The World Bank has approved a $100 million loan to help the government of Nepal to improve the financial viability and governance within the electricity sector and recovering from the COVID-19 crisis.
The loan is the World Bank’s second in a series of three issued through the Development Policy Credit (DPC) which aims to support governments’ efforts to improve the financial viability and governance of the electricity sector.
Nepal will use the loan to recover its energy sector from COVID-19 and support key policy, regulatory and institutional reforms to unlock the economic potential of the electricity sector.
The government plans to enhance the operations of the Nepal Electricity Authority (NEA) and establish a regulatory framework that is autonomous, transparent, and accountable.
The loan will also support the country’s efforts to improve the integration of its grid with the regional electricity market to ensure the optimal use of Nepal’s hydropower resource.
Nepal’s energy sector has been successful over the past years hence the need to fully optimise the industry through increasing competition amongst energy players and ensuring effective management of the market.
The country has recorded an increase in energy generation, reduced system losses and load shedding, enhanced cross-border transmission capacity and NEA has recorded profits in three consecutive years.
To date, the country has managed to electrify 88% of the population.
Due to the COVID-19 crisis, the sector has been hit hard by demand shocks, a cash flow crunch, and a halt of construction activities.
Faris Hadad-Zervos, World Bank Country Manager for Nepal, said: “Continued reforms to strengthen the electricity sector in Nepal is of utmost importance during the crisis and for post-crisis recovery.
“This operation will help refocus investment priorities and support the government’s commitment to developing a reliable, affordable, and sustainable electricity sector that supports poverty reduction and shared prosperity in the country.”
Xiaoping Wang, Senior Energy Specialist at the World Bank, added: “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.”