The Asian Development Bank (ADB) and the government of Pakistan Wednesday signed an agreement under which ADB will provide $900 million for a 600 megawatt supercritical coal-fired power plant, the ADB said.

Pakistan has been facing rising oil prices and declining gas reserves as well as tight foreign account situation, rendering the reliance on the import of oil to fuel power plants increasingly unaffordable.

The country spends more than $14 billion per year on importing oil, a major part of which goes into power generation.

Chronic power shortages have often caused social unrest, and cost the country about 2 percent of its gross domestic product growth each year.

ADB Vice President Zhang Wencai, Director General of the Central and West Asia Department Klaus Gerhaeusser and Pakistan's Finance Minister and ADB Governor Muhammad Ishaq Dar witnessed the signing of the agreement.

"The project will at Jamshoro in southern Sindh province boost low-cost power supply and improve Pakistan's energy mix. Diversifying to coal will help the country cut down its electricity generation cost, and reduce its oil import bill," Zhang said at the signing ceremony.

The 600 MW supercritical coal-fired power generation plant, using an 80/20 blend of imported sub-bituminous coal and domestic lignite when available, will be in accordance with international and national environmental standards.

A more efficient and sustainable energy mix can spur economic growth and create employment opportunities for millions.

The Jamshoro power project was approved by ADB's Board of Directors in December 2013. The project is expected to be completed by December 2018.

The Islamic Development Bank will provide $220 million, whereas $380 million will be the government's contribution to meet the overall estimated project cost of $1.5 billion.