World Bank approves $250mn loan for Jordan
Program to support energy & water sector development following rise in refugee population.
The World Bank Board has approved a $250mn financial package to support Jordan’s process to reform the energy and water sectors, two critical public services which are challenged by scarce resources and further burdened by a sharp rise in demand caused by the influx of Syrian refugees.
The policy program financed by the Development Policy Loan (DPL) will include a gradual reform of electricity and water subsidies, diversification of fuel sources for environmentally friendly and sustainable power generation, increasing efficiency in the energy and water sectors, and optimising water use water.
The DPL is aligned with the medium-term objectives of the Government’s own “Jordan 2025: A National Vision and Strategy,” which seeks to achieve financial and environmental sustainability, enhanced productivity and increased competitiveness.
“We are pleased to continue supporting the Government of Jordan in implementing its ambitious and far reaching reform programs, which aim to bolster the country’s broad development agenda,” said Ferid Belhaj, World Bank Director for the Middle East.
“Implementation of the Program will lead to significant gains in efficiency for the water and electricity sectors, thus offering public services to the Jordanian citizens in a more sustainable manner. The larger fiscal space generated will allow the government greater maneuverability to invest in pro-poor programs and inclusive economic activities to improve the population’s living standards.”
Jordan’s historic vulnerability to the fluctuations in fuel prices, coupled with the frequent interruptions in piped natural gas from Egypt since the outbreak of the Arab upheaval in 2011, have severely taxed the budget.
To compensate for the gas shortages, Jordan has resorted to importing more expensive diesel and fuel oil. This development encouraged the Government to develop and implement programs to diversify and reduce cost of energy supply through the development of domestic renewable energy resources and alternate natural gas supply options for power generation.
“Jordan has made significant progress in developing new renewable energy private sector projects and is on track to reach its target of 10 percent of renewable energy in the overall energy mix by 2020,” said Husam Beides, World Bank Program Leader for Sustainable Development.
The new LNG terminal in the Aqaba Port on the Red Sea, which became operational in July 2015, will also enable the Government to restore the share of the natural gas supply for power generation to 70 percent or more reducing therefore Jordan’s dependency on more expensive and polluting diesel and heavy fuel oil imports.
On the water front, Jordan has historically grappled with water scarcity, which has forced the Kingdom to maximize its use of shared resources, while becoming more dependent on non-conventional, and often very energy-intensive, water infrastructure. A series of external shocks, including the fluctuations in oil prices and the influx of the Syrian refugees in the country, have rapidly increased the cost of water.
In response, the Government is implementing a sector reform program that aims to optimize the allocation of water resources, while reducing the use of energy in the sector – a program that would be supported by the DPL. The plan will optimize the use of existing surface water resources while allocating increasing flows of treated wastewater to farmers and industry to support economic growth while reducing the over-extraction of groundwater.
“The water sector is on track to start generating energy efficiency savings that will help to reduce the fiscal and environmental footprints of the sector,” said Caroline van den Berg, World Bank Lead Water and Sanitation Specialist. The water sector is one of the largest consumers of electricity in the country, and hence any increase in energy efficiency will help to reduce the cost of water and reduce emissions and subsequently the carbon footprint of the sector.
In addition to the new $250mn loan, the World Bank’s portfolio in Jordan comprises three projects amounting to $430mn, as well as 15 trust fund grants for a total of $83.4mn.