The Asian Development Bank (ADB) on Friday approved two loans totalling $685 million for Pakistan to support health and energy sector reforms.
The ADB approved a $300 million policy-based loan to support financial, technical, and governance reforms to strengthen Pakistan’s energy sector and improve its financial sustainability, the lender said in a statement.
“The financing is part of the second subprogram of ADB’s Energy Sector Reforms and Financial Sustainability Program, 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,” it added.
Yevgeniy Zhukov ADB director general for Central and West Asia said ADB has been supporting the government to expand access to reliable, affordable electricity and help enact reforms that make the sector more efficient and sustainable
“This program 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.”
Disruption from the coronavirus disease (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 Pakistan 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 Pakistan and finances.
Reforms under ADB’s program 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 program also aims to enhance energy infrastructure and professionalize the management of energy entities to improve their performance.
The ADB also approved $385 million in financing to help improve the livability and community health of five cities in Pakistan’s Khyber Pakhtunkhwa province.
The Khyber Pakhtunkhwa Cities Improvement Project will help to construct two clean water supply treatment facilities, three sewerage treatment facilities, and will rehabilitate dysfunctional tube wells among several other important subprojects in the cities of Abbottabad, Kohat, Mardan, Mingora, and Peshawar.
More than 3.5 million 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. 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, Khyber Pakhtunkhwa province is becoming more exposed to health risks due to deteriorating municipal services and the impacts of climate change. Strong, climate-resilient urban infrastructure combined with access to reliable services benefit people, the environment, and support sustainable development. This project will help address these challenges of urban centers in Khyber Pakhtunkhwa province.
Zhukov said large urban projects are often delayed due to their inherent complexity and competing interests in limited urban space.
“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 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.”
ADB will provide a $380 million loan and a $5 million grant, while the Asian Infrastructure Investment Bank will provide cofinancing of $200 million, subject to approval of their board of directors. Together with $65 million in financing from the government of Pakistan, this represents ADB’s largest urban project ($650 million equivalent) in Pakistan.
ADB’s loan includes more than $106 million 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.
With a strong focus on gender, the project will boost women’s access to economic opportunities and increase their participation in urban governance by upgrading a center dedicated to women’s skills development. The project will rehabilitate streets, parks, and nature trails, adding female-friendly urban facilities such as women’s sports complexes, family areas, and well-lit rest areas and toilets. The project will also support a scholarship program for qualified female students.