April 25, 2022 (MLN): The ongoing fuel shortage has forced cash-strapped Pakistan to cut power to households as almost a fifth of electricity generation capacity was offline because the government cannot afford to buy coal or natural gas from overseas to fuel its power plants, a report by Bloomberg noted.
The South Asian nation is struggling to procure fuel from the spot market after prices of liquefied natural gas and coal surged to a record level last month as the war in Ukraine exacerbated supply shortfalls.
The energy cost has increased by more than twofold to $15 billion in nine months, and the country is not able to spend more on additional shipments, the report claimed.
The electricity crunch was complicating the already tough economic challenge for the new government.
“A relatively poor nation that’s highly dependent on energy imports, Pakistan has been hit especially hard by rising fuel costs,” the report added.
About 3,500 megawatts worth of power capacity had been shut due to the fuel shortages as of April 13, according to a Twitter post by Finance Minister Miftah Ismail.
A similar amount is offline due to technical faults, he said.
The more than 7,000 megawatts represent almost a fifth of the total generation capacity, according to Tahir Abbas, the head of research at Arif Habib Ltd. in Karachi.
Pakistan’s long-term LNG suppliers canceled several shipments scheduled for delivery over the last few months, further tightening supplies. The nation released a tender on Sunday to procure six LNG cargoes from the spot market, but that could end up costing the government hundreds of millions of dollars if fully awarded.
“Pakistan’s situation will not change in the near term since global dynamics are still the same,” said Samiullah Tariq, head of research at Pakistan Kuwait Investment Co. “There have been forced outages to deal with the energy shortages.”
While speaking at an event hosted by the renowned US think tank Atlantic Council in Washington DC, Finance Minister Dr Miftah Ismail highlighted the economic agenda of the new government of bringing economic and fiscal stability to the country by encouraging recovery and growth.
The government, however, will ensure that this growth was all-inclusive and benefited the poor segments of society, he said.
He also underlined that during his meeting with IMF, he also agreed to pursue structural reforms to boost a crisis-wracked economy.
The minister claimed that the previous government had put the new government in trouble, he said.
Adding in to that he stated, “making petrol cheap is not a favor, it is the nation’s money through which they give subsidies.”
Miftah Ismail further stated that the government was giving a subsidy of Rs52 on diesel and Rs21 on petrol, forcing it to pay Rs68bn from the national exchequer just for April’s subsidy.
He also underlined that Pakistan is the world’s fifth-most populous nation but the subsidies it gave mostly benefited the rich.
“We have such an elite-benefiting country that almost every subsidy that you can speak of actually goes to the richest people,” he said.
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