Pakistan : Energy Sector Reforms and Financial Sustainability Program (Subprogram 1)
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/Economy
Pakistan -
Sector
- Energy
| Project Name | Energy Sector Reforms and Financial Sustainability Program (Subprogram 1) | ||||||||
| Project Number | 53165-001 | ||||||||
| Country / Economy | Pakistan |
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| Project Status | Closed | ||||||||
| Project Type / Modality of Assistance | Loan |
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| Source of Funding / Amount |
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| Operational Priorities | OP2: Accelerating progress in gender equality OP3: Tackling climate change, building climate and disaster resilience, and enhancing environmental sustainability OP6: Strengthening governance and institutional capacity |
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| Sector / Subsector | Energy / Energy sector development and institutional reform |
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| Gender | 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) |
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| 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 |
| 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 | 17 Jun 2022 | 300.00 | 0.00 | 100% |
| Counterpart | 0.00 | Cumulative Disbursements | |||
| Cofinancing | 0.00 | 17 Jun 2022 | 300.00 | 0.00 | 100% |
Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.
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| Title | Document Type | Document Date |
|---|---|---|
| Loan Agreement (Ordinary Operations [Concessional]) for Loan 3881-PAK: Energy Sector Reforms and Financial Sustainability Program (Subprogram 1) | Loan Agreement (Ordinary Resources) | Dec 2019 |
| Energy Sector Reforms and Financial Sustainability Program (Subprogram 1): Report and Recommendation of the President | Reports and Recommendations of the President | Nov 2019 |
| Energy Sector Reforms and Financial Sustainability Program: Concept Paper | Concept Papers | Sep 2019 |
| Energy Sector Reforms and Financial Sustainability Program: Initial Poverty and Social Analysis | Initial Poverty and Social Analysis | Aug 2019 |
Safeguard Documents See also: Safeguards
Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.
None currently available.
Evaluation Documents See also: Independent Evaluation
None currently available.
Related Publications
None currently available.
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Requests for information may also be directed to the InfoUnit.
ADB Approves $300 Million to Reform Pakistan's Energy Sector
ADB today approved a $300 million policy-based loan that will help the Government of Pakistan to address financial sustainability, governance, and energy infrastructure policy constraints in Pakistan’s energy sector.
Tenders
Contracts Awarded
Procurement Plan
None currently available.