The World Bank Board of Directors has approved a 300-million shilling loan to cement its support of the construction of a hydropower dam at the Bujagali Falls. A statement from the World Bank says the International Development Association credit was approved yesterday. It includes a 220 million dollar investment loan and 80 million dollars for policy support. It will also benefit from an additional 6.5 million dollar co-financing grant from the Swedish International Development Agency. The ongoing electricity crisis has placed a significant strain on growth in Uganda over the medium term. The country has been plagued by substantial power shortages attributed to a significant regional drought over the past few years and delays in adding new generation capacity to support the annual 8 percent growth in demand for electricity. According to the World Bank statement, the Power Sector Development operation will have three major components. The first will involve a set of investments and policy measures designed to reduce the supply-demand gap until the Bujagali hydropower plant comes into service around 2011. The operation also includes financial support for the Government of Uganda to absorb a part of the high costs of short-term thermal power generation and policy measures aimed at making the sector financially viable. Malcolm Cosgrove-Davies, the Task Team Leader for the operation, says the three components respond to the realities of the Ugandan power sector. He said it supports investments to overcome country-wide power shortages and financial imbalances, and sets the stage for the sector's sustained future expansion. Grace Yabrudy the World Bank Country Manager for Uganda said that by investing in the Bujagali project, the World Bank is working with Uganda to address its urgent energy needs and bridge a critical gap that will help Uganda meet its economic growth and poverty reduction goals. Despite significant persistent opposition of the Bujagali hydropower dam by environmentalists and tourism operators, the National Environment Management Authority (NEMA) approved the construction of the dam. NEMA's Executive Director Henry Aryamanya Mugisha said all the environmental aspects were considered and the mitigation measures were satisfactory. Support for the project has also come from the Private Sector Foundation. Additionally, a strategic assessment of power development options for the Nile Equatorial Lakes region recommended urgent installation of a hydropower dam at the Bujagali Falls in order to deal with the acute power shortage in the region. The study conducted by the Basin Initiative and the World Bank said the assessment on Bujagali was made after careful consideration of portfolios of regional power options, the potential cumulative social and environmental impacts and mitigation strategies. The proposed 200 megawatt Bujagali hydropower dam would be located on the Victoria Nile, about eight kilometers downstream of the existing Kiira and Nalubale hydroelectric projects.