Document of The World Bank FOR OFFCIAL USE ONLY Report No. 11882 PROJECT COMPLETION NOTE PAKISTAN INDUS BASIN PROJECT, 1964 SUPPLEMENTAL CREDIT (CREDIT 60-PAK) MAY 17, 1993 Agriculture Operations Division Country Department III South Asia Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EOUIVAIENTS Year 1975 Currency Unit = Pakistan Rupee (PRs) PR% 9.90 = US$1.00 PR 1.00 = US$0.10 PRs I million = US$101,010 ABBREVIATIONS IDA - International Development Association OED - Operations Evaluation Dcpartment PCR - Project Completion Report FISCAL YEAR July I to Junc 30 FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A. Offic, of Director-General Operations Evaluation May 17, 1993 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT Subject: Project Completion Note on Pakistan Indus Basin Supplemental Credit (Cr. 60-PAK) Attached is a copy of the report entitled "Project Completion Note on Pakistan Indus Basin Supplemental Credit (Credit 0060-PAK)" prepared by the South Asia Regional Office. The Credit, approved in 1964 and fully disbursed by 1967, represented the Bank's share of the 1964 Supplemental Agreement to the Indus Basin Development Fund, co-financed by Pakistan and seven donors, and which the Bank supported through Loan 266. The Note clarifies why there is no PCR on this Credit. In 1976, the Region and OED agreed that the report Pakistan--A Review of the Indus Basin Proiect. 1960-1975 (No. 1122a-PAK) would take the place of a PCR for Ln. 266 (and by implication for Cr. 60), since it provided a detailed and comprehensive assessment of the results achieved under the Bank's contribution to the Indus Basin Development Fund. The Supplemental Credit cannot be evaluated separately from the program to which it contributed, it is not rated and will not be audited. Attachment This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. I PROJECT COMPLETION NOTE Indus Basin Project, 1964 Supplement Credit (Credit 60-PAK) 1. The "Indus Water Treaty 1960", governing the use of the waters of the Indus river system, was signed in September 1960 by India, Pakistan, and the Bank. Signature of the Treaty marked the end of a critical and long-standing dispute between India and Pakistan. At the same time, Australia, Canada, Germany, New Zealand, Pakistan, the United Kingdom, the United States, and the Bank agreed to create an Indus Basin Development Fund of almost US$900 million to finance the construction of irrigation and other works in Pakistan which would enable the country to use and develop the share of the Indus waters allocated to it under the Treaty. The Bank's contribution consisted of a loan of US$90 million (Ln. 266-PAK, Indus Basin Project), including US$10 million for capitalized interest and other charges not payable to the Fund. 2. In 1964, a Supplemental Agreement came into force under which Australia, Canada, Germany, New Zealand, the U.K, the U.S., and the Bank agreed to contribute an additional amount of US$315 million in foreign exchange for the financing of the Indus Basin works in Pakistan (divided in the same proportions as the previous contributions). Pakistan undertook to provide the rupees required to finance local costs not covered by the rupee contributions under the 1960 agreement. The Supplemental Agreement provided that the Bank's contribution could be a Bank loan or an IDA credit, or both. The Bank and IDA decided that because of Pakistan's burden of external debt this contribution should be in the form of an IDA credit. They also decided that future calls by the Administrator of the Indus Basin Fund on account of the Bank's original and supplemental contributions would be met first from the IDA credit until it was fully disbursed and thereafter from Ln. 266-PAK 3. Credit 60-PAK, in the amount of US$58.54 million, was approved on July 16, 1964, signed on July 21, 1964, and became effective on September 14, 1964. The Fund Administrator made the first call for a contribution from the credit in September 1964 (repeated in December). With the sixth call in June 1967 the credit was fully disbursed, and withdrawals from Ln. 266-PAK resumed in December 1967. 4. It quickly became clear that loan disbursements for Ln. 266 (and therefore interest and other charges) would lag behind original expectations as a result of the 1964 arrangements to provide the Indus Basin Fund with additional resources, and the 1965 agreement with the United States on the sequencing of the Bank/IDA and U.S. loan contributions. Revised estimates indicated that the last disbursement would occur when the last call was made on the balance of the Indus Fund available to finance the Tarbela Project. Therefore, the Bank decided in mid-1968 to extend the loan closing date from September 30, 1973, to December 31, 1975 (and the deadline for using the portion allocated for interest and other charges from April 1, 1968, to October 1, 1970). 5. A report Pakistan: A Review of the Indus Basin Project. 1960-1975 (No. 1122a-PAK, April 1976) reviewed achievements towards the original objectives of the Indus Basin Development Fund Agreement of 1960. The report was prepared by Bank staff and consultants after field visits in 1975, and incorporated the findings of previous missions, including a review of irrigation and drainage (Vol. II of a Special Agriculture Sector Review, No. 922a-PAK, 1976), and missions in 1968 and again in 1969/70 to review the Action Program included under Cr. 60, the Supplemental Agreement. The report concluded that the Indus Basin works have fulfilled their basic replacement objective (from the diversion of water to India) and provided a very small increment of water, that the growth in water supply, especially through tubewells, had a significant impact on agricultural production, and that the increase in power supply had been very cost effective. 6. Since this report was a comprehensive effort to assess the results achieved under the Bank contribution to the Indus Basin Project and its Supplemental Credit, management in the Region and in OED agreed that a PCR would not be prepared for Ln. 266 (memorandum of December 9, 1975). Although the memo does not mention Cr. 60, the Credit provided supplemental funding to achieve the Indus Basin objectives and cannot be evaluated separately from Ln. 266. -3- ANNEX Basic Information Project: Indus Basin Project, 1964 Supplement Credit Estimated Project Cost: US$315 million equivalent Credit Amount: US$58.54 million equivalent Borrower: Islamic Republic of Pakistan No Appraisal Board Presentation: July 21, 1964