World Bank’s USD 100m Loan to Nepal for Reform Electricity Sector Reform

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 World Bank’s USD 100m Loan to Nepal for Reform Electricity Sector Reform

The World Bank today approved a USD 100 million Development Policy Credit (DPC) to continue its support to Nepal in improving the financial viability and governance of the electricity sector and boost COVID-19 crisis recovery efforts. The Washington D.C-based lender in a press statement said that the approved credit is the second in a series of three DPC operations to support key policy, regulatory and institutional reforms to unlock the economic potential of Nepal's electricity sector.

“These include measures to improve the financial viability of the Nepal Electricity Authority (NEA) as the sole off-taker; establish a regulatory framework that is autonomous, transparent, and accountable; achieve greater integration with the regional electricity market to ensure the optimal use of Nepal’s hydropower resource; and restructure NEA to empower provincial and local governments under the federal structure,” reads the statement.

“Continued reforms to strengthen the electricity sector in Nepal is of utmost importance during the crisis and for post-crisis recovery,” the statement quoted Faris Hadad-Zervos, World Bank Country Manager for Nepal as saying. “This operation will help refocus investment priorities and support the government’s commitment to develop a reliable, affordable, and sustainable electricity sector that supports poverty reduction and shared prosperity in the country.”

World Bank has noted that Nepal’s energy sector made great strides with increased electricity generation, reduced system losses, and enhanced cross-border transmission capacity while putting an end to the nationwide power cut in the recent years and electricity is now available to 88 percent of the population. “An independent electricity regulator, central to the sector’s reform agenda, has become operational. A new Electricity Act pending Parliamentary approval will, among others, enable competition in electricity generation and establishing power trade as a licensed activity. With strong government commitment and effective management, NEA has reduced system losses, remained profitable for three consecutive years and has improved its financial performance,” said the bank.  

Due to the COVID-19 crisis, however, the sector has been hit hard by demand shocks, a cash flow crunch, and a halt of construction activities, according to the statement.

“This operation builds on the important progress made under the first energy sector DPC operation and we will continue to support the government in addressing the immediate, medium- and long-term impacts of the crisis on Nepal’s energy sector through the third operation of the DPC series,” the statement quoted Xiaoping Wang, senior energy specialist at World Bank as saying.


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