World Bank commits $55 million to help govt reform power sector

Minister for Power Sardar Awais Ahmad Khan Leghari received a delegation from the World Bank to discuss reforms that are currently in progress, along with discussing additional avenues of collaboration. Details from reports reveal that Anna Bjerde, Managing Director Operations at the World Bank, is heading the delegation.

According to a press statement, the power minister has highlighted initiatives to bring about a competitive power market in the country. This move is reportedly expected to reduce financial strain on the federal government by improving efficiency.

During the discussions, the power minister told the World Bank’s delegation about the establishment of an Independent System and Market Operator (ISMO), which will serve to ease the shift from the government being the only power purchaser to a system where various buyers and sellers can operate in the power market.

Reports indicate that Pakistani authorities have already begun to hire officials to make the aforementioned shift. Moreover, the power minister outlined progressive policies, telling the delegation about the ministry’s success in public revenue enforcement and Islamabad’s goals to substitute broad subsidies with those that offered support to a targeted segment.

This could result in the national exchequer being spared unnecessary strain, allowing the government to consolidate its fiscal position or allocate the freed-up funds elsewhere. 

According to reports, the power minister requested the World Bank’s help regarding the design and implementation of narrow subsidies. If designed correctly, it would allow for only the deserving stratum of the population to receive subsidies.

Anna Bjerde assured Pakistani officials that the country would have the World Bank’s support in the implementation of the reforms. She hailed the ISMO as a significant landmark in Pakistan’s journey to deregulate and liberalise the power market.

The power minister outlined Pakistan’s excess electricity capacity of approximately 7,000 megawatts. As per reports, he suggested that the electricity should be diverted to industrial customers at competitive rates instead of allowing it to go to waste.

The reduction in electricity rates could encourage a greater level of industrialisation in the economy. A fall in power rates could pull the large-scale manufacturing (LSM) sector out of its decline, which has witnessed a 1.9 percent contraction in the large-scale manufacturing (LSM) sector during the first eight months of fiscal year 2024-25. 

The delegation from the World Bank agreed with the idea of utilising surplus electricity. The World Bank’s Country Director, Najy Benhassine, pledged $55 million in funding to assist Islamabad in transforming the country’s power sector.