World Bank approves $800m loan for Pakistan’s power sector reforms, human capital development

• World Bank approves $800 million loans for two programmes.
• The $400 million PACE initiative focuses on measures to improve financial viability of power sector. 
• The $400 million SHIFT II programme supports a federal structure to strengthen basic service delivery for human capital accumulation.

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ISLAMABAD: The World Bank’s Board of Executive Directors on Tuesday approved $800 million worth of loans for two programmes in Pakistan—the Pakistan Program for Affordable and Clean Energy (PACE) and the Second Securing Human Investments to Foster Transformation (SHIFT II).

The $400 million PACE initiative focuses on measures to improve the financial viability of the power sector and support the country’s transition to low-carbon energy.

It prioritises actions needed to initiate critical power sector reforms focused on: reducing power generation costs, better targeting of subsidies and tariffs for consumers, and improving efficiencies in electricity distribution with the participation of the private sector.

Additional medium-term reforms are under development, focusing on subsidies, competitiveness, and power sector sustainability. The goal is to reduce circular debt over the long-term.

“Power sector reforms are critical to resolving Pakistan’s fiscal challenges,” said Rikard Liden, World Bank task team leader for the PACE programme.

He added that decarbonising the energy mix will reduce the dependence on fossil fuel imports and vulnerability to price fluctuations because of movement in exchange rates.

“PACE prioritizes action on such reforms, which must be sustained to address circular debt and set the power sector on a sustainable path.”

The $400 million SHIFT II programme supports a federal structure to strengthen basic service delivery for human capital accumulation.

The programme will help improve health and education services, increase income-generation opportunities for the poor, and promote inclusive economic growth.

Tazeen Fasih, World Bank task team leader for the SHIFT II programme, said that strengthening services that build human capital in a coordinated manner between provincial and federal authorities, along with improved targeting of social safety nets, will better support families to recover from the COVID-19 crisis, and pave the way for more robust crisis preparedness in the future.

SHIFT II reforms increase budget reliability for sustainable financing of child immunization and quality primary healthcare programmes, promote student attendance — especially for children who are out of school due to COVID-related closures — and support data-driven decision-making.

The programme supports reforms to encourage women’s participation in the economy by improving working conditions and empowering those in the informal sector. It supports the enhancement of national safety net programmes and better targeting to protect the most vulnerable, building resilience to shocks like the COVID-19 pandemic.

“The reforms underpinning PACE and SHIFT can contribute to facilitating sustainable investments and generate welfare gains for those most in need,” said Najy Benhassine, World Bank Country Director for Pakistan.