World Bank to consider approving $500m energy sector loan

Washington–based lender to review implementation of agreed reforms


Shahbaz Rana August 04, 2015
PHOTO: ARIF SOOMRO/EXPRESS

ISLAMABAD:


The World Bank is mulling over the possibility of approving $500 million loan for the cash-starved energy sector only after it reviews the implementation of the agreed reforms, underscoring the credibility gap between the two sides.


The issue of approval of $500 million Development Policy Credit, which was originally scheduled to be approved in June this year, was discussed on Monday during a meeting between Finance Minister Ishaq Dar and visiting Managing Director of the Washington-based lender, Sri Mulyani Indrawati.



During the meeting, Pakistani officials narrated the measures they have taken so far under a policy matrix agreed between the two sides for the approval of the loan, according to an official who attended the meeting. The Pakistani delegation also shared the energy sector plan with the WB authorities.

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While appreciating the blueprint to rescue the struggling energy sector in the country, the managing director is said to have emphasised on the implementation, which suggests that the Washington-based lender was not willing to approve the loan only based on promised actions, said the officials on condition of anonymity.

The delegation also advised the government not to change the goalposts and stick to their original plans even after receiving the loan, said the sources.

The WB and the Asian Development Bank had decided to give $2 billion to Pakistan for energy sector reforms under a medium-term programme. The programme was part of $10 billion that the international lenders had agreed to provide over a period of three years. The amount included $6.6 billion bailout package of the International Monetary Fund.

In May 2014, the country received the first tranche from both the WB and the ADB totalling $1 billion. The second tranche of roughly the same amount was scheduled to be approved in June this year, which the WB and the ADB delayed due to the federal government's inability to implement the promised reforms.

“We are trying to get $500 million at the earliest, as its approval was also connected with approvals of $400 million loan by the ADB and $100 million Japanese assistance for the power sector,” said Finance Minister Ishaq Dar following  the meeting. To a question, Dar said the $500 million could be approved in September.

He said over 90% of the agreed actions have already been taken, hoping that the remaining work will be completed soon.

Dar said a comprehensive plan to address the circular debt has been finalised.

Under the plan, the circular debt, which stood at Rs303 billion by the end of last fiscal year will be brought down to 204.4 billion in financial year 2018, a reduction of Rs99 billion that will be done by recovering this amount from the honest electricity consumers. In addition, the Power Holding Company Limited (PHCL) debt, will be reduced from Rs335 billion to Rs140 billion by 2018.

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Under the same plan, the government has already slapped electricity surcharges on consumers instead of passing on the benefits of lower tariffs.

The finance minister said the MD of the WB was very positive about the reforms programme of Pakistan.  Miss Indrawati is also said to have urged the economic managers to continue the reforms path, which she believed was not easy. The WB delegation also encouraged Pakistan that they should not compromise transparency in the power sector, said the sources.

Published in The Express Tribune, August 4th, 2015. 

COMMENTS (3)

ABC | 8 years ago | Reply People of Pakistan should get ready to pay more in indirect taxes, which will eventually go in the pockets of corrupt Pak government and IMF
بازی اندروید | 8 years ago | Reply The news was very good. Thank you.
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