LONDON, June 18: The World Bank on Tuesday approved $256.85 million credit and loan to Pakistan, designed to improve reliability and efficiency of power supply. Poor electricity service has been identified as a major constraint to Pakistan’s sustained economic growth. While electricity sales have risen by 40 per cent in the past five years, generation capacity remained practically stagnant.

It is estimated that the system lacks about 2000 MW to cover peak demand with acceptable reliability. The country’s transmission and distribution networks are over-loaded, under-invested, and under-maintained, with high technical and commercial losses.

The Electricity Distribution and Transmission Improvement Project aims to improve distribution and transmission networks to meet increasing electricity demand and to strengthen institutional capacity of electricity distribution companies.

“While Pakistan has added about one million new, mainly household, electricity connections each year, about a quarter of its population still has no access to electricity, and the quality of service to those who are connected has been deteriorating sharply, ” said Yusupha Crookes, World Bank Country Director for Pakistan. “This has an adverse impact on both the normal conduct of social and economic activity and the delivery of social services.”

Improving electricity distribution and transmission services is a key element of the overall effort of reforming Pakistan’s power sector and strengthening its operating performance.

“The project supports investments in the distribution and transmission networks, which are essential to meet the growth in electricity demand more efficiently, and with improved quality of service,” said Rashid Aziz, World Bank Senior Energy Specialist and project team leader.

“The project also aims to help the companies reduce technical and commercial losses and help strengthen various corporate functions and governance. It also includes a component to support energy efficiency and conservation activities to urgently respond to the critical shortages that the country is facing right now.”

The $173.6 million loan from the International Bank for Reconstruction and Development (IBRD) has 30 years maturity, including a five year grace period.

The $83.1 million credit is provided by the International Development Association (IDA), the World Bank’s concessionary lending arm and has 35 years to maturity and a 10-year grace period.