ADB approves $300 million loan to strengthen Pakistan’s energy sector

ISLAMABAD: The Asian Development Bank (ADB) on 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 the ADB’s Energy Sector Reforms and Financial Sustainability Programme, which aims at improving the governance of Pakistan’s energy sector and reduce and manage the accumulated cash shortfall across the power supply chain known as the circular debt. The first sub-programme of $300 million was approved in December 2019.

“As Pakistan’s key development partner in the energy sector, [the] 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,” ADB Director General for Central and West Asia Yevgeniy Zhukov said.

“This 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.”

Disruption from the coronavirus disease (Covid-19) pandemic stressed the finances and supply chains of Pakistan’s energy sector, slowing the pace of the sector reforms initiated by the government in 2019.

The losses incurred by the state-owned enterprises that impacted the energy sector’s circular debt, together with the pandemic relief measures put unprecedented pressure on the energy sector’s liquidity and finances.

Reforms under the ADB 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 at enhancing energy infrastructure and professionalise the management of energy entities to improve their performance.

“[The] ADB continues to work with the development partners to advance crucial energy sector reforms and implement a roadmap for a competitive electricity market,” ADB Central and West Asia Director for Energy Joonho Hwang said.

“Ultimately, these reforms will help improve the quality and reliability of power supply to the benefit of all, commercial, domestic, urban, and rural consumers.”

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