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ADB to support Pakistan’s power sector with $300mn loan
PAKISTAN
THE Asian Development Bank (ADB) is to lend $300mn to Pakistan to help the government improve the country’s energy sector’s financial sustainability, governance and infrastructure.
The financing will form part of the $1bn Energy Sector Reforms and Financial Sustain- ability Programme, a long-term IMF-led pro- ject that aims to drive sustainable and inclusive growth after years of economic decline.
The country’s power sector needs $10bn to meet demand for electricity and to support economic growth, the ADB said, with debts and unpaid bills in particular holding back investment.
“The cash shortfall across the power sup- ply chain in Pakistan, also known as circular debt, has shot up to more than $10bn and is a long-standing chronic issue ailing the country’s power sector,” said ADB director general for Central and West Asia Werner Liepach.
“A comprehensive and realistic Circular Debt Reduction Plan, assisted by ADB in close co-or- dination with other development partners, is the cornerstone of this subprogramme. The plan aims to drastically cut the new flows of circular debt and provides policy directions on address- ing accumulated circular debt.”
While Pakistan has made a significant effort in recent years to expand its electricity genera- tion capacity and stabilise supply, the country is yet to overcome the challenge of inefficiencies, distortions, and uneven reform progress in the sector. These inefficiencies were estimated to have cost the country’s economy up to $18bn, or 6.5% of gross domestic product, in 2015.
The reforms aim to address the underlying causes of circular debt by focusing on improv- ing the inadequate tariff and subsidy systems, strengthening energy accounting and reducing generation costs.
The ADB will finance the programme with support from its development partners such as the Export–Import Bank of Korea, which will furnish $80mn of co-financing.
The energy financing comes as the ADB has also released $1bn of immediate budget sup- port to Pakistan to shore up the country’s public finances and help strengthen a slowing economy.
Known as a Special Policy-Based Loan, the cash is part of a comprehensive multi-donor economic reform programme led by the IMF to stabilise Pakistan’s economy after a financial crash in mid-2018 caused growth to slump and threatened progress in alleviating poverty.
Week 49 11 •December•2019 w w w . N E W S B A S E . c o m P7
