The Asian Development Bank (ADB) has approved a 400 million U.S. dollar loan to support Pakistan's ongoing reform to tackle the country's chronic energy crisis which has crippled industries and caused social unrest, the ADB said here Thursday.
Pakistan's economy has been devastated by chronic power shortages which are estimated to have slowed GDP growth by at least 2 percentage points a year.
Private investment has been sharply reduced and power sector subsidies have caused high fiscal deficits and elevated public debt. The government is implementing the National Power Policy which was approved in July 2013 to resolve these problems.
Building on the firm commitment of the government to reforms exemplified in this policy, ADB, Japan and the World Bank have worked with the government to develop a five-year plan and set milestones to implement the policy.
ADB is the lead development organization in Pakistan's energy sector supporting energy efficiency, transmission, distribution, cross-border natural gas pipelines, power generation, and renewable energy projects, a statement from the ADB office in Islamabad said.
The sustainable energy sector reform program will support the overhaul of existing tariffs and subsidies as the government moves to eliminate subsidies by 2016, except for low income customers. It will also back reforms to reduce power losses and encourage more involvement from the private sector and improve transparency and accountability.
The full program is expected to total 1.2 billion dollars, with future amounts subject to further discussions between ADB and the government. For the first sub-program, cofinancing from Japan of 5 billion yen (49 million dollars) and the World Bank of 600 million dollars is expected. The full program is due for completion by June 2018.
"The loan is part of an assistance program which will underwrite reforms needed to make the energy sector affordable, reliable, sustainable and secure," said Klaus Gerhaeusser, the Director General for Asian Development of ADB.
"This in turn will accelerate industrial activity needed to boost economic growth and help create jobs, which are key to reducing poverty level, " the statement quoted Gerhaeusser as saying.