HomeNewsWorld Bank president pushes Pakistan to end power dispute

World Bank president pushes Pakistan to end power dispute


Washington, Nov. 14, 2000 (Bloomberg) à‚– World Bank President James Wolfensohn is pushing Pakistan’s government and Hub Power Co. to resolve a three-year old dispute over the rates the producer charges the government-owned electric utility.

“There is a window of opportunity open, which must be seized now,” Wolfensohn said in a recent letter to Pakistani Finance Minister Shaukat Aziz and Mohammad Alireza, chairman of Hub Power, according to a bank spokeswoman.

It was Wolfensohn’s first letter about the power fight in more than two years, and came just weeks before Pakistan will come before the board of the International Monetary Fund for money.

A new IMF loan would allow the country to get eased repayment terms for $2.2 billion in outstanding debts due next year. Getting those debts rescheduled is key to bolstering Pakistan’s economy, analysts said.

And the government needs to keep the World Bank satisfied à‚– either proving or dropping corruption charges against the power company’s backers à‚– in order to get the IMF loan approved, an IMF spokesman said.

“If the bank has problems with Hub (Power) than we have problems,” said William Murray, the spokesman.

The international lenders and investors have said the power fight in Pakistan discourages foreign investors from considering the southwest Asian country of 132 million people.

Hub Power, which is owned in part by Britain’s National Power Plc, operates a 1,257-megawatt oil-fired power plant and sells its electricity to the state-run utility Water and Power Development Authority.

The Pakistani government wants the company to cut tariffs to less than 5 cents per kilowatt hour from 6.86 cents à‚– one of the highest rates in the world, it says.

IMF Role

The World Bank provided a guarantee against political risks for $240 million of commercial loans to the project. It has pressured the government to end the fight.

Even though the bank and the fund have insisted on a resolution of the crisis, Pakistani officials say they see an easing of the pressure by the two lenders.

“The IMF had agreed not to make the settlement of the Hub Power Co. tariff issue a condition for offering the loan,” said Ishrat Hussain, governor of the State Bank of Pakistan, the country’s central bank. “The World Bank is coming out as an honest broker now to resolve the three-year-old tariff dispute.”

Three years ago the government of former Prime Minister Nawaz Sharif, ousted by Musharraf in a coup, said that the previous power purchase agreement overcharged the utility because of illegal payoffs from the company to the government of Benazir Bhutto. Those charges were never proven.

The World Bank asked the Pakistani government to show them any proof of corruption, which the government never did, bank officials said.

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