Pakistan’s Chronic Energy Crisis has No Short Term Solution

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Successive Pakistani governments have promised to alleviate the country’s long-lasting energy challenges but have been unable to do so. The country is once again going through relentless ‘load-shedding’.

Pakistan’s energy crisis has been a long time in the making. The country could have been better prepared had policymakers made smarter decisions. The last time the PML-N was in power it “attempted to overcome the power shortages and plan for the future by inviting foreign investors and lenders to help establish a series of power projects which would offer them guaranteed returns. These plants are run mostly on imported fuel. The policy not only drastically increased Pakistan’s risk exposure to global supply shocks and adverse movements in international markets, it also created considerable surplus power generation capacity which had to be paid for in dollars even if it was never utilised.”

Under Imran Khan, the “strategy to devalue the dollar to contain the current account deficit had the side effect of triggering a surge in electricity generation costs, which increased as the dollar rose sharply against the rupee. Distribution companies also played a role in exacerbating problems by failing to contain line losses and improve recoveries during either government’s tenure. Both governments also paid short shrift to renewable sources of energy like wind and solar, which Pakistan has ample potential to tap. As fuel prices rose and the dollar strengthened over the past few months, electricity generation rapidly became more unaffordable. To top it off, stuck payments for power generation companies and shortages of fuel due to the PTI government’s failure to arrange sufficient stocks in time worsened the bad situation, leaving the entire system unable to meet increased summertime demand.”

As an editorial in Dawn noted, “there is, unfortunately, no short-term solution to the crisis the people currently face. The incumbent government is cash-strapped and in no position to magically cure the power sector’s many structural issues. It is attempting to curtail demand with the restoration of a five-day workweek, but more will need to be done. For the long term, the political class urgently needs to work towards a multiparty consensus on the country’s long-term energy goals. It is clear no single party can provide the solution to the chronic problems that plague Pakistan’s energy sector.”

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Author: Alia Khan