The World Bank has highlighted the energy sector’s losses and mounting credit as a significant threat to Pakistan’s economy.
In its Pakistan Development Update Report, the World Bank states that the revolving credit in the electricity and gas sectors has soared to 5.501 trillion rupees.
As of January 2024, the revolving debt in the power sector stands at 2.635 trillion rupees, equivalent to 2.4 percent of the GDP. Similarly, the circular debt in the gas sector has reached 2.866 trillion rupees, which amounts to 2.7 percent of the GDP.
The World Bank warns that without reforms in the energy sector, the only recourse would be to raise electricity prices, with a particular emphasis on safeguarding the poor from these increases. It notes a rise in distribution losses for electricity from 0.2% to 0.5% by 2022.
While the World Bank pledges support to mitigate transmission losses in the energy sector, it underscores the need for the government to enhance energy sector revenues. Pension reforms are also advocated for long-term financial stability.
Furthermore, the World Bank recommends increasing taxes on socially harmful goods like tobacco and eliminating personal income tax withholding charges on the consumption of energy products, telecommunications, financial services, and others to alleviate the tax burden on low-income and vulnerable households, thereby reducing the load.
