Pakistan will receive a $330 million loan to upgrade its energy grid, which will help hydropower reach major cities, the Asian Development Bank said Thursday.

The country of 250 million faces chronic power outages, soaring electricity costs, and a ballooning circular debt in the power sector that has reached 1.7 trillion rupees ($5.9 billion), according to government data.

“These investments will address long-standing constraints in Pakistan’s north–south power corridor, enabling the transfer of up to 3,200 megawatts of clean energy from hydropower plants in the north,” the ADB, which approved the loan on Thursday, said in a statement.

Pakistan’s ageing power grid is plagued by inefficiencies, with significant amounts of energy lost during transmission and widespread theft.

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The bank said the loan would “help reduce reliance on imported fuels, improve energy security, and support Pakistan’s transition to a more affordable and sustainable energy mix”.

“This project represents ADB’s strong partnership with Pakistan and our shared commitment to accelerate clean energy transition,” said ADB’s Pakistan director Emma Fan.

The ADB loaned Pakistan $250 million in November 2023 to expand its high-voltage transmission network in Punjab and Khyber Pakhtunkhwa provinces.

The lender also approved a $410 million package in August to develop Pakistan’s Reko Diq copper and gold mine.

Pakistan relies heavily on external borrowing and narrowly avoided default in 2023 after a political crisis compounded an economic downturn.

A $7 billion IMF bailout helped unlock further loans from friendly nations, staving off collapse.

AFP