Govt seeks $400m WB loan for energy sector

Reporting about 20 per cent increase in peak summer electricity demand, the government on Wednesday sought approval for an approximately $400 million energy sector loan by the World Bank (WB) by end-September.

A senior government official told Dawn that a meeting of WB’s Board of Directors is expected on September 27 and the authorities are making efforts to address outstanding issues including finalisation of the Circular Debt Management Plan (CDMP) in advance to ensure smooth sailing.

Informed sources said a visiting WB delegation – led by its vice president for South Asia Hartwig Schfer – had a meeting with Minister for Energy Hammad Azhar and Minister for Planning Asad Umar. The two sides discussed the latest situation on CDMP and asked their respective technical teams to finalise an acceptable plan for the board approval at the earliest.

Mr Hammad told the WB delegation that around 20pc increase in peak demand for electricity has been registered this summer which was a good omen for the energy sector and the economy. He sought the bank’s support to enhance the capacity and modernise the transmission network.

An official statement said the minister told the delegation that due to effective measures by the government the growth in circular debt was being curtailed to a considerable amount. During FY21, around Rs130bn was added to the circular debt which was some Rs408bn lower than in FY20.

“The Power Division has planned an addition of considerable capacity in the existing transmission network by the end of FY22 for which funds have also been allocated,” the statement said. About Rs120bn worth of funds for transmission network are part of the Public Sector Development Programme. Mr Azhar advocated the “importance of WB’s assistance in expansion and modernisation of Pakistan’s electricity Transmission System”.

On the occasion, Mr Schfer acknowledged the slowdown in growth of circular debt and renewed the commitment of WB to continue working with the government in the energy sector, the energy ministry said. The WB official acknowledged Pakistan had the potential of achieving growth rate of 6-7pc and called for closer working between the experts group of the two sides to deliver on targets.

Informed sources said the government had been struggling with the revised CDMP following the political decision to withhold about Rs1.40 per unit average increase in consumer tariff a few months ago despite a commitment with the WB and the International Monetary Fund.

Of late, the government has made some procedural progress by securing powers through amendment in the Nepra Act to impose surcharge on electricity and filing of petitions before the power regulator to increase various consumer slabs and subsidy rates. The Power Division and Finance Division have been divided over the fundraising through tariff and subsidy adjustments.

For current fiscal, the Power Division had worked out the power sector subsidy of about Rs501bn and received about Rs331bn subsidy allocations from the Finance Division in the budget. The Power Division has reported about Rs170bn shortfall on this account which has to flow to the circular debt.

To revive the energy sector loans direly needed for balance of payments, Minister for Finance Shaukat Tarin had recently written to the WB to deliver on GOP commitments. Officials said the next tariff increase was being planned for implementation after mid-September. In the meanwhile, however, the circular debt had been reconciled at about Rs2.33 trillion as of June 30, 2021. The Power Division claims that a major part of this increase was due to unbudgeted and unpaid subsidies.

The WB delegation was informed by the planning minister about the government plans to revamp the Pakistan Bureau of Statistics to modernise statistical system and enable it for high-frequency data generation.

Mr Umar said the PBS would also be conducting first digital census 2023 and expected the WB’s technical assistant in this regard. The WB VP called for faster and sustainable reforms.

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