ISLAMABAD: The Asian Develop­ment Bank (ADB) has approved two policy and project loans worth $685 million for Pakistan’s energy sector reforms and improvement of health and civic facilities.

Under the first loan, the Manila-based lending agency will provide a $300m policy-based lending to support financial, technical and governance reforms to strengthen the country’s energy sector and improve its financial sustainability, the ADB said in a statement issued on Friday.

The financing is part of the second sub-programme of ADB’s Energy Sec­tor Reforms and Financial Sustain­ability Programme, which aims to improve the governance of Pakistan’s energy sector and reduce and manage the accumulated cash shortfall across the power supply chain known as circular debt. The first sub-programme under the $300m financing was approved in December 2019.

“This programme will help facilitate public and private sector investment across the energy sector value chain through key policies and integrated planning and will help expand renewable energy generation,” said Yevgeniy Zhukov, ADB Director General for Central and West Asia.

Asian lender approves $300m for energy sector and $385m for five KP cities

The statement said the disruption from the Covid-19 pandemic stressed the finances and supply chains of Pakistan’s energy sector, slowing the pace of sector reforms initiated by the government in 2019. Losses incurred by state-owned enterprises that impacted the energy sector’s circular debt, together with pandemic relief measures, put unprecedented pressure on the energy sector’s liquidity and finances.

Reforms under the ADB programme will help make the country’s energy sector more financially sustainable by addressing inefficient tariffs and subsidies, high generation costs, system losses, and a lack of integrated planning. The programme also aims to enhance energy infrastructure and professionalise the management of energy entities to improve their performance, the ADB said.

Reforms under the ADB programme will help make Pakistan’s energy sector more financially sustainable by addressing inefficient tariffs and subsidies, high generation costs, system losses, and a lack of integrated planning. The programme also aims to enhance energy infrastructure and professionalise the management of energy entities to improve their performance.

“ADB continues to work with development partners to advance crucial energy sector reforms and implement a road map for a competitive electricity market,” said Joonho Hwang, ADB Director for Energy for Central and West Asia. “Ultimately, these reforms will help improve the quality and reliability of power supply to the benefit of all — commercial, domestic, urban, and rural consumers.”

Project for five KP cities

The second loan worth $385m is targeted to improve the liveability and community health of five cities in Khyber Pakhtunkhwa — Abbottabad, Kohat, Mardan, Mingora and Peshawar.

The KP Cities Improvement Project will help construct two clean water supply treatment facilities, three sewerage treatment facilities, and rehabilitate dysfunctional tubewells among several other important subprojects.

More than 3.5m people will benefit from improved access to clean and safe water, reliable and integrated waste management and sanitation services, green urban spaces and gender-friendly urban facilities, the ADB statement said, adding that about 150,000 households will gain new connections to water supply systems and have smart water meters installed in their homes.

With its rapidly growing urban population, KP “is becoming more exposed to health risks due to deteriorating municipal services and the impacts of climate change”, the Asian Bank said, adding that this project will help address these challenges of urban centres through strong, climate-resilient urban infrastructure combined with access to reliable services to benefit people, the environment and support sustainable development.

“This project has used ADB’s project readiness financing facility to ensure detailed engineering design, safeguards assessments, and other critical preparatory work was completed in advance — a first for the central and west Asia region. That will ensure the transformative benefits of this project will flow to the people of Khyber Pakhtunkhwa province more quickly,” Mr Zhukov said.

The ADB will provide a $380m loan and a $5m grant, while the Asian Infrastructure Investment Bank will provide co-financing of $200m, subject to approval of their board of directors. Together with $65m in financing from the government of Pakistan, this represents ADB’s largest urban project (equivalent to $650m) in the country.

ADB’s loan includes more than $106m for climate adaptation and mitigation, the bank’s largest climate financing contribution in any urban project in 2021, reaffirming its commitment to helping its developing member countries fight climate change.

Published in Dawn, December 11th, 2021