Pakistan seeks $1.2 billion World Bank program loan for power sector reforms

ISLAMABAD: Pakistan has asked World Bank for $1.2 billion loans during the ongoing fiscal year, including $600 million for Pakistan Programme for Affordable and Clean Energy to reduce circular debt via cost cut in power generation, decarbonising energy mix, improving distribution, and retargeting electricity subsidies.

The proposed programme loan of $600 million would be given in the shape of $300 million IDA loan and remaining $300 million as IBRD financing. “Pakistan and the WB high-ups discussed $1.2 billion programme loans approval till June 30, 2021, for undertaking reforms on energy and fiscal side,” top official sources confirmed to The News on Friday.

Project financing has been slowed down in Pakistan due to various reasons, including lacklustre approach of executing agencies of donor funded projects. Therefore, authorities were now aiming to generate dollar inflows through programme loans, because its funding was disbursed after undertaking structural reforms.

It is not yet known how Pakistani authorities would convince the World Bank about avoiding tariff hike committed through Circular Debt Management Plan.

The government committed with the IMF it would hike power tariff by Rs5/unit till June 30, 2021. But later, the premier stopped the Power Division from raising the tariff.

It was now up to the government to come up with an alternative plan for reducing generation cost, slashing down losses and improving collection of bills. It is not yet known how much the WB would be satisfied with the alternate plan presented by Islamabad high ups during this high-level meeting being here at the Ministry of Finance. According to the official announcement made after the meeting, Federal Minister for Finance and Revenue Shaukat Tarin, held a virtual meeting with World Bank Group Vice President South Asia Region Hartwig Schafer, at the Finance Division on Friday.

Federal Minister for Energy Muhammad Hammad Azhar, Federal Minister for Economic Affairs Division Omar Ayub Khan, SAPM on Finance and Revenue Dr Waqar Masood, Secretary Finance Division, Secretary Power Division and other senior officers participated in the meeting.

In his opening remarks, Schafer expressed concerns over resurgence of Covid-19 pandemic during the third wave in South Asia and the alarming increase in the number of active infections and corresponding fatalities.

In his remarks, Tarin apprised that the third wave of Covid-19 was particularly challenging as Pakistan was going for an aggressive smart lockdown to curtail the spread of the virus across the country.

Reviewing the progress on ongoing World Bank projects and programmes, secretary Power Division underlined that Pakistan was pursuing a policy of targeted subsidies in the Power sector. “The government is firmly committed to subsidy rationalisation (in phases) for bringing efficiency and improving service delivery,” he added.

In his concluding remarks, the finance minister said the government’s focus would be on socio-economic development, better financial management, building resilient institutions, reforming energy sector, strengthening social sector and enhancing revenue generation during these testing times.

The World Bank appreciated the government’s relief initiatives to curtail the impact of Covid-19 effectively and reiterated continuous support to the government and people of Pakistan during the ongoing third wave.