Pakistan's energy crisis, characterized by power shortages, high costs, and inadequate infrastructure, has severely impacted its economic growth, affecting industrial output, foreign investment, and national productivity. This research article examines the link between energy shortages and economic performance, exploring contributing factors such as political instability, military dictatorship, and defense spending prioritization over energy infrastructure
By Aqib Shahzad
The energy crisis in Pakistan has become a major impediment to its economic progress. Over the years, Pakistan has experienced recurrent power shortages, leading to widespread disruptions in both industrial and domestic sectors. The country, with a population exceeding 200 million people, continues to struggle with a widening energy deficit, despite being endowed with significant energy resources, such as coal, natural gas, and renewable potential. While the root causes of the energy crisis in Pakistan are complex and multifactorial, it is clear that energy shortages have detrimental effects on Pakistan's economic performance, affecting industrial productivity, employment, and GDP growth. Pakistan's energy issues are not only confined to the lack of supply but are deeply intertwined with political instability, historical military dictatorships, and significant defense expenditure. These factors, combined with policy mismanagement, have perpetuated the energy crisis and have diverted attention away from the urgent need to develop energy infrastructure. Â
Literature Review:Â The energy crisis in Pakistan has been widely studied, with scholars focusing on its impacts, causes, and solutions. According to Ijaz et al. (2019), energy shortages in Pakistan have led to reduced industrial output, job losses, and a decline in foreign investment. In particular, the textile and manufacturing sectors, which are heavily reliant on energy, have faced significant challenges. The authors argue that energy deficits contribute to a decrease in industrial competitiveness, limiting Pakistan's ability to participate effectively in the global market. Similarly, the Asian Development Bank (2017) highlights the poor energy infrastructure in Pakistan as one of the key reasons for the crisis. The lack of adequate generation capacity, outdated transmission and distribution systems, and poor management of energy resources have contributed to inefficiency and a lack of energy reliability.Â
In addition to infrastructural issues, political instability has been identified as a significant factor affecting Pakistan’s energy crisis. Shujaat et al. (2020) argue that political instability in Pakistan, characterized by frequent changes in government, corruption, and lack of long-term planning, has undermined efforts to address energy shortages. The lack of cohesive energy policy and the absence of political will to tackle energy issues have made it difficult for Pakistan to implement sustainable solutions. Moreover, Pakistan's historical military dictatorships and heavy defense spending have also been cited as contributing factors. For example, in the 1980s and 1990s, military regimes diverted resources away from infrastructure development towards defense needs which led to the neglect of vital sectors like energy (Ali, 2015). This imbalance has persisted in subsequent civilian governments, further exacerbating the energy crisis.
Energy & Economic Issues in Pakistan: Pakistan's energy crisis has been a significant obstacle to its economic development, with energy shortages leading to widespread inefficiencies and reduced productivity across various sectors. Over-reliance on imported oil and natural gas subjects Pakistan to global price fluctuations, further straining its energy budget. This energy scarcity directly impacts industries, particularly manufacturing, which relies heavily on stable and affordable power. Frequent power outages and high energy costs have resulted in production slowdowns, leading to increased operational costs, reduced export competitiveness, and a decline in foreign direct investment. The high energy expenses also discourage domestic investment, as businesses struggle to stay profitable amid rising operational costs. Moreover, Pakistan’s energy inefficiency is exacerbated by transmission and distribution losses, which account for a significant portion of electricity consumption. These energy challenges have a direct bearing on Pakistan's economic growth, with the country’s GDP growth rate stagnating as a result. The energy crisis also undermines industrial innovation, job creation, and overall economic stability, while further deepening poverty and inequality by limiting access to essential services like healthcare and education. The government’s failure to address these issues, coupled with the prioritization of defense spending over critical infrastructure investment, has led to a stagnation in energy sector reforms, further prolonging the crisis and negatively affecting Pakistan’s long-term economic prospects.Â
Political Instability and Military Dictatorships: Political instability has been a major obstacle to addressing Pakistan’s energy crisis. Frequent changes in government, coupled with corruption, have hindered the implementation of long-term energy policies. The lack of continuity in government policies has prevented the formulation of a coherent and sustainable energy strategy. In addition, Pakistan’s history of military dictatorships has played a role in diverting resources away from energy development. During military regimes, defense spending took precedence over infrastructure development, including energy. For instance, the military governments of Zia-ul-Haq (1977-1988) and Pervez Musharraf (1999- 2008) focused heavily on strengthening Pakistan’s defense capabilities, while energy and infrastructure projects were sidelined. The military’s influence over national policy and its control over resources have also limited the participation of civilian governments in shaping energy policy. This imbalance between military priorities and national development has been detrimental to Pakistan’s long-term economic stability.Â
Renewable Energy: The Way Forward Â
Renewable energy can offer a sustainable solution to Pakistan's energy crisis, leveraging abundant natural resources like solar, wind, hydro, and biomass. Solar energy, given Pakistan's sunny climate, can significantly reduce reliance on imported fuels and provide affordable electricity, especially in rural areas. Wind energy, particularly in Sindh and Balochistan, holds untapped potential, with the Gharo-Keti Bandar corridor capable of generating substantial power. Hydroelectric power, though already a key contributor, can be expanded with improved infrastructure and water management. Biomass energy from agricultural waste offers further potential, especially in rural regions. To unlock these resources, Pakistan needs strong government policies, incentives, and private sector investment. Pakistan has taken several steps to address its energy crisis, including investing in hydro, thermal, and renewable energy projects, such as the Neelum-Jhelum and Jhimpir wind projects. The country has sought energy imports from Iran and China, particularly through the China-Pakistan Economic Corridor (CPEC). Privatization of power companies and efforts to improve energy efficiency, like promoting energy-saving appliances, have been attempted. Additionally, nuclear power plants have been developed, and steps to manage circular debt have been taken. However, these efforts have been hindered by challenges such as outdated infrastructure, political instability, energy theft, and financial mismanagement, leading to limited success. Given these ongoing issues, renewable energy stands as the ultimate way forward for Pakistan. Investing in solar, wind, and hydropower can provide sustainable, cost-effective, and independent solutions, helping Pakistan alleviate its energy crisis, reduce dependence on imports, and improve its economic performance in the long term.