WB, ADB insists on early introduction of reforms

  • $1 billion credit to energy sector
- Post Report, Kathmandu

Jun 18, 2016-

Officials from the World Bank (WB) and Asian Development Bank (ADB) have insisted early introduction of reforms measures in the energy sector as two multilateral donors expressed interest to extend credit worth $1 billion (Rs107.76 billion) to Nepal in the sector.

A joint mission of the two lenders on Friday held a meeting with Nepali government officials, including those from Energy and Finance Ministries, on the proposed credit. 

A government official attending the meeting said the donors particularly insisted on early introduction of the new Electricity Act, Energy Security Policy and restructuring of Nepal Electricity Authority (NEA). 

After Nepal requested for a $2-billion credit to implement its 10-year Energy Emergency Scheme, the multi-lateral donors came for negotiation.

The World Bank has proposed to invest in Nepal’s energy sector for the first time since the Arun III debacle in 1994. It could also be the largest ADB funding through a single window, although it has an accumulated portfolio of around $1 billion in the energy sector. 

Such a credit is provided based on policy reforms initiated by the government. The donors had initially put the endorsement of the new Electricity Act as a pre-condition for extending the Development Policy Credit in Energy (DPCE), according to the participant in the meeting.

“But they have now become flexible on the matter after we convinced that passing the bill is the business of the Parliament and the government does not have the authority to dictate the Parliament,” said the official.

Based on the ongoing discussions, the World Bank and ADB are ready to provide the first instalment of the assistance based on the progress towards introducing necessary policies and sending reforms-related bills to the Parliament after Cabinet decision. “Progress towards the endorsement of the bills from the Parliament and their implementation will ensure additional funding,” said the official. 

Nepal can receive the amount in three phases -- lasting up to 5 years, according to the discussions so far. The donors have said they are interested in supporting Nepal in the energy sector as the country has been facing prolonged power cuts and the power crisis has emerged as one of key bottlenecks to Nepal’s growth.

In order to address the power crisis, the government declared 10-year energy emergency scheme in February. Under the plan, the government will unbundle 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.

Published: 18-06-2016 09:30

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