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World Bank loan for energy sector

World Bank loan for energy sector

According to newspaper reports, the World Bank has approved a loan of about $500 million to increase reliability and efficiency of the national transmission system after the government assured the donor agency that it will set up an independent organization to support structural reforms and improve financial, technical and commercial performance of the power sector. The government has already fulfilled several conditions of the bank to obtain the loan, including steps to make power distribution companies attractive for privatisation and take parliament into confidence on conservation of energy. The World Bank, despite all odds, is an important development partner of the country, but obtaining loans one after the other for budgetary supports has landed the country on the trouble zone, making it difficult for the government to maintain its debt serving liabilities. The approval of the fund may bring some respite in the energy sector but a trouble in the long run.

As the government could not fulfill the conditions of the donor agency on time, it took 10 months to the bank to approve the loan. However, the fact remains that preference of the successive governments to tap budgetary support created a debt sustainability issue in the country. The PML-N government is following the same path as was of the Pakistan People’s Party government in the past as it is running the country’s affairs on borrowed money and will leave the burden of liabilities on the next government. As for as the independence of the institutions is concerned, internal political pressure and foreign interference have marred their credibility. The government is going to establish an independent organization to purchase electricity from producers, but it is feared it will meet the same fate as of the other ‘independent’ institutions in the country.

According to the World Bank Country Director for Pakistan, this operation will further support the country’s efforts in overcoming the energy crisis and implement key reforms towards an efficient and consumer-oriented electric power system. The government is set to receive $400 million from the Asian Development Bank and a $50 million grant from Japan next week. News reports suggest that the government is facing difficulties in obtaining loans on easy terms and is looking for expensive sources of funding, which will definitely increase the troubles in the long run. Until and unless the government reforms administrative affairs, brings transparency in the utilization of loans and maintains a strict financial discipline, the loan amount will continue to pileup and the nation will continue to suffer economic woes.