Unveiling Pakistan’s Energy Crisis: Causes And Solutions

Unveiling Pakistan’s Energy Crisis: Causes And Solutions
Pakistan has been facing a chronic energy crisis for many decades.  This problem has badly impacted the socio-economic development of the country. The demand for energy is increasing in the country on a day to basis while the growth of its production is highly stagnant. Further ignorance in this regard would have serious repercussions for the survival and stability of the nation. Now is high time for the government to analyze the problem and take the proper steps towards addressing it.

This article will provide a detailed analysis of the causes of the energy crisis in Pakistan. In this regard, lack of political will, poor economic growth, corruption in the country’s power sector and lack of technological development are the important factors that would be discussed. In addition, a complete framework for addressing Pakistan's energy woes is also provided, including building resilient energy infrastructure, diversifying the energy mix and implementing reforms in the power sector of the country.

Roots of the Energy Crisis in Pakistan

Major factors behind the energy crisis in Pakistan include:

  1. Unaffordable Energy Mix

A power policy was issued in 1994 that emphasized the diversification of energy sources and encouraged private sector participation in the energy sector. The policy offered a large number of incentives to foreign investors and also encourage the quick installation of thermal power plants, the bulk of which were fuel and oil-based The government of the time considered this strategy to

be optimal because thermal power plants could be installed with relative ease compared to hydropower plants. However, it drastically transformed the country’s energy mix from renewable to non-renewable energy sources. In 1984, about 60 % energy needs of the country were fulfilled from hydel resources. However, it dropped to 30% in less than 3 decades and currently the major portion of the country’s energy mix is coming from expensive imported oil and LNG.  At present, Pakistan produces almost 80% of its electricity from crude oil, 11% from hydel, 6% from coal, 1% from LPG and 2% from nuclear energy. In this regard, the higher oil prices in the global market and the massive depreciation of the Pakistani rupee are making oil more expensive, triggering external sector pressure and widening the trade deficit of the country.

  1. High Circular Debt in the Energy Sector

The energy sector of Pakistan has been experiencing the problem of circular debt for decades. Successive governments have tried to minimize the issue but the problem is still persistent. According to a report by the Ministry of Finance: The circular debt of Pakistan was Rs 450 billion in FY-2013 and it increased to Rs 1148 billion in FY 2018. By March 2022, the circular debt stood at Rs 2467 billion. This indicates that circular debt equates to 3.8 per cent of Pakistan’s GDP and represents 5.6 per cent of Pakistan’s government debt. If this issue stays unaddressed, it is estimated to reach Rs 4 trillion by 2025. This debt cycle has a detrimental impact on the overall energy sector and contributes to the energy crisis.

  1. Lack of Political Consensus 

Political polarisation and the blame game of politicians have already put Pakistan on the verge of an energy dilemma. All the key political parties of the country have varying views regarding the policy reforms in the energy sector such as changes in tariff structures, incentives for renewable energy projects, regulations for private sector participation, and improvements in governance and transparency. They also differ in their approach to attracting foreign investment for energy projects, engaging with international partners, and seeking technological advancements to enhance energy production, distribution, and efficiency. For example, the Kalabagh dam can produce an estimated 3600 MW of electricity but politicians from KPK and Sindh have always hindered its construction. They have protested on the grounds that construction would create an acute water shortage in these provinces. In this way, the energy sector has suffered from policy inconsistencies and frequent changes in government priorities. Lack of political consensus results in the absence of a long-term, consistent energy policy. This uncertainty hampers investments, as private investors are hesitant to commit to long-term projects without a stable policy framework

  1. Poor Economic Growth  

A strong energy sector requires an even stronger economic system to sustain itself. In this regard, Pakistan’s economy presents a deplorable state of affairs. A weak and unstable government cannot collect funds from its citizens for the construction of new projects. Such states are also not ideal destinations for foreign investments and loans. In Pakistan, limited financial resources are available for investment in the energy sector. Insufficient funds hinder the development of new power projects, the maintenance of existing infrastructure, and the adoption of advanced technologies. This lack of investment leads to a shortage of electricity generation capacity and perpetuates the energy crisis.

  1. Energy Theft 

Another potent factor behind the energy crisis is ongoing electricity theft. This malicious practice is very common in all the regions of Pakistan. In the fiscal year 2022-2023, the country has lost  Rs380 billion due to power theft and the loss is estimated to reach Rs520 billion next year. These unpaid bills and power theft coupled with the higher circular debt badly impact the energy sector and the economy of the country.

Addressing Pakistan's Energy Crisis: A Path to Sustainable Solutions and Power Sector Reform

In order to effectively address the energy crisis in Pakistan, it is imperative to embrace the following measures:

  1. Investment in Renewable Energy Sources 

Pakistan must tap the potential of renewable energy resources for generating electricity. Instead of relying on fossil fuels such as natural gas and coal, it should invest in renewable energy sources such as solar, wind, hydro, and biomass for power generation.  Pakistan has rich hydropower resources. The estimated hydropower potential of Pakistan is about 60,000 MW. Currently, Pakistan is utilizing only 16% of its total hydropower potential. The potential of wind power in Pakistan is also high and the country can generate an estimated 50,000 MW from its wind corridors. Similarly, the availability of abundant sunlight throughout the country can also be used to get rid of the chronic energy problems of Pakistan. In this regard, the high initial costs of installation of renewable energy projects, technical limitations, and the absence of a clear and consistent policy and regulatory framework deter government bodies from taking such initiatives. In this regard, a long-term renewable energy policy with clear objectives, targets, and timelines should be implemented. Moreover, the government should actively seek partnerships with private entities to share risks, leverage expertise, and attract investments.

2. Building Resilient Power Infrastructure 

it is crucial to invest in energy infrastructure. This includes expanding and upgrading power generation capacity, transmission and distribution networks, and fuel supply chains. Developing a modern and resilient energy infrastructure will ensure a stable and uninterrupted power supply, enabling industries to operate efficiently and attract both domestic and foreign investments. The factor that needs the government’s attention is the use of modern technology. The leadership should ponder upon the use of technology. There is a dire need for the government to make use of advanced equipment to overcome the crisis.

3. Implementing Power Sector Reforms 

The government should create a conducive environment to attract private investment in the power sector. This can be done by offering competitive tariffs, streamlining regulatory processes, and ensuring a stable policy framework. Public-private partnerships can also be explored for the development of power projects. In addition, the regulatory framework for the power sector should be strengthened to ensure fair competition, transparent decision-making, and effective enforcement of regulations.


In a nutshell, Pakistan's chronic energy crisis has severely hindered its socio-economic development and poses a threat to the survival and stability of the nation. The causes of this crisis include an unaffordable energy mix, high circular debt in the energy sector, lack of political consensus, poor economic growth, and energy theft. To address this crisis, the government must take immediate action. Addressing the energy crisis in Pakistan requires a coordinated and comprehensive approach. The government, along with stakeholders and international partners, must work together to overcome the challenges and implement sustainable solutions. By investing in renewable energy, building resilient infrastructure, and implementing power sector reforms, Pakistan can alleviate its energy woes and pave the way for socio-economic progress and stability.