The Determinants and Forecasting of Electricity Supply in Pakistan (1972-2014)

Abstract

Development of Today’s world is impossible without the presence of required energy supply especially electricity in developing countries. Electricity is one of the most important forms of energy and its use increasing progressively with time. Pakistan faces sever electricity crises in the last two decades more specifically after the year 2000, which effect different sectors of the economy like agricultural, industrial and the services sectors. In recent years Pakistan commenced many projects to enhance electricity supply but failed to achieve the required target. This is due to fiscal mismanagement and policy inefficiency. To overcome the problem of electricity shortfall government and policy makers should to recognize the determinants of electricity generation and to accurately forecast electricity supply. The present study focused on the determinants of electricity supply from 1972-2014, followed by forecasting of electricity supply up to 2025. The study use OLS econometric technique to point out the determinants and ARIMA technique is used for forecasting electricity supply. Results showed that total petroleum import, electricity transmission and distribution loss, price of petroleum and technology were statistically significant, while rainfall and electricity price were statistically insignificant determinants of electricity supply. Moreover price elasticity of electricity is inelastic. The finding of the study suggests that government and private sectors should inject more funds to energy particularly electricity sector in favor of technology and to increase electricity supply to meet increasing demands of energy.

Keywords: Electricity, Determinants, Forecasting, ARIMA, Pakistan.