ADB Approves $350 mn Loan to Reform the Energy Sector in Pakistan

ADB has decided to shortly approve a loan worth USD 350 million for reforms and financial sustainability programmes in the Pakistan energy sector.

The Asian Development Bank (ADB) has decided to shortly approve a loan worth USD 350 million for reforms and financial sustainability programmes that aims to address fiscal, governance, technical and policy deficits in the Pakistan energy sector.

These deficits have adversely impacted the sector’s quality and efficiency of services, and the sustainability of energy infrastructure and finances, thereby challenging Pakistan’s fiscal balance and macroeconomic stability, Dawn reported.

According to the project documents released by the ADB, the bank will start loan negotiations with the government next month, and it is expected that the loan signing and effectiveness of the loan will take place in November this year.

Out of the total amount, the ADB will provide USD 300 million while the rest of USD 50 million will be provided by the Export-Import Bank of Korea.

Pakistan’s Ministry of Finance will execute the project in collaboration with ADB, while the Ministry of Energy will be the implementing agency.

The programmatic approach and policy-based loan will finance three sub-programmes in 2019-23, and through interlinked policy actions, reform areas of the three sequenced sub-programmes are underpinned on securing financial sustainability, strengthening governance, and reinforcing infrastructure improvements.

The programme is conceived in close coordination with key development partners and underpins the International Monetary Fund’s recently approved USD 6 billion extended fund facility to curtail the sector’s burden on the annual budget and associated negative impact on the economic growth of the cash-strapped country.

Earlier this month, we reported that ADB President, Takehiko Nakao had met with Prime Minister Narendra Modi and pledged to support the government’s new flagship initiatives led by the Prime Minister. In their meeting, the two leaders discussed how to further enhance the partnership in areas such as the promotion of new technologies and innovation, renewable energy, solar-pump irrigation, electric vehicle and battery, fintech, sustainable tourism, and the recycling of plastics.