This month, Pakistan tumbled into sovereign default for the first time in its history because the government failed to reimburse millions to independent power providers — more proof that, after years of mismanagement and neglect, the nation’s energy sector is in extremis.
Now some experts suggest that the power crisis is more of a threat to Pakistan’s stability than is terrorism — a bitter outcome given the massive amount of aid the United States has poured into energy projects here over the decades.
A long-running Islamist insurgency has carved 2 percent from the nation’s GDP, said Sakib Sherani, a former government economic adviser, whereas rotating daily blackouts — referred to here as “load shedding” — have resulted in a 4 percent loss.
The shutdowns paralyze commerce, stoke inflation and unemployment, and further enrage a restive populace. Load shedding averages five to 10 hours a day in some urban areas and more than double that in rural ones.
Shopkeepers and factories use backup generators if they have them, but businessmen say the rising cost of fuel to run the machines hurts their bottom line.
“We have been shattered by these problems, and the government is responsible,” said Muhammad Naeem, sitting in the darkened office of the marble and granite company he runs in Islamabad. Persistent outages have forced him to cut shifts by half and reduce his payroll from 35 people to eight as production has fallen off, he said.
Pakistani officials, while accusing previous governments of neglecting a predictable crisis, say coal, nuclear and hydropower projects are in the works, as are electrical grid and dam repairs to boost capacity. But relief is years away.
“The government knows the suffering of people. It is trying its best to resolve the electricity shortage problems,” said Zargham Eshaq Khan, a spokesman for the Ministry of Water and Power. “The results will be evident in time.”
U.S. assistance on energy
Many power-improvement efforts are backed by the U.S. Agency for International Development, which says it has made the energy sector its priority in Pakistan. With $865 million in overall assistance this year, Pakistan is on the receiving end of the second-largest USAID program in the world, according to State Department officials. The share of aid devoted to energy this year is $112 million.
Yet, for all its efforts, USAID has earned scant credit among the Pakistani public, polls have shown. And reliance on non-Pakistani contractors and high administrative costs have fueled resentment, according to a recent Congressional Research Service report on aid to Pakistan.