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Big ADB loan for Pakistan energy sector reforms

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ISLAMABAD: The Asian Development Bank (ADB) on Wednesday signed six agreements with Pakistan to extend $1.543 billion worth of loans for energy sector reforms, social protection, roads and water resource.

ADB Country Director Yong Ye and Secretary Economic Affairs Division Mian Asad Hayaud Din signed the agreements on behalf of respective sides. The projects were approved by ADB Board of Directors last week. Minister for Economic Affairs Omar Ayub Khan, ADB Vice President (Operations 1) Shixin Chen and ADB Director General for Central and West Asia Department Yevgeniy Zhukov witnessed the ceremony.

“The projects signed today mark ADB’s strong commitment for Pakistan’s post-pandemic recovery and sustainable development. Pakistan and ADB will continue working together to improve economic management, build resilience, boost competitiveness and private sector development,” Mr Ye said on the occasion.

Mr Khan thanked the ADB Management and Board of Directors for their continued and enhanced financial support towards reforming the energy sector, improving road networks, enhancing social protection and developing sustainable cities in Pakistan.

Under the $300 million policy-based loan for the energy sector, ADB is supporting technical, and governance reforms to strengthen Pakistan’s energy sector and its financial sustainability. The financing is part of the second sub-program of ADB’s Energy Sector Reforms and Financial Sustainability Program, which aims to reduce and manage the accumulated cash shortfall across the power supply chain known as circular debt.

In another loan agreement, the lending agency will provide $235 million loan to upgrade 222-kilometer Shikarpur–Rajanpur section of the National Highway 55 from two lanes to four-lane carriageway. The N55 is part of the Central Asia Regional Economic Cooperation (CAREC) Corridor 5 which links the ports of Karachi and Gwadar in southern Pakistan with national and international economic centers to the north.

The $650m financing will help improve the livability of five cities in the Khyber Pakhtunkhwa province by upgrading urban infrastructure and expanding access to reliable services. The project consists of a $380m ADB loan and a $5m grant with a co-financing of $200m loan by the Asian Infrastructure Investment Bank to improve water supply and sanitation in the cities of Abbottabad, Kohat, Mardan, Mingora, and Peshawar by enhancing water supply systems and sewerage networks benefitting up to 3.5m people.

The ADB will also provide $15m under the Second Project Readiness Financing for KP Cities Improvement Project to plan and design three ensuing loan in the next three years to provide sustainable urban services and mobility across multiple cities in the province, following a systematic approach to planning, higher quality of project readiness, and increased focus on institutional capacities for sustainable project operations.

Another $603m results-based lending program aims to expand social protection programs in Pakistan through conditional cash transfers. The program will support the implementation of Ehsaas program, which is the national social protection and poverty reduction strategy.

Under the Integrated Social Protection Development Program, ADB will provide a regular loan of $600m and a $3m grant from the Asian Development Fund and will administer a $24m grant from the Education Above All Foundation. ADB will provide $5m ‘project readiness financing’ for the Kurram Tangi Integrated Water Resources Development Project. The facility will ensure high-quality design, stakeholder engagement, and safeguards readiness of the ensuing project for timely approval and cost-effective implementation.

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