Pak: ADB to lend $800-mn for power projects

Islamabad: The Asian Development Bank (ADB) has agreed, in principle, to provide Pakistan a multi-tranche financing facility of $800 million for various projects in power sector. The facility is extendable to $1,200 million. Well-placed sources said that the major chunk of this loan will be at Ordinary Capital Resource (OCR) rates instead of at Asian Development Fund's (ADF) concessional rates.

Pakistan's quota of concessional funding declined during the past two years because of its poor economic performance, considered a critical element in annual concessional allocations from all multilateral institutions, including the Asian Bank, the sources said. The OCR loans classified as Overseas Development Assistance (ODA) are provided on a commercial basis.

This understanding has been reached between Pakistan and the ADB at a meeting of the ADB delegation headed by Sean O'Sullivan, deputy director general, Central and West Asia Department, with Water and Power Minister Raja Pervez Ashraf.

A senior official of the water and power ministry, when contacted, said that it was the responsibility of the Economic Affairs Division (EAD) to determine the rates of a loan. He said that most likely the ADB loan would be available at mixed rates. The final decision in this regard will be taken when the EAD and the ADB sign the final agreement, he added.

According to an official statement, the ADB has offered investment in millions of dollars in water and power sectors in Pakistan in coming years. The delegation assured technical and financial support for water and power sector projects, including the up-gradation of existing distribution systems and transmission lines in order to improve system efficiency. The investment opportunities as well as the progress of on-going projects in water and power sectors were discussed in the meeting.

Raja Pervez Ashraf informed the delegation that Pakistan was facing more than 3000 MW shortfall and that the present democratic government was interested in attracting foreign investment in the power sector as according to him, there was a great scope for this in the sector. However, the delegation was not in a position to support him in this objective, as its terms of reference do not include attracting foreign investment.

He informed the delegation that Pakistan was also focusing on alternative energy projects like wind, solar energy, coal-based generation, and hydropower and that the Asian Bank's support would be appreciated.

The minister said that to meet the shortfall in power, the government wants to increase the generation capacity and intends to install a large number of river hydropower projects, such as Kohala and Bunji for which he sought technical and financial assistance of the Asian Bank.

He also informed the delegation that Pakistan was embarking on construction of multipurpose dams, which would meet the power needs on a long-term basis. This will involve an overall investment of over $18 billion in the next 5-10 years. He expressed the hope that the ADB would extend financial assistance particularly for Diamir Bhasha Dam, work on which would start in early 2009.

Raja Pervez Ashraf informed the delegation that to meet urgent needs of power, some thermal projects were going to commence in the public sector, but stressed the need for involvement of the private sector as a long term objective and continuity of reforms agenda in the power sector.