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ADB approves $400mn loan to boost Pakistan's energy sector

April 28, 2014

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Federal Minister for Finance Senator Ishaq Dar talks to media persons after signing MoU between ADB and Economic Affairs Division in Islamabad on Monday. – APP Photo
Federal Minister for Finance Senator Ishaq Dar talks to media persons after signing MoU between ADB and Economic Affairs Division in Islamabad on Monday. – APP Photo

ISLAMABAD: The Asian Development Bank (ADB) has approved $400 million loan to help Pakistan carry out reforms for overcoming power shortages.

An agreement in this regard was signed by Secretary Economic Affairs Division Nargis Sethi and ADB's Country Director for Pakistan Werner E. Liepach here on Monday. Finance Minister Ishaq Dar and ADB's Governor witnessed the signing ceremony.

“The ADB has approved a soft and concessionary loan for Pakistan, which has the best terms and conditions with interest rate of even less than 2 per cent annually,” said Ishaq Dar.

He said the ADB had also recently approved a loan of $900 million for Jamshoro coal power project to produce cheaper electricity.

Speaking on the occasion, Werner E. Liepach said the loan would support key reforms in the energy sector to ensure uninterrupted supply of cheaper and dependable power to millions of industrial and private consumers, who were presently adversely affected by long power outages.

“This important energy sector assistance will propel growth, boost businesses, and create jobs that are critical to reduce poverty in the country,” said Liepach.

In line with Pakistan's National Power Policy approved in 2013, the sustainable energy sector reform programme targets robust policy, capacity development and institutional strengthening action to reduce crippling power shortages that according to estimates, are costing the country about 2 per cent of its GDP growth every year.

The ADB along with Japan and the World Bank have been working with the Pakistan government to formulate and implement a five-year plan targeting increased power supply, reduction of losses and boosting the efficiency of the power sector.

The programme would support government's plans to rationalise tariffs and eliminate subsidies by 2016, except for low income customers.

“The reforms will improve transparency and accountability, which will also go a long way in leveraging stronger private sector led investments in the power sector,” said Werner Liepach.

The full programme, set to complete by June 2018, spans a total of $1.2 billion investment by the ADB, and for the first sub-programme, co-financing is expected from Japan with $49 million and the World Bank with $600 million.

The ADB is the lead development partner in Pakistan's energy sector supporting a wide range of power sector development activities, including energy efficiency, transmission, distribution, cross-border natural gas pipelines, power generation, and renewable energy projects.

The ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members – 48 from the region.

In 2013, ADB assistance totalled $21 billion, including co-financing of $6.6 billion.