Impact of Energy Sources and the Electricity Crisis on the Economic Growth: Policy Implications for Pakistan

Abstract

The electricity crisis in Pakistan is a very real problem and because of this, life as we know it in Pakistan is extremely challenged. Imagine living in a country with power outages accounting for more than 12 hours a day with in the urban centers of the country and with only a couple of hours of electricity in the rural areas. With people living in such abject circumstances, how can one consider their country to grow economically? If we look closely at the energy deficit we find various problems pointing towards bad governance. At a glance if we examine the energy issue we get puzzled, because the total demand for energy in the country roughly amounts to 17,000 Megawatts while the total energy production capacity of the existing apparatus is 22,797 Megawatts. The total energy being produced by the existing apparatus fluctuates around 12-13,000 Megawatts. The reasons for under production are owed to bad governance and poor resource management due to which a circular debt is created within the energy supply chain. The aim of this study is to build a sound understanding of the results attained by the numerical/statistical analysis using data from Pakistan and compare them with the existing literature, thus enabling the authors to develop, meaningful policy recommendations. The statistical analysis using the GMM technique corresponds with the existing literature and point towards the fact that, in the case of Pakistan there exists a “growth hypothesis”; highlighting a strong relationship between electricity consumption and economic growth, and that economic growth is significantly dependent on electricity.

Keywords: Energy Crisis, Pakistan Electricity Production, Relation between Electricity Consumption and Economic Growth, China Pakistan Economic Corridor.