ADB approves $300m to strengthen Pakistan’s energy sector

ISLAMABAD: The Asian Development Bank (ADB) Friday approved a $300 million policy-based loan to support financial, technical, and governance reforms to strengthen Pakistan’s energy sector and improve its financial sustainability.

The financing is part of the second sub-programme of ADB’s Energy Sector Reforms and Financial Sustainability Programme, which aims to improve the governance of Pakistan’s energy sector and reduce and manage the accumulated cash shortfall across the power supply chain known as circular debt, according to a statement issued by the Manila-based lender. The first sub-programme in the amount of $300 million was approved in December 2019.

ADB Director General for Central and West Asia Yevgeniy Zhukov said that as Pakistan’s key development partner in the energy sector, ADB has been supporting the government to expand access to reliable, affordable electricity and help enact reforms that make the sector more efficient and sustainable.

He said that the programme will help facilitate public and private sector investment across the energy sector value chain through key policies and integrated planning, and will help expand renewable energy generation.

According to the statement, disruption from the coronavirus disease (Covid-19) pandemic stressed the finances and supply chains of Pakistan’s energy sector, slowing the pace of sector reforms initiated by the government in 2019. Losses incurred by state-owned enterprises that impacted the energy sector’s circular debt, together with pandemic relief measures put unprecedented pressure on the energy sector’s liquidity and finances.

Reforms under ADB’s programme will help make Pakistan’s energy sector more financially sustainable by addressing inefficient tariffs and subsidies, high generation costs, system losses, and a lack of integrated planning. The programme also aims to enhance energy infrastructure and professionalise the management of energy entities to improve their performance.

ADB Central and West Asia Director for Energy Joonho Hwang said that ADB continues to work with development partners to advance crucial energy sector reforms and implement a road map for a competitive electricity market. Ultimately, these reforms will help improve the quality and reliability of power supply to the benefit of all—commercial, domestic, urban, and rural consumers, Hwang added.

Pakistan is a founding member of ADB. Since 1966, ADB has committed more than $36 billion to promote inclusive economic growth and improve the country’s infrastructure, energy and food security, transport networks, and urban and social services.

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