Pakistan’s energy crisis major hurdle in economic growth: ADB
KARACHI: The Asian Development Bank (ADB), in a report released Wednesday, has said that Pakistan’s economy faces a major hurdle in the shape of its domestic energy crisis.
The ADB has identified rising inflation, investment decline, low tax revenue and losses at public-sector enterprises as other factors hindering economic growth.
“The economy continues to be affected by structural problems, including a domestic energy crisis, a precipitous decline in investment, persistently high inflation, and security issues. Budget deficits remain high, driven by substantial subsidies and losses at state-owned enterprises, and tax revenue below target,” says the report.
The ADB sees power as the main constraint for economic growth, stressing for better load-management to minimize commercial losses.
The report adds: “Losses arising from power and gas shortages held down GDP growth by 3–4 per centage points in FY2011 and FY2012. Improved management of power resources could ameliorate predictability of load-shedding to allow the private sector to better schedule work and minimize costs.”
“For every unit of power sold, there is a loss to the sector reflected in the form of subsidies. An outstanding accumulation of PRs220 billion was carried into FY2012, and an additional financing of 1–1.5% of GDP is likely to be required in FY2012.”
Furthermore, the ADB advises reforms in not only the energy sector but also state-owned enterprises, naming Pakistan Railways, Pakistan International Airlines (PIA), and Pakistan Steel Mills as entities suffering the steepest of losses.
“The challenge of improving efficiency and putting these enterprises on a viable commercial footing is formidable. Reforms are needed, including a separation of these enterprises from operational interference by government ministries,” advises the ADB.
The report adds: “The slow growth in recent years was exacerbated by widespread floods in FY2011. Unless progress can be made in resolving these fundamental problems, the growth outlook will stay modest.”