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World Bank Approves US$550 Million to Improve Education and Enhance Natural Gas Supply in Pakistan

April 26, 2012

Projects expected to benefit 8 million school children in Punjab, and reduce waste of energy by saving more than 20 billion cubic feet of gas per year

WASHINGTON, April 26, 2012: The World Bank’s Board of Directors today approved two projects totaling US$550 million aimed at supporting Pakistan’s effort to strengthen the education and natural gas sectors, which are critical to Pakistan’s growth and development. The US$350 million Second Punjab Education Sector Project will support the Government of Punjab’s education sector reform program designed to increase child school participation and student achievement. The US$200 million Natural Gas Efficiency Project aims to enhance the supply of natural gas in Pakistan by reducing the physical and commercial losses in the gas pipeline system. 

Significant shortfalls persist in both school participation and student achievement in Punjab. To address these challenges, the Government of Punjab is implementing the Punjab Education Sector Reform Program (PESRP), which aims to improve schooling outcomes through institutional development and strengthening, improved monitoring, and enhanced governance and accountability. The Bank has supported this program since 2008. During this time, the reform program has put in place and strengthened important initiatives. Over 850,000 additional students - more than half of them girls – are now enrolled in low cost private schools supported under government subsidies tied to minimum school quality standards; some 400,000 female students receive quarterly stipends tied to school attendance; and free textbooks are provided to all students in public schools. The new results-based project will build on these achievements and support the second phase of the reform program over the period 2012-2015.

“With a target school-aged population of over 12 million children, 30 percent of who remain out of school and with relatively low levels of learning, continuation of our support to the government’s reform program is critical,” said Rachid Benmessaoud, World Bank Country Director for Pakistan. “The second phase of the program aims to take the next evolutionary step and zero in on improving service delivery performance at the school level. A key focus will be improving teacher quality and performance, which is critical for better school quality, and, thereby helping retain students in school and attract new children to school.”

The challenges in the gas sector are also significant. Pakistan faces severe scarcity of gas, with production failing to keep pace with demand. Other critical challenges include inadequate allocation of gas, inefficient end-use of gas, and high levels of unaccounted-for gas (UFG). More than 10 percent of gas supplied in Pakistan is unaccounted for, which is unaffordable and a major contributor to the current gas supply crisis. UFG is typically at 1-2 percent in OECD countries.

The main focus of the Natural Gas Efficiency Project is to reduce UFG to about 5 percent by 2017 in distribution areas served by the Sui Southern Gas Company Limited (SSGC). This includes Karachi, interior Sindh, and Balochistan.

“Results will be achieved through pipeline rehabilitation, use of cathodic protection to halt corrosion, and installation of automatic pressure management systems and advanced consumer metering systems,” said Bjorn Hamso, World Bank Senior Energy Economist and project team leader. “Key to the project’s success is to install hundreds of wholesale meters in the distribution network in such way that network activity can be monitored on a localized level and investments can be put to use where the leakage problem is the largest and the theft problem the most severe.”

The project will also provide technical assistance to enhance SSGC’s operational efficiency and service delivery to its customers.  

The Second Punjab Education Sector Project is a credit from the International Development Association (IDA), the World Bank’s concessionary lending arm. It carries a 0.75% service charge, and 1.25 percent interest rate, a grace period of 5 years, and a maturity of 25 years.

The Natural Gas Efficiency Project includes US $100 million loan from the International Bank for Reconstruction and Development (IBRD). It is a fixed-spread loan with a maturity of 23 years, including a grace period of 7 years. The remaining $100 million is an IDA credit with the same terms as the Second Punjab Education Sector Project.

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