ISLAMABAD: Pakistan’s Ministry of Energy announced on Thursday that the Asian Development Bank (ADB) has approved a $130 million loan for the country’s energy sector, and vowed to support Islamabad’s bid to promote clean energy and improve its power transmission and distribution system.
Pakistan’s power sector is riddled with challenges which include frequent and lengthy power outages, high transmission losses, dependence on expensive imported fuels, limited renewable energy sources and most of all, a massive circular debt. The circular debt is a cascade of unpaid government subsidies that results in accumulation of debt on distribution companies.
Pakistan has sought help from international partners, including the ADB, to improve its energy infrastructure by modernizing its transmission system and promoting renewable energy projects. Sardar Awais Ahmad Khan Leghari, Pakistan’s power minister, met an ADB delegation led by Joonho Hwang, the director of energy at the bank, to discuss Islamabad’s reforms and future areas of cooperation.
“Joonho Hwang expressed pride in ADB’s partnership with Pakistan’s energy sector,” the energy ministry said in a statement. “He informed that $130 million has been approved for Pakistan’s energy sector, out of which an initial $30 million is immediately available.”
The ADB official said the bank values Pakistan’s efforts to promote green financing and that a World Bank team would review projects from the initial stages to ensure maximum benefit for Pakistan.
“He further assured that ADB will extend full support in privatization, establishing a carbon market, modernizing transmission and distribution systems and advancing renewable energy projects in Pakistan,” the statement said.
Leghari informed the ADB delegation that during the first phase of its move to privatize power distribution companies (DISCOS), Islamabad would privatize three DISCOs, adding that it would welcome the ADB’s investment and technical assistance.
Privatization of loss-making state-owned enterprises has long been on the International Monetary Fund’s (IMF) list of recommendations for Pakistan, which is struggling with a high fiscal shortfall and a huge external financing gap.
Pakistan and the IMF reached a deal for a $7 billion bailout last year, which has been crucial in the country’s efforts to revive its economy.
Leghari told the ADB delegation that the government is prioritizing clean energy and seeks international cooperation to improve grid and metering systems.
“He also highlighted that Pakistan has shut down around 2,800 MW of fossil fuel power plants ahead of schedule as part of its environmental responsibility and now seeks access to green financing and carbon credits,” the energy ministry said.
