EVEN with IMF funds almost in hand, Pakistan’s worsening blackouts continue to signal economic distress. Signs are that last year’s energy crisis will appear milder in comparison to what the people are going to experience in 2023 — both in summer and winter. There are multiple factors behind Pakistan’s energy shortage. The immediate problem is simple: there isn’t enough fuel. The other major reason is the aging power grid, which is incapable of meeting the massive growth in the summer load. Therefore, consumers have not only to cope with hours-long scheduled and forced outages daily, but also frequent tripping and fluctuation in power supply. The energy outlook for winter is also bleak, as the bid to secure six ‘spot’ LNG cargoes has been rebuffed by global gas suppliers because of Pakistan’s dollar crunch and problems in opening letters of credit for imports. Will the next attempt to purchase three cargoes for January and February succeed? It is anyone’s guess.
Long power outages are not new to Pakistanis; one can recall the late 2000s and early 2010s — or even earlier. The massive Chinese investments in electricity generation under the CPEC initiative had, however, engendered hopes that the blackouts would soon be history. That didn’t happen. Rather, the price of new generation capacity increased the cost of production, forcing the government to accumulate a huge power-sector debt because it could not recover the full electricity production bill from consumers, despite raising retail prices multiple times. The post-Covid surge in global oil and LNG prices made matters worse, as the government was compelled to resort to frequent power and gas outages, both in summer and winter, to reduce its energy import bill, which was proving to be a drain on our meagre foreign exchange reserves and causing the current account deficit to expand. That said, we must acknowledge that the present energy crisis is not an outcome of historical and structural factors pulling down the fragile power sector alone. In recent months, energy shortages have become a symptom of Pakistan’s failing economy. With the authorities struggling to procure fuel and consumers scrambling to pay bloated bills, Pakistan’s power troubles are unlikely to go away anytime soon without significant improvement in the country’s financial position and the implementation of the painful reforms needed to fix structural issues in the energy sector.
Published in Dawn, July 3rd, 2023
