ADB announces $1.4bn loan for Pakistan’s energy sector406 views
KARACHI: Asian Development Bank (ADB) on Friday announced around $1.4 billion worth of loan to help Pakistan resolve some of the key issues in its power sector that falls short of 5,000 megawatts to meet the country’s total electricity demand.
At least $990 million is sanctioned for advanced electricity metering infrastructure (AMI) system for power distribution companies across the country, which will help reduce losses, improve revenue collection and load management, and strengthen the financial viability of the sector. Another $400 million loan is to support ongoing policy reforms.
“Nearly 20 percent of generated electricity is lost due to high technical and commercial losses and measures like the installation of the AMI system are necessary to counter this,” a statement quoted Adnan Tareen, Senior Energy Specialist, as saying. “The two programs, collectively, will help create a more efficient, transparent, modern and sustainable energy sector.”
Pakistan is struggling with an ongoing power crisis which puts pressure on real GDP growth. The electricity supply-demand gap of 5,000 megawatts is blamed for a sharp decline in manufacturing.
“Distribution power companies face financial problems with customer tariffs being lower than the cost of service, and high system losses resulting in delayed payment to generating companies,” said the ADB.
“The distribution enhancement program will install advanced ‘smart’ meters at distribution companies across the country to reduce power losses and boost company revenues. A modern, computerised customer billing and information system will also be put in place to improve service quality. This infrastructure will be rolled out in phases, covering Pakistan’s major cities and industrial and commercial hubs.”
The Manila-based bank, which works to reduce poverty in Asia and the Pacific through inclusive economic growth, said the financial assistance for the policy reforms will address extensive debts in the electricity sector of Pakistan.
Circular debt has swelled to Rs600 billion, marring the ability of the planners to bring efficiency in the power sector.
The rectifying structural issues in the sector will lift growth, boost incomes, and cut poverty, said the ADB.