16/03/2007: Signature of a Loan Agreement of 4 Million Kuwaiti Dinars for the Financing of the Metolong Water Supply Project in the Kingdom of Lesotho

A Loan Agreement has been signed today in Maseru, Lesotho, between the Kingdom of Lesotho and the Kuwait Fund for Arab Economic Development whereby the Kuwait Fund provides a loan of 4 million Kuwaiti Dinars (equivalent to about US$ 13.36 million) to assist in financing the Metolong Water Supply Project.

The Loan Agreement was signed by his Excellency Mr. Timothy T. Thahane, Minister of Finance and Development Planning, on behalf of the Kingdom of Lesotho and on behalf of the Kuwait Fund by Mr. Hesham Al-Waqayan, Deputy Director-General of Kuwait Fund for Arab Economic Development. 

The main objective of the Project is to meet the increasing demand for domestic and industrial water in the capital Maseru and three adjacent towns, namely, Roma, Mazenod and Teyateyaneng, through the construction of a dam on the South Phuthiatsana river. The Project would also create work opportunities, and improve health and living condition for inhabitants in the area. 

The Project consists of the construction of a roller compacted concrete dam, with an impounding capacity of 52 million cubic meters, construction of a water treatment plant and of transmission pipelines and reservoirs, in addition to the provision of necessary engineering and environmental protection services and establishment of the project implementation unit. 

Work on the Project is expected to start during the second half of 2007 and to be completed in the year 2010. 

Total Project cost is estimated at 758 million Maloti, equivalent to about 36.6 million Kuwaiti Dinars, of which 68% (equivalent to about 514 million Maloti or 24.8 million Kuwaiti Dinars) would be incurred in foreign exchange. The Kuwait Fund loan of 4 million Kuwaiti Dinars would cover about 11% of total project cost, representing about 16% of the foreign exchange cost, and will be utilized to finance construction of the dam and related works, in participation with loans, to be provided by the Saudi Development Fund, the OPEC Fund for Development, and the Arab Bank for Development in Africa (BADEA). The government is also planning to secure further financing from external sources, including the International Development Association, to assist in financing works related to water treatment, transmission and distribution. 

The Loan provided by the Kuwait Fund will mature over a period of 25 years, including a grace period of 5 years, and will be repaid in 40 semi-annual installments, the first of which to fall due on the first date on which interest or other charges will be payable on the loan after the expiry of the above-mentioned grace period. The loan will be charged interest at the annual rate of 1.5%, in addition to an annual charge at the rate of 0.5% for loan administration. 

The signature of this Loan Agreement brings to total number of loans provided by the Kuwait Fund to the Kingdom of Lesotho to 6 loans, totaling the equivalent of 13.7 million Kuwaiti Dinars.