Pakistan plans first green bond to fund hydropower projects

KARACHI: Pakistan’s government is planning to issue a $500 million green bond in the next few months to help boost its development of hydroelectric power, Bloomberg reported.

The bond, denominated in euros, will be the government’s first to fund environmental goals, Malik Amin Aslam, an adviser to Prime Minister Imran Khan on climate change, said in an interview. It is set to be issued through the country’s state-owned Water and Power Development Authority, with JPMorgan Chase & Co. advising, he said.

“We’ve got a lot of hydro potential in Pakistan,” he said on Thursday. “The bonds are there to accelerate this.”

The government is investing in renewable energy to ramp up its economic stimulus in the wake of the pandemic. It’s also promised to ban new coal power plants and is looking to plant 10 billion trees.

The nation’s cities rank among the worst globally for air pollution.

Pakistan’s government planned to increase the share of renewable electricity into the energy mix to 20 percent by 2025 and 30 percent by 2025.

The South Asian nation has a fragile economy that goes through regular boom and bust cycles.

It received debt relief during the pandemic, restoring its $6 billion bailout program that it secured from the International Monetary Fund in 2019 to avoid bankruptcy.

The economy saw its decades-worst contraction in the past fiscal year when growth was in negative 0.4 percent due to coronavirus lockdown for three to four months. The economic shutdown affected the already ailing economy that had been facing structural adjustments since the current government took over in August 2018.

However, market-based rupee movements, combined with taxation and power sector’s reforms, led the IMF to restore its loan program that had been in suspension for over one year. The IMF’s nod to economic reforms process has already persuaded other financial institutions, including the World Bank and Asian Development Bank, to resume policy-base lending to Pakistan.

External account sector that was undergoing extreme pressure with import payment capacity reduced to less than three months has been seen improving since the gush of foreign inflows in shape of debts, remittances and foreign direct investment.

Issuance of green bonds globally is seen surging to $375 billion in 2021 by Moody’s Investors Service, after record sales last year.

While Europe has led the way, countries from Singapore to Brazil plan to sell their first to tap buoyant investor demand. JPMorgan, the world’s top arranger of green debt, declined to comment.