The Ministry of Finance (MoF) and the Civil Aviation Authority of Nepal (CAAN) on Sunday signed a loan agreement to fund the construction of the Pokhara International Airport.
As per the contract, the MoF will provide the loan to the CAAN at an annual interest rate of five per cent. The Rs 21 billion project is scheduled for completion by 2020.
The MoF’s loan is in fact being underwritten by China. During Prime Minister KP Oli's visit to Beijing in March, the Nepal government and the Export-Import Bank of China signed a $ 215.96 million (approximately Rs 21 billion) financing deal.
A quarter of the Chinese credit is interest-free, but Nepal must pay two per cent interest each year for the remaining 75 per cent of the borrowed funds.
After returning from China, PM Oli laid the foundation stone for the Pokhara airport in April. In his budget speech last week, Finance Minister Bishnu Poudel announced that his ministry had allocated Rs five billion to begin the Pokhara airport construction, with the aim of it being ready within the next four years.
However, a dispute over the interest rate of the sub-loan by the MoF to the CAAN had been delaying the commencement of the project. The inking of the loan agreement on Sunday has now paved the way for the work to be kick-started.
Nepal has only one international airport, but is building three more — including the one in Pokhara — to attract more tourists. The first detailed survey to build such an airport in Pokhara had been conducted as far back as 1970, but no significant progress was made in the last four decades.