Government Mismanagement Fuels Power Shortages in Pakistan

July 06, 2012

By Jacqueline Lee - Contributing Writer

In Pakistan, power shortages of up to 20 hours per day are not uncommon. The country has a demand for about 19,000 megawatts of power and experiences shortfalls of around 5,733 megawatts. The Pakistani government owes about $375 million to power producers, and officials have recently had to scramble to take out loans to pay the government’s electric bills.

Many observers worry that power shortages could lead to political instability, but most ordinary citizens have little knowledge of political events. “Things may be happening out there, but without electricity I can’t switch on the radio or TV,” said factory worker Aziz Khan, “so I don’t know about them.”

TV and radio aren’t the only elements of daily life that are interrupted by the lack of power. Many Pakistanis use electric pumps to draw water out of wells, which means people often have insufficient water for drinking and washing.

People can’t buy perishable food items because refrigeration is intermittent at best.

According to estimates, power cuts held back Pakistani GDP growth between 3 and 4 percent. Because of current electricity shortages, the industrial sector is operating at just 50 percent of its capacity.

The Pakistani government regularly sets end-user prices for electricity below the cost of production and then promises to pay subsidies to power producers to make up for the shortfall. However, the government’s failure to actually make its subsidy payments has left the industry struggling in a cycle of interconnected debt.

Any attempts to raise power prices to close up the revenue shortage are met with vigorous protests from the Pakistani population.

The Pakistani People’s Party, in power for four years now, works to maintain a broad coalition so that it doesn’t provoke challenges from rivals. The problem with their strategy is that the government has no will to push through needed structural reforms because they fear angering anyone in that coalition.

The government also just appointed Raja Pervez Ashraf as prime minister. A former energy minister, Ashraf allegedly mismanaged the energy sector and accepted kickbacks from rental power projects.

Pakistan’s national debt is currently at 62 percent of GDP. The financial and energy crises facing the country could be more of a threat to stability than any group of homegrown terrorists.

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Edited by Braden Becker

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