General

WB, ADB ‘to extend’ $1b line of credit

- PRITHVI MAN SHRESTHA, Kathmandu

Jun 15, 2016-

The World Bank (WB) and the Asian Development Bank (ADB) have expressed interest to provide $1 billion (Rs107.89 billion) to Nepal under Development Policy Credit in Energy (DPCE) in the largest ever loan for the energy sector through a single window. 

With this scheme, the World Bank has returned to help the government in the energy sector after Arun III debacle in 1994, and it could be the largest ADB funding through a single window although it has accumulated portfolio of around $1 billion in the energy sector. 

Officials of both the donors said that it is probably the first time they joined hands to lend in Nepal’s energy sector. A joint mission of the two major multilateral donors is in Kathmandu to discuss the issue with the government. 

The two sides are scheduled to hold high-level discussion on June 17 on providing credit to Nepal as well as areas of reforms the country should carry out to qualify for the loan. Such credit is provided based on the policy reforms initiated by the government.

While unveiling its 10-year Energy Emergency Plan in February with various reforms proposals, the government had asked for big line of credit from the two donors. A senior official at the Finance Ministry said Nepal had requested the two donor to provide credit to the tune of $2 billion dollars. “They have been positive on providing credit only up to $1 billion,” said the ministry official. 

Nepal can receive the amount in three phases lasting 4-5 year period as far as discussion so far has moved ahead, according to a World Bank official.

Kenichi Yokoyama, ADB Country Director for Nepal, said that the planned policy credit is meant to support the government to implement the 10-year Energy Emergency Plan. Under the plan, the government has promised to unbundle Nepal Electricity Authority (NEA); sign power purchase agreement in US dollar term for 10 years; reduce procedural delays and conduct legal reforms with introduction of new Electricity Act and Act on National Electricity Regulatory Body. 

Unbundling of the NEA is one of the biggest reforms sought after by the donors. Increasing financial strength of the presently indebted NEA, carrying out competitive bidding for project development agreement are among the issues that need to be agreed upon during the negotiation, officials said. 

“The donors are seeking to give credit so that government would not renege on its reform agenda initiated in energy emergency plan,” said the Finance Ministry official.

The donors said the objective of the joint mission is to discuss the vision, plan and status of the Nepal government’s power sector reforms; discuss and agree in principle on the prior actions for the overall DPCE, the phases of the DPCE, and the scope of prior actions and timelines. 

Other objectives include conducting review the status of specific on-going studies and discussing and agreeing on the modality of joint support of WB and ADB for the DPCE. 

Currently, discussions are under way in three areas. Firstly, reforms in tariff and loss reduction. Secondly, legal and policy reforms to enhance private sector participation. Preparing new guidelines for sustainable hydropower development, resettlement and benefit sharing is another area under discussion. 

Published: 15-06-2016 08:21

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