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Pakistan: Energy Sector Reforms and Financial Sustainability Program (Subprogram 1)

Sovereign (Public) Project | 53165-001 Status: Closed

The proposed Energy Sector Reforms and Financial Sustainability Program aims to address fiscal, governance, technical, and policy deficits in Pakistan's energy sector. These arrears have adversely impacted the sector's quality and efficiency of services, and the sustainability of energy infrastructure and finances, thereby challenging Pakistan's fiscal balance and macroeconomic stability. The program incorporates lessons learned from similar policy-based interventions by the Asian Development Bank (ADB) and draws on the recommendations and lessons in the sector assistance program evaluation. The program is conceived in close coordination with key development partners, and underpins the International Monetary Fund's recently approved $6.0 billion extended fund facility to curtail the sector's burden on the annual budget and to stem quasi-fiscal losses and associated negative impact on economic growth.

Project Details

Project Officer
Aleem, Asad Central and West Asia Department Request for information
Country
  • Pakistan
Sector
  • Energy
 
Project Name Energy Sector Reforms and Financial Sustainability Program (Subprogram 1)
Project Number 53165-001
Country Pakistan
Project Status Closed
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 3881-PAK: Energy Sector Reforms and Financial Sustainability Program (Subprogram 1)
concessional ordinary capital resources lending / Asian Development Fund US$ 300.00 million
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Drivers of Change Gender Equity and Mainstreaming
Governance and capacity development
Partnerships
Private sector development
Sector / Subsector

Energy / Energy sector development and institutional reform

Gender Equity and Mainstreaming Some gender elements
Description The proposed Energy Sector Reforms and Financial Sustainability Program aims to address fiscal, governance, technical, and policy deficits in Pakistan's energy sector. These arrears have adversely impacted the sector's quality and efficiency of services, and the sustainability of energy infrastructure and finances, thereby challenging Pakistan's fiscal balance and macroeconomic stability. The program incorporates lessons learned from similar policy-based interventions by the Asian Development Bank (ADB) and draws on the recommendations and lessons in the sector assistance program evaluation. The program is conceived in close coordination with key development partners, and underpins the International Monetary Fund's recently approved $6.0 billion extended fund facility to curtail the sector's burden on the annual budget and to stem quasi-fiscal losses and associated negative impact on economic growth.
Project Rationale and Linkage to Country/Regional Strategy The programmatic approach and policy-based loan will finance three subprograms to be implemented in 2019-2023. Through interlinked policy actions, reform areas of the three sequenced subprograms are underpinned on three pillars: (i) securing financial sustainability, (ii) strengthening governance, and (iii) reinforcing infrastructure improvements. In line with these pillars, subprogram 1 will (i) check the accumulation of circular debt through cost-reflective tariffs with automatic quarterly adjustments and notification mechanism, fully budgeted subsidies, a credible circular debt management plan, and investor-friendly national electricity and renewable energy policies; (ii) streamline integrated planning and bolster governance through appointment of professional heads and autonomous boards, separation of hydrocarbon policy and regulation functions, and development of a privatization road map for liquid natural gas plants; and (iii) enhance infrastructure investments to reduce line losses, rationalize generation cost, increase private sector participation with frequent bidding rounds, finalize a road map to reduce unaccounted-for gas, and set up an alternative dispute resolution mechanism for appeals on regulatory decisions. Subsequent subprograms will build on the earlier initiated interventions and reforms, focusing on settling the stock of circular debt and past taxation issues, instituting multiyear tariffs, unbundling the gas sector, increasing private sector participation, functional outsourcing and management contracts in distribution sector and rolling out distributed generation and off-grid solutions. The program is consistent with ADB's current country partnership strategy for Pakistan, and the under preparation strategy for Pakistan, 2020- 2024; and, it is included in the country operations business plan.
Impact Financial sustainability and self-reliance of energy sector achieved (Vision 2025)
Project Outcome
Description of Outcome Financial, technical, and governance deficits in energy sector reduced
Progress Toward Outcome Outcomes under the subprogram were achieved and funds disbursed on 9 December 2019. These outcomes are linked with policy actions for subprograms 2 and 3 under the programmatic approach. Implementation of reforms, albeit slow, is ongoing, and jointly monitored by ADB, IMF and the World Bank through quarterly review missions.
Implementation Progress
Description of Project Outputs

Securing financial sustainability

Strengthening governance (institutional and regulatory)

Status of Implementation Progress (Outputs, Activities, and Issues) Outputs under the subprogram were achieved and thereafter funds were disbursed on 9 December 2019. These outcomes are linked with policy actions for subprograms 2 and 3 under the programmatic approach. Implementation of reforms, albeit slow, is ongoing, and jointly monitored by ADB, IMF and the World Bank through quarterly review missions.
Geographical Location Nation-wide
Safeguard Categories
Environment C
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects Not Applicable
Involuntary Resettlement Not Applicable
Indigenous Peoples Not Applicable
Stakeholder Communication, Participation, and Consultation
During Project Design Not Applicable
During Project Implementation Not Applicable
Responsible ADB Officer Aleem, Asad
Responsible ADB Department Central and West Asia Department
Responsible ADB Division Energy Division, CWRD
Executing Agencies
Ministry of Finance
Q-Block, Finance Division,
Pak Secretariat, Red Zone, Islamabad,
Pakistan
Timetable
Concept Clearance 09 Sep 2019
Fact Finding 09 Sep 2019 to 13 Sep 2019
MRM 25 Oct 2019
Approval 06 Dec 2019
Last Review Mission -
Last PDS Update 30 Mar 2020

Loan 3881-PAK

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
06 Dec 2019 09 Dec 2019 09 Dec 2019 30 Jun 2020 - 30 Jun 2020
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 300.00 Cumulative Contract Awards
ADB 300.00 06 Dec 2019 300.00 0.00 100%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 06 Dec 2019 300.00 0.00 100%

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