EVEN Pakistan’s growing blackouts continue to indicate economic turmoil even as IMF money are practically in hand. There are indications that the energy crisis of last year will seem gentler in comparison to what people will go through in 2023, both in the summer and the winter. Pakistan’s lack of energy is caused by a number of issues.
There isn’t enough fuel, and that is the only current issue. The ageing electricity grid, which is unable to handle the enormous increase in summer load, is the other significant factor. Customers must therefore deal not only with daily hours-long scheduled and forced outages but also with regular tripping and variations in power supply.
The bid to acquire six “spot” LNG shipments was rejected by international gas providers due to Pakistan’s dollar shortage and difficulties securing letters of credit for imports, therefore the energy prognosis for winter is likewise dismal. Will the subsequent endeavour to buy three cargoes for January and February be successful? One can only speculate.
For Pakistanis, prolonged power outages are nothing new; one only needs to think back to the late 2000s and early 2010s, or even earlier. But there had been hopes that the blackouts would soon be a thing of the past because of the significant Chinese investments made in electricity generation as part of the CPEC programme.
That did not occur. Instead, the expense of new generation capacity raised production costs, causing the government to amass a massive debt in the power industry because it could not. Instead, the price of new generation capacity raised the cost of production, forcing the government to rack up a sizable debt in the power sector because it was unable to recover the full cost of producing electricity from consumers despite successive price increases for consumers.
Even worse, the government was forced to resort to frequent power and gas outages, both in the summer and the winter, to reduce its energy import bill, which was putting a strain on our scant foreign exchange reserves and increasing the current account deficit. This was made worse by the post-Covid surge in global oil and LNG prices. Having said that, it is important to recognise that the current energy crisis is not just the result of structural and historical reasons weakening the already vulnerable power industry. Energy shortages have recently been linked to Pakistan’s struggling economy. Pakistan’s power problems are unlikely to get better any time soon without a significant improvement in the nation’s financial situation and the implementation of the difficult reforms required to address structural problems in the energy sector. The government is struggling to obtain fuel, and consumers are struggling to pay bloated bills.
