ADB mulls $2bln lending for Pakistan’s energy sector

ISLAMABAD: Asian Development Bank (ADB) is considering $2 billion of loan in next three years to help Pakistan tackle energy sector’s structural issues, the bank’s top official said on Wednesday.

ADB Director General for Central and West Asia Department Werner Liepach unveiled the plan during a meeting with Minister for Power Omar Ayub Khan and Special Assistant to the Prime Minister on Petroleum Nadeem Babar. ADB Country Director Xiaohong Yang was also present at the meeting.

ADB remains the top energy sector’s partner of Pakistan with $2.1 billion loan portfolio. It’s already released $300 million to the country to support its energy sector’s reforms, including measures to tackle chronic circular debt issue. The loan is in addition to one billion dollars released as policy-based lending to help the country that implemented a series of IMF-supported reforms and actions to improve its current account deficit, strengthen its revenue base, and protect the poor against the social impact of the economic crisis.

The bank said that the energy reform program aims to address the underlying causes of circular debt with a focus on improving inadequate tariff and subsidy systems, strengthening energy accounting, and reducing generation costs.

The government targeted to bring the circular debt to zero by December 2020. It said monthly accumulation of the circular debt has been reduced to Rs11 to Rs12 billion as opposed to earlier Rs39 billion/month.

It was decided that a comprehensive portfolio review meeting would be held between power division and the bank by the end of this month to steer the ADB-funded projects to their logical culmination.

It was also agreed that both the sides would render efforts to ensure maximum transparency during the execution of energy sector projects.

The Manila-based lender also showed interest in facilitating technical studies for the gas storage facility in Pakistan. “During later part, ADB can also consider financing the project,” a statement quoted Liepach as saying.

The ADB team was apprised of approval of new renewable energy policy, which would be placed before the Council of Common Interests in a meeting scheduled end of this month. The team was briefed about various steps taken by the power division to boost the efficiency of the system and campaigns against power theft.

The meeting was informed that the circular debt capping plan was perused and implemented by the power division, resulting in considerable reduction in its growth. The ADB team expressed satisfaction over the steps taken by the power division and termed its efforts positive for the energy sector.