Dear Readers,
Many people, especially outsiders not familiar with how things work at the official level in Pakistan will be shocked to learn that not a single project of the size of either Mangla or Tarbela dam has beer initiated during the last four decades or so. Should it then be surprising that Pakistan finds itself mired in an energy crisis that keeps swelling and threatens to bring the people to their knees? By rough estimates power generation has shrunk by up to 50% in recent years while the shortfall has increased from 4,600 MW to over 7,000 MW per day. It is now normal for many cities to experience 12 hours of outages daily while in rural areas these last upto 20 hours. Power riots have become an everyday affair, especially in the Punjab and Khyber Pakhtunkhwa where violent mobs vent their anger by engaging in arson and destruction. One does not have to look far to identify the problems that have accentuated Pakistan’s energy crisis – bad planning, mismanagement and inefficiency – these cou-1 pled with financial constraints have exacerbated the crisis. Electricity consumption has increased over the years yet successive governments failed miserably to plan for the future. Because of this, Pakistan’s demand for electricity has skyrocketed but it has very few power generation plants that can cope up with the demand. The government’s myopic policy relating to power generation and its continued failure to resolve problems also prevents the country’s moribund economy from getting off the ground thereby giving birth to a vicious cycle that spawns poverty, joblessness and disaffection among the people. Not too long ago in 2001 Pakistan had almost 4,000 megawatts of excess power capacity while today it has about a 15 percent plus shortfall of the capacity it needs. It is unfortunate that despite having a huge capacity for hydropower and large deposits of coal, no one in officialdom has ever shown any real urgency to exploit these resources. For the benefit of readers I am reproducing my article “RUNNING OUT OF TIME AND MONEY”.
The prime reasons for the electricity crisis is that the feel-good consumer oriented economic policies of the Musharraf regime never thought about investing commensurately in massive generation to meet manifold increased electricity demand, its transmission means thereof and/or its distribution
The Shaukat Aziz formula to keep everyone happy was Marie-Antoinette simplicity itself, let everyone have an air conditioner, a refrigerator, TV, washing machine, microwave oven, etc, if they cannot have bread let them eat cake. Sold in their millions on easy installments they added significantly to the electricity consumption, the supply of which diminished in the face of required increases due to aging of equipment, inefficiency, corruption, etc. A child in Class one can figure out that when demand exceeds supply by such a wide margin and is force-multiplied by the increase in population, a crisis of multiple proportions is bound to occur.
Our present PM aka “Raja Rental” added to the problems by diverting funds from the existing independent power producers (IPPs) to the scam of the rental power stations (RPPs) where money could be siphoned off conveniently. What can be more cynical than Zardari then appointing the one man most responsible for the present shortages on the “set a thief to catch a thief” analogy to reduce the power gap as the Chief Executive of the country?
What does load-shedding cause besides acute discomfort to a large segment of the population? Electricity shortages mean less of manufacturing as well reduced services, massive unemployment and decreases in corporate revenues. The decreased labour activity cuts into the wages of a vast majority thereby reducing. their buying power, the means derived from less manufactured goods, curtailed services and unemployment causes a down-turn in the economic cycle, money in short supply to pay salaries force-multiplies the recession into a possible depression. How many mutinies have taken place when the government of the day could not pay its soldiers?
The hot summer days without lights and fans for long, extended periods cause acute physical discomfort, exacerbated by the mental agony that the common man faces daily with reduced wages and/or bereft of a job and not having the means to pay for bare minimum food on the table for his family, their medical needs and for their schooling, etc. When frustration crosses the patience threshold, it morphs into violence. The streets across the length and breadth of the country are resounding with public patience wearing thin, individuals get-ting together as crowds and turning into mobs, collectively venting their pent up rage on whoever or whatever comes their way. Violence and mayhem ruling the streets take a heavy toll on the economy not only in material losses, but the time and effort to put things together again and to get them working.
Transfixed in the eye of the storm, the term “Catch-22” was probably invented specifically to describe the hapless predicament of Federal Finance Minister Dr Abdul Hafeez Shaikh, damned if you will, damned if you won’t! Revenues dropping, tax collections going down, etc adds to the cycle of despair that Hafeez Shaikh wakes up to every morning, to pay for Pakistan’s bills by scrounging around for money he does not have. As the succour of last resort the IMF is the easy route. Not being able to pay for the oil, gas, etc for generation adds to existing woes, with power stations shut down the gap between demand and supply of electricity increases. Assailed by all and sundry in the Cabinet nobody is enthusiastic about collecting taxes. The circular debt has assumed alarming proportions, the present slow-down could well become the noose strangulating the economy and to a complete shutdown.
Hafeez Shaikh could well look at the Argentine model, the success of the “Kirchnerism strategy” was based on fiscal sobriety and a flat refusal to repay much of the $100 billion in foreign debt on which Argentina defaulted in 2002. This default was brought on by excessive borrowing in the 1990s, the col-lapse of the Argentine peso and draconian austerity demands from the IMF, does that sound familiar? The country restricted its debt in most cases to some 30% of its value but did not reach agreements with all its creditors. While it still can’t access inter-national credit markets because of its massive 2002 debt default, Argentina has become a showcase in less than a decade. This surge from basketcase to showcase was only possible because of increased domestic consumption, high prices for commodity exports and increased social spending, the bottom line was to renege on the debt. The poverty rate in Argentina was cut by half and the country became the richest nation per capita in South America.
The tightening of import restrictions in Argentina has caused many nations to accuse Fernandez of illegal protection-ism. Increased state currency controls have led to hoarding of US dollars as a hedge against inflation or a possible devaluation of the Argentine peso. Some informed economists believe this model could be emulated by Greece and other indebted disaster zones. The recent Greek election was a near run thing for the Euro, under the Syriza Party socialists Greece would have been only too happy to try to leave the Eurozone.
Cristina Fernandez is keeping up her defiant nationalist stance, her “colonialist” detractors are derided vehemently, she contrasts her economically booming Argentina to the recession-racked modern, developed countries like US and Europe which are in real trouble and collapsing as not the models to follow. Mark Weisbrot, a co-director of the liberal Centre for Economic and Policy Research in Washington DC says “Argentina proves a country doesn’t have to accept austerity policies that make your economy worse”. Why do we in Pakistan accept austerity measures that will beggar our population further?
The standoff with the US continues. Among other things Pakistan wants an apology for the Salala incident and a transit fee of US$ 5000 per NATO container, the resumption of drone strikes are causing quite some heartburn among the masses. The US Government is reluctant to give that apology in a Presidential election year, the Republicans would use it to tar and feath(1- Obama. What is of some mystery to Pakistan is why tile US is reluctant to pay the transit fee, it is not huge given that the US is spending far more using the much longer, more difficult Northern Distribution Network (NDN). The US has had something of a free ride for over a decade, more importantly our road network is in shambles because of the heavy NATO traffic. The US needs the Pakistan transit route, both countries must work out an amicable solution. Because of the emotive nature of the Salala incident anything less than an apology will look like a sell-out, no general of the Pakistan Army will risk a wedge between the senior hierarchy and other ranks.
Hafeez Shaikh is in between a rock and a hard place. Without a deal with the US, the IMF will likely not give the necessary funds, Pakistan can probably last till October without going bankrupt, with the IMF infusion, we could possibly go on to December.
What happens after December? Who will pay the bills?
