Financial Mismanagement Worsening Power Cuts in Pakistan
Riots have broken out as the Punjab, Pakistan's largest province, finds itself in the midst of the worst ever electricity crisis in the nation's history. The power shortfall has reached almost 9000 megawatts across the country, over half of the total demand of about 17000 MW.
Many public and private power producers have shut down their power plants due to the suspension of fuel supply by Pakistan State Oil, the state-owned oil company, according to a report in the Express Tribune. The oil company is demanding payment of Rs. 155 billion in outstanding dues from the power producers before resuming fuel supply.
The key players in this "circular debt" trap are the federal and provincial governments as the biggest deadbeats, the power distributors like LESCO and KESC, the power producers like Pepco and Hubco, and the fuel suppliers like government-owned Pakistan State Oil (PSO) and partially state-owned Pak-Arab Refinery Ltd (PARCO). This debt circle begins with the government as the biggest debtor and ends with a government-owned entity as the biggest creditor. So the obvious question is: If the government is both the biggest debtor and the biggest creditor, then why is it that the government leaders can not solve the problem? Is it the lack of will? or the lack of competence?
Increased load shedding in Pakistan has cost 400,000 jobs in recent years, according to the World Bank. Although the World Bank report does not address it directly, the anecdotal evidence suggests that almost all of Pakistan's 13 million jobs in the decade of 2000-2010 were created from 2000-2007 when the economy showed robust gdp growth.
Clearly, the circular debt problem has assumed alarming proportions, threatening Pakistan's future. The IMF and the US officials in their recent meetings with Pakistan government have described the circular debt as a significant threat to the country’s economy.
Unless the government urgently takes serious steps to manage and resolve this worsening electricity crisis by putting a fully empowered competent team in charge, it will only get worse and make life impossible for both businesses and consumers, and cause a total collapse of an already struggling national country.
Circular Debt and Load Shedding
Musharraf's Economic Legacy
Pakistan's Tops Jobs Growth in South Asia
World Bank Report on Jobs in South Asia
Pakistan's Twin Energy Crises
Pakistan's Worsening Electricity Crisis
Pakistan's Struggling Economy
Lahore School of Economics Paper on Circular Debt