Reluctant Islamabad: ADB pushes Pakistan to avail $1 billion loan

Lending agency wants Islamabad to install smart electricity meters

ISLAMABAD:

The Asian Development Bank (ADB) that had previously refused to finance the Diamer-Bhasha dam due to financial constraints is now pushing Pakistan to avail a $1-billion loan for the installation of smart electricity meters despite Islamabad’s reluctance. This lack of enthusiasm stems from the fact that the government wants to privatise power distribution companies.

The latest push came from ADB’s visiting Vice President Wencai Zhang, who urged Pakistani authorities to obtain the $1-billion loan for the installation of smart meters, officials told The Express Tribune after the meeting.

Zhang would meet Prime Minister Nawaz Sharif along with the finance minister, federal ministers for water and power, planning and development and chief ministers of the four provinces. The ADB’s active funding portfolio comprises 32 loans amounting to $5.1 billion.

The government again sought loans for the Diamer-Bhasha dam that the Manila-based lending agency had refused to provide due to multiple reasons — most significantly due to its cost estimated at $14 billion and India’s objection to the project.

“Economic Affairs Division’s Secretary Saleem Sethi emphasised the need to explore multi-donor financing for mega energy projects of Dasu and Diamer-Basha dams,” according to an official handout.



However, sources said that the visiting VP remained non-committal. During the Pakistan Peoples Party government, the ADB had promised to provide $4.5 billion for Diamer-Bhasha dam but later on, it backtracked.

“Pakistan is not keen to get loans for the smart metre project, as it has already advertised to privatise electricity distribution companies and does not see any economic rationale behind booking Rs100 billion on its budget,” the officials said.

Further, officials of the planning commission also opposed the loan-taking, stating that the project was technically unfeasible. The commission also wants that the ADB should instead fund transmission expansion projects.

The ADB’s position on smart meter project not only contradicts its policy where it has been urging Islamabad to lessen reliance of the power sector on the national kitty but also indicates the increasing influence of the lender that is forcing the government to change its priorities.

The Economic Affairs Division officials said that the vice president was keen on selling the smart metre project. In the first phase, the ADB has offered $400 million for installing smart meters in Lahore and Islamabad electricity distribution companies, the officials added.

Both the entities are on the privatisation list and the Privatisation Commission has already hired financial advisors to sell them before the end of this year.   The officials said that Sethi had asked the bank vice president to take up the issue of smart metre project with the planning commission and the ministry of water and power.

The ADB has also conditioned the $400-million budgetary support to Pakistan with Islamabad’s willingness to accept the loan, the officials said.

The Manila-based lender is also keen that Pakistan should convert the ‘Renewable Energy Development Sector Investment Programme’s remaining balance of $53 million into budgetary support, as both the projects are going to lapse by June next year.  The officials said that the EAD was also reluctant to convert the project loans into budgetary support, which were originally meant for creating assets.

Pakistan and the ADB also reviewed the upcoming five-year 2015-19 Country Partnership Strategy (CPS). The ADB would give $6 billion for the next five years. The funding will be utilised to finance the 660-megawatt Jamshoro coal project and constructing new road projects including the Hassanabdal-Havelian and Gojra-Khanewal motorways.

The EAD asked the VP to enhance the role of ADB Pakistan Resident Mission for a speedy disposal of implementation and procurement issues, according to the finance ministry’s handout.

The VP witnessed the loan-signing ceremony of Balochistan National Highway Development Project, amounting to $197 million. The ADB had approved the loan in June last year but it took almost a year to sign the agreement.


Published in The Express Tribune, May 13^th, 2015.