The European Investment Bank (EIB) is providing â‚¬100 million to the Islamic Republic of Pakistan to part-finance investments in the renewable energy sector.
The operation will be co-financed with the Asian Development Bank (ADB) under an innovative arrangement. Carlos Da Silva Costa, EIB Vice-president, Dr. Syed Rizwan Ahmed, on behalf of the Government of Pakistan, and Antonio Andrea Monari, Resident Director General of the Asian Development Bank, signed the relevant documents in Luxembourg this week.
The European Investment Bank is the EU's long-term financing institution promoting European objectives. Set up in 1957, the EIB operates in the 27 EU member states and more than 130 other countries in Asia and Latin America, Central and Eastern Europe, the Balkans, the Mediterranean region, Africa, the Caribbean and the Pacific. Lending operations outside the EU are part of the EU's cooperation policy with third countries.
Since 1993 the EIB has carried out four successive lending mandates for Asia and Latin America. Under the current mandate (ALA IV), covering the period 2007-2013, the EIB is authorized to lend up to â‚¬3.8 billion for financing operations that contribute to climate change mitigation or support the EU presence in those regions through foreign direct investment or the transfer of technology and know-how. The â‚¬3.8b. regional ceiling is broken down into indicative sub-ceilings of â‚¬1b. for Asia and â‚¬2.8b. for Latin America.
The new lending operation is structured as a framework scheme, under which the EIB will support a series of investments in the renewable energy sector in Pakistan, thereby contributing to the mitigation of climate change, one of the core objectives of the European Union's mandate for lending in Asia. The investments will be part of the multi-year program to develop the renewable energy sector in Pakistan set up by the countryâ€šs government, for a total amount of $2.2b. The program has also the financial support of the ADB ($510m.) and is backed by technical assistance from ADB, the World Bank and bilateral development agencies (USAID and Germany's GTZ).
EIB-ADB collaboration in the project could make it possible to exploit synergies between the two financial institutions and might minimize the transaction costs to the borrower. Under the co-financing agreement signed between the EIB and ADB, the EIB will be delegating to the ADB a series of tasks concerning loan administration and project monitoring. This innovative approach is in line with the principles of the 2005 Paris declaration on aid effectiveness and with the 2008 Accra Agenda for Action which call for a reduction in the fragmentation of aid by improving the complementarity of donorsâ€š efforts and the division of labor among donors.
This is the EIB's fifth lending deal in Pakistan, where it started operations in 1993. It also represents the third operation with Pakistan's Ministry of Finance.
Ari Syrquin is the head of the International Department at GSCB Law Firm.