The Central Government has cut the USD 1 billion loan by half, that Andhra Pradesh wanted to borrow from World Bank to build its new capital, Amaravati. The Department for Economic Affairs of the Union Ministry of Finance has pruned the loan size to US $500 million and asked for an approval from the World Bank with regard to this change. Earlier in this year, the ministry had agreed to let the state raise a US $ 1 billion loan from the World Bank.
However, the AP state government does not think the pruning is going to affect the Amaravati project a lot. According to an official, if at all the World Bank had sanctioned US$ 1 billion, the state might not have been able to utilize the entire amount immediately. He believes that the loan size was cut by half because of other compulsions. “The total loan that the Centre will allow all states put together to raise in a year is not more than two to three billion US dollars. If the Centre allows AP alone to raise one billion dollars there will have to be drastic cuts for other states,” he said.
He also said it is quite possible that the Centre may in fact want the state to spread the loan over two lending agencies which in fact might work out in the state’s favour. For instance, the Asian Infrastructure Investment Bank (AIIB) headquartered in Beijing, lends at one percent point less than the World Bank. “The Centre might ask us to approach the Asian lender for the remaining US $ 500 million,” the official said.