World Bank Approves Over $1 Billion to Boost Electricity Supply and Improve Irrigated Agriculture in Pakistan

March 21, 2012

Islamabad, March 21, 2012- The World Bank’s Board of Executive Directors approved two projects on Tuesday totaling US$1.09 billion aimed at supporting Pakistan’s growth agenda for reducing poverty. The Tarbela IV Extension Hydropower Project will add power generation capacity of 1,410 megawatts, and the Punjab Irrigated Agriculture Productivity Improvement Project is geared toward maximizing water use efficiency for increased yield per unit of water.
Availability of electricity is of crucial importance for the economic growth and development of Pakistan. Widespread load shedding is disrupting the lives of ordinary Pakistanis and the economic impact of energy shortages is estimated at upward of 2 percent of GDP. By developing its vast hydropower potential - of which only 15% has been developed - Pakistan can significantly reverse the situation and reduce the cost of energy supply mix.  The US$840 million Tarbela IV Extension Hydropower Project will use the existing dam, tunnel, roads and transmission line for generating additional electricity in summer months when demand for electricity and river flows are high.   
“The Tarbela IV Hydropower Project will enhance Pakistan’s energy security by adding low-carbon, least-cost and renewable hydel power to its energy portfolio", said Rachid Benmessaoud, World Bank Country Director for Pakistan. “The beauty of this project is that it will help Pakistan reduce the gap between supply and demand of electricity by maximizing the benefits of existing infrastructure of Tarbela Dam without requiring any land acquisition or relocation of population. The direct beneficiaries will be millions of energy users, including industry, households and farmers who would get more electricity at a lower cost and suffer fewer blackouts.”  
The challenges in the water sector are equally daunting. Pakistan’s water availability is shrinking while demand is increasing. Vast amounts of water are lost due to deteriorating watercourses and wasteful on-farm water use. Improved water use efficiency and new technology that promotes crop diversification will be critical going forward.
The US$250 million Punjab Irrigated Agriculture Productivity Improvement Program Project is aimed at getting maximum productivity out of every drop of irrigation water by weaning farmers away from the traditional and wasteful flood irrigation to more modern methods like drip and sprinkler irrigation systems, which in turn will encourage crop diversification. 
“High efficiency systems to be installed over 120,000 acres of irrigated lands in Punjab would promote water conservation and increase crop yields”, said Masood Ahmad, World Bank’s Lead Water Specialist. “This would have demonstrative effect and local industry would develop for installation of such systems as it happened in case of ground water development over the last three decades after installation of groundwater wells by the Government for controlling water logging and salinity.”
Tarbela IV Extension Hydropower Project includes US $400 million loan from the International Bank of Reconstruction and Development (IBRD). It is a fixed spread loan with a maturity of 21 years, including a grace period of 6 years. The remaining $440 million of Tarbela Project and US $250 million for Punjab Irrigated Agriculture Productivity Improvement Project are credits from the International Development Association (IDA), the World Bank’s concessionary lending arm. These carry a 0.75% service charge, and 1.25 percent interest rate, 5 years of grace period and a maturity of 25 years.

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