Pakistan Likely to Secure $380 Million World Bank Loan for Power Sector Reforms

Pakistan is expected to receive a new loan of nearly $380 million out of the estimated cost of $700 million from the World Bank to strengthen its electricity transmission system and improve energy reliability across the country, sources told ProPakistani.

The proposed financing forms part of the BEST-PAK Multi-Phase Program (MPA) – Grid Stability Enhancement Project, a long-term initiative aimed at addressing weaknesses in Pakistan’s power sector.

According to official documents seen by ProPakistani, the overall value of the energy program is estimated at nearly $700 million, with additional financial support expected from the Asian Infrastructure Investment Bank and the Islamic Development Bank.

Major Energy Upgrade

The project’s primary objective is to improve transmission performance, enhance energy security, and enable greater deployment of renewable energy.

Under Phase-1 of the program:

1. About $378.9 million will be financed through the World Bank’s International Bank for Reconstruction and Development (IBRD).
2. Counterpart funding of roughly $134.6 million will be provided locally.
3. The initiative will support the installation of reactive power compensation equipment to stabilize the national grid.
4. Technical assistance will be provided for institutional reforms within the power transmission system.

The project is part of a 10-year reform program spanning 2026–2035 to support Pakistan’s Transmission System Expansion Plan (TSEP 2024-34).

New Transmission and Grid Upgrade

A key component of the project is the development of a 500-kV transmission corridor from Matiari to Rahim Yar Khan to reduce congestion in the south-center-north electricity network. The program will also introduce:

• battery energy storage systems,
• strengthening of existing transmission infrastructure,
• improved system flexibility for renewable energy integration,
• expanded private sector participation in transmission investments.

These upgrades are critical to reducing electricity shortages caused by transmission bottlenecks.

Power Sector Facing Challenges

World Bank assessments highlight persistent weaknesses in Pakistan’s power sector, including:

1. electricity theft,
2. weak bill recovery,
3. high system losses,
4. transmission constraints,
5. growing circular debt pressures.

Despite significant growth in generation capacity of over 46,000 MW, transmission limitations prevent efficient delivery of low-cost electricity nationwide.

The country remains heavily dependent on imported fossil fuels, leaving it vulnerable to global price shocks and supply disruptions.

The project also supports the ongoing restructuring of the National Transmission and Dispatch Company (NTDC) into three separate entities:

1. National Grid Company (NGC) to own transmission assets,
2. Independent System and Market Operator (ISMO) to manage dispatch and market operations,
3. Energy Infrastructure Development and Management Company (EIDMC) to implement new projects.

Technical assistance under the program will help strengthen governance, accountability, and commercial operations across energy institutions.

Economic Context Behind the Financing

The financing initiative comes as Pakistan continues economic stabilization efforts following a recent macroeconomic crisis. The World Bank noted that while inflation is easing and foreign exchange reserves have improved, energy reforms remain essential for sustainable growth.

Transmission bottlenecks have already forced reliance on expensive LNG-based power generation, increasing electricity costs and financial losses within the sector.

The World Bank emphasized that improving grid stability is crucial to making electricity supply more reliable while enabling Pakistan’s transition toward cleaner energy, with renewable energy targeted to reach 60 percent of the energy mix by 2030.