Kathmandu, Jun 3
The World Bank Board on Wednesday
approved a $100 million Development Policy Credit (DPC) to continue support to Nepal
in improving the financial viability and governance of the electricity sector
and recovering from the COVID-19 crisis.
The loan 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, the WB
said in a statement.
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.
“Continued
reforms to strengthen the electricity sector in Nepal is of utmost importance during
the crisis and for post-crisis recovery,” stated Faris Hadad-Zervos, WB Country Manager for
Nepal. “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.”
In recent years,
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 load shedding.
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.
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.
“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,” stated Xiaoping Wang, Senior Energy Specialist at
the World Bank.
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