By Staff Reporter
ISLAMABAD: The Asian Development Bank (ADB) has approved a $130 million loan for Pakistan’s energy sector to help promote clean energy and upgrade the country’s power transmission and distribution systems, the energy ministry said on Thursday.
The approval comes as Pakistan grapples with persistent power sector woes, including frequent outages, high transmission losses, reliance on costly imported fuels, limited renewable energy capacity and a ballooning circular debt. The circular debt refers to an accumulation of unpaid bills, subsidies, and other liabilities within Pakistan’s power sector, creating a liquidity crunch that disrupts supply and discourages investment.
The government is negotiating a Rs1.25 trillion loan with commercial banks to reduce its bulging energy sector debt that touched around Rs2.38 trillion.
Pakistan has also turned to international lenders like the ADB to bolster its energy infrastructure through modernization and renewable projects. Power Minister Sardar Awais Ahmad Khan Leghari discussed reforms and potential cooperation with an ADB delegation headed by Joonho Hwang, the bank’s energy director.
“Joonho Hwang expressed pride in ADB’s partnership with Pakistan’s energy sector,” the 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.”
Hwang noted the ADB’s appreciation for Pakistan’s push toward green financing and said a World Bank team would assess projects from the outset to maximize benefits for the country.
“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 added.
Leghari told the delegation that Pakistan plans to privatize three power distribution companies (DISCOS) in the first phase of its privatization drive and would welcome ADB investment and technical aid.
Privatizing loss-making state entities has been a key demand from the International Monetary Fund (IMF) for Pakistan, which faces a wide fiscal deficit and external financing shortfall. Pakistan secured a $7 billion IMF bailout last year, a vital step in stabilizing its economy.
Leghari emphasized the government’s focus on clean energy and the need for global partnerships to enhance grid and metering infrastructure.
“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 ministry said.
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