Report: Suhail Sundoo

Impact Fund Denmark is providing its largest loan ever of EUR 183 million – almost DKK 1.4 billion – for a new large Danish-built wastewater treatment plant in Faisalabad, Pakistan’s third largest city and the centre of the country’s textile industry. Pakistan currently only treats 10 percent of its wastewater. The rest flows untreated into local rivers and canals and is used by agriculture for irrigation, which pollutes both the environment and food production. The water can change colour depending on the colour used in the area’s significant textile production. The new plant will be able to treat 150,000 m3 of wastewater. This will improve water quality for around 765,000 people. Specifically, the money is raised by Impact Fund Denmark providing a guarantee that Danske Bank can provide a loan to the Pakistani Ministry of Finance. At the same time, Impact Fund Denmark pays the interest on the loan.

Denmark provides record-breaking billion-dollar loan for new Danish-built wastewater treatment plant in Pakistan.

Why is this needed?

• Large textile factories in Pakistan currently discharge untreated wastewater directly into rivers
• This severely pollutes water resources, harms agriculture, and creates major health and environmental problems
• Pakistan struggles to finance large infrastructure projects due to its low credit rating

Who is involved?

• Impact Fund Denmark, a state-owned development finance institution under the Danish Ministry of Foreign Affairs
• Danske Bank, which provides the loan backed by a Danish state guarantee
• Munck Gruppen, a Danish construction company building the facility
• Pakistan’s Ministry of Finance, which receives the loan

How does the financing work?

• Impact Fund Denmark guarantees the loan, enabling Danske Bank to provide it
• The fund also covers the interest payments, as the project is not commercially profitable
• This is the largest loan ever issued by Impact Fund Denmark

What are the benefits?

• Improved water quality for around 765,000 people
• Reduced pollution of rivers and farmland
• Sludge from the treatment process will be used to produce biogas, covering up to 80% of the plant’s energy needs
• The project combines environmental protection, public health, and renewable energy

The bigger picture

The project shows how Denmark uses development funds to:

• Promote global sustainability
• Export Danish expertise and companies
• Address environmental challenges that private markets cannot solve alone

Thanks to Tina Kollerup Hansen, Managing Director og Co-Head af Public Infrastructure i Impact Fund Denmark & Thøger Kirk, External Communications Director.