Pakistan’s electricity supply companies caused a staggering Rs660 billion loss to the national exchequer in the last fiscal year ending June 30, 2024, which is 11 times the federal government’s Rs59.7bn budget for higher education. This stark comparison highlights the depth of the structural problems affecting Pakistan’s power sector.
The inefficiencies of electricity supply companies are draining national resources, leaving little fiscal space for the government to invest in the economic welfare of Pakistan’s 241 million citizens. While power sector reforms are underway, even the most optimistic policymakers acknowledge that eliminating these losses is unlikely in the near future.
The inefficiencies in the power sector, which lead to significant financial losses each year, have a snowball effect on the economy. They add to the mounting circular debt, further constrain fiscal space, drive energy price hikes, and hamper industrial production. This not only reduces output but also increases the cost of goods, exacerbated by prolonged power outages.
Among the worst affected are small and medium enterprises, small shopkeepers, and IT freelancers—vital contributors to much-needed foreign exchange—who rely on uninterrupted electricity and internet services to work from home or modest offices.
Unless the government accelerates reforms in the power sector and effectively addresses internet service disruptions, IT professionals will continue to emigrate, and export-oriented businesses will struggle to remain competitive in global markets due to high energy costs. This poses a serious threat to sustaining the growth momentum in exports of goods and services.
In the first five months of this fiscal year (July-November 2024), goods exports grew by 12.57% to $13.69bn, while services exports increased by 7.91% to $2.6bn. Maintaining this growth trajectory is crucial for narrowing the trade deficit.
However, challenges remain. Poor performance in wheat and cotton crops threatens to slow the growth of goods exports, while the relocation of IT businesses to Dubai has introduced uncertainty in foreign exchange inflows from this critical segment of services exports.
Remittances from overseas Pakistanis ($14.76bn in July-November 2024) have now become the largest source of non-debt foreign exchange inflows, surpassing goods exports. However, escalating political turmoil in the Middle East presents grave concerns.
