Mohmand Dam cost jumps 115% to Rs666 billion

Pakistan has revised the estimated cost of the under-construction Mohmand Dam to Rs666 billion, marking a 115% increase from its original budget of

Pakistan has revised the estimated cost of the under-construction Mohmand Dam to Rs666 billion, marking a 115% increase from its original budget of Rs310 billion approved in 2018. Officials have attributed much of the rise to rupee depreciation, higher construction expenses, design changes, flood damage and security challenges.

The revised estimate represents an additional Rs356 billion in project costs. The proposal was presented at a recent meeting of the Central Development Working Party (CDWP). However, the forum could not reach a decision due to a shortage of time. The proposal will require further consideration before final approval by the Executive Committee of the National Economic Council (ECNEC).

The Water and Power Development Authority (Wapda), which is overseeing construction, has prepared the revised cost assessment. The project was initially scheduled for completion by September 2025. However, several challenges have delayed progress and pushed the completion timeline beyond the original target.

According to project officials, fluctuations in the dollar exchange rate account for a substantial share of the cost increase. Wapda informed the Planning Commission that around 51% of the additional expenditure was linked to exchange-rate changes. Since the project involves both local and foreign currency payments, rupee depreciation has increased the domestic cost of foreign-funded components.

The Planning Commission has sought details of dollar-denominated contractual payments and the extent to which exchange-rate variations can legally be reflected in the revised project cost. Officials stressed that foreign currency components must be assessed according to contractual obligations and applicable exchange-rate provisions rather than simply converted using current rates.

Other factors contributing to the escalation include changes in project design, increased construction costs, security concerns and damage caused by the devastating floods of 2022. Floodwaters in the Swat River damaged diversion tunnels, forcing construction activities to stop for an extended period.

A joint venture comprising China’s Gezhouba Group Company Limited and Pakistan’s Descon Engineering Limited is constructing the dam.

Project documents show that approximately 57% of the physical work had been completed by September, while expenditure had reached Rs275 billion. The project received approval in April 2018 at an estimated cost of Rs310 billion, including Rs71.5 billion allocated as rupee cover.

Under the revised assessment, the cost of dam construction has increased to Rs267 billion, up by Rs153 billion, or 134%, from the earlier estimate. The power generation component has risen to Rs399 billion, reflecting an increase of Rs204 billion, or 105%.

Once completed, Mohmand Dam is expected to add 1.29 million acre-feet to Pakistan’s water storage capacity. It is also designed to generate approximately 2.9 billion units of electricity annually and supply 300 million gallons of drinking water to Peshawar each year.

The project is considered strategically important because Pakistan faces persistent water shortages, growing energy requirements and increasing risks from climate-related disasters. Additional storage capacity is expected to support water management and help meet future demand.

However, the Planning Commission has raised concerns over delays and cost overruns in major projects being implemented by Wapda. It has recommended an independent third-party assessment of financial and physical progress, resource utilisation, changes in the scope of work, variation orders, escalation costs, project duration and financial arrangements.