The Asian Development Bank (ADB) has approved a $330 million loan to upgrade Pakistan’s energy grid, aiming to enhance the transmission of hydropower to major cities. This development is crucial for a country plagued by chronic power outages, high electricity costs, and a significant circular debt of 1.7 trillion rupees ($5.9 billion) in the power sector.
Pakistan, with a population of 250 million, faces significant challenges in its energy sector, including an aging power grid that suffers from inefficiencies and widespread energy theft. The ADB’s investment seeks to address these issues by improving the north-south power corridor, allowing for the transfer of up to 3,200 megawatts of clean energy from hydropower plants in the north.
The loan is expected to reduce Pakistan’s reliance on imported fuels, improve energy security, and support the country’s transition to a more affordable and sustainable energy mix. According to ADB’s Pakistan director, Emma Fan, this project represents a strong partnership between the ADB and Pakistan, demonstrating their shared commitment to accelerating the clean energy transition.
This is not the first time the ADB has provided financial assistance to Pakistan. In November 2023, the bank loaned $250 million to expand the high-voltage transmission network in Punjab and Khyber Pakhtunkhwa provinces. Additionally, in August, the ADB approved a $410 million package to develop Pakistan’s Reko Diq copper and gold mine.
Pakistan’s economy has been facing significant challenges, including a heavy reliance on external borrowing. The country narrowly avoided default in 2023 after a political crisis exacerbated an economic downturn. However, a $7 billion IMF bailout helped unlock further loans from friendly nations, preventing economic collapse.
The ADB’s loan is a significant step towards addressing Pakistan’s energy challenges and promoting sustainable development. As the country continues to work towards improving its energy sector, investments such as these will play a critical role in shaping its energy future. With the loan, Pakistan aims to increase its energy security, reduce its reliance on imported fuels, and transition towards a more sustainable energy mix, ultimately benefiting its economy and population.