year Plan and Poverty Reduction Strategy Paper.


Japan resumed ODA lending to Pakistan in 2005. Lending had been suspended following the country’s nuclear tests in 1998.