ADB support key to strengthen Pakistan’s energy sector: Independent Evaluation

February 12, 2019: The Asian Development Bank’s (ADB) support to Pakistan’s energy sector has produced positive results from investment programmes supporting three key areas including conventional generation, power transmission, and, to a lesser extent, electricity distribution, according to a report by Independent Evaluation on the bank’s contribution to the country’s energy sector.

Looking at sector assistance over a 12-year period, the report titled Pakistan: ADB’s Support to Pakistan Energy Sector (2005–2017) found that Pakistan has seen significant improvement in power supply reliability as a consequence of ADB support to expansion of power transmission and distribution systems, as well as increasing generation capacity.

ADB has been the leading development partner in Pakistan’s energy sector with $6.2 billion committed during the study period. Disbursements reached $3.2 billion by the end of 2018. ADB supported Pakistan’s power sector at two levels: institutional and regulatory, and power infrastructure, using sector reform programs, technical assistance, and infrastructure investments. ADB also provided non-sovereign financing for conventional and renewable energy generation.

“Pakistan has endured a severe energy crisis over the past decade, with long blackouts and industries unable to operate at optimal levels. ADB’s support across all energy sub sectors has helped expand and strengthen the national power grid, build power plants, and increase access to electricity,” said the Director General of Independent Evaluation at ADB Mr. Marvin Taylor-Dormond. “As a result of this support, the power system's reliability and efficiency have increased over the years but much more work remains to be done.”

The evaluation finds that working in a very challenging environment, ADB has been successful in helping increase conventional power generation capacity and expand the transmission and distribution systems. In particular, ADB financed the addition of 42% of the total transformer capacity at high voltage of the national power grid during the study period and supported the first private hydropower plant in the country.

Despite these successes, during the review period, ADB’s efforts to improve the sector’s financial sustainability and institutional efficiency, as well as those targeting clean energy, were less than successful.

“ADB has made limited progress in addressing the underlying causes of circular debt and in strengthening the financial sustainability of the energy sector. Despite these limitations, the situation of the sector would have been even more precarious without ADB support. Going forward, these areas need more attention,” said Mr. Alfredo Baño, team leader of the evaluation.

Independent Evaluation’s strategic recommendations to ADB include supporting improved governance in the power sector and better interagency coordination. ADB should work with Pakistan to help address the underlying causes of its accumulated circular debt. Technical assistance and infrastructure investments should be deployed to support long-term planning and better management for the energy sector. Finally, the report recommends that ADB focus more on support for clean energy and conservation through investments in renewable energy and energy efficiency.

On the operational side, the report recommends that ADB also support the development of a competitive electricity market in Pakistan and promote other ways to improve the financial sustainability of the energy sector, including commercialization of electricity distribution companies, and sovereign investments for lowering the cost of power generation. ADB’s internal monitoring system also needs an overhaul, to ensure all project-related information is consolidated, and easily accessible for continuous reporting.

Abundant opportunities exist for ADB and the Government of Pakistan to work constructively, in collaboration with other development partners, to develop a sustainable and efficient energy sector in Pakistan.

(APP)