The World Bank (WB) has finally approved a $500 million loan for Pakistan after the government fulfilled over half a dozen conditions, including setting up an independent entity to purchase electricity from producers.
The conditions the government met also included giving an application to the power sector regulator for determining multi-year electricity tariffs to make power distribution companies attractive for privatisation and submitting the Energy Efficiency and Conservation Bill to parliament.
The World Bank’s board of directors has approved $500 million worth of budgetary support for energy sector reforms in Pakistan, a brief statement issued by the finance ministry said.
The loan will be utilised for budget financing, unlike project loans that are used for creating assets. In recent years, successive governments have preferred to tap budgetary support to finance the budget, which is creating a debt sustainability issue for the country.
The Washington-based lender approved the loan after a delay of about ten months, as the PML-N government could not implement all conditions in time. The loan was originally scheduled to be approved in April this year.
WB’s credibility as an independent development institution suffered a blow over the last few years and it now wants to prove itself as a reformer of rather than an extension of Pakistan’s finance ministry, sources privy to the discussions said.