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Illustration by Shahd Nigim

Pakistan in Crisis: Economic Recession and Electricity Blackout

Amid political instability, worsening economic crisis and speculations of Pakistan defaulting, the country grapples with power breakdowns and securing bailout packages.

Feb 6, 2023

On Jan. 24, the people of Pakistan woke up to realize that lights were out all over the country because of technical difficulties in the national grid. However, the blackout served as a reminder of the severity of the financial crisis that the incumbent government is facing.
Load-shedding is a common practice in Pakistan and has been present during all of the past governments.. It is most frequent in rural Southern Punjab, Interior Sindh, and most of the Balochistan province. When demand is high, electricity is cut off during low usage hours, usually overnight. This year, the winter has been harsher in Pakistan, which means that power usage during the day is at a maximum for heating purposes, resulting in the Ministry of Power shutting down electricity daily during the night to conserve resources.
However, on one such occasion last week, power units around the nation were shut down for an overnight blackout to conserve energy, resulting in the failure of the national grid network. Pakistanis, enduring near-freezing temperatures, were made to live without electricity for approximately 40 hours. The blackout is an indicator of a much broader issue at play in a country of more than 220 million people, which is currently experiencing a dark time of political instability, an economic crisis, and upcoming general elections.
The nation is struggling to make ends meet, with depleting foreign reserves and the International Monetary Fund breathing down its neck. In such a situation, a bail-out is the only option which also has major downsides. Meeting the IMF’s demands means letting go of any holds placed on the exchange rate of the Pakistani Rupee. Just in the last week, the rupee has fallen by 14 percent indicating to the global market that Pakistan might be the next economy to default.
Inflation keeps rising at a momentous 28 percent. Although the government excused itself from taking responsibility for the blackout by blaming it on technical faults, the fact remains that the nation’s foreign reserves have come down to approximately 3.1 billion USD meaning Pakistan can only afford the next three weeks of import expenses after which a default will become even more probable.
At this point, when the facts are made clear, it becomes increasingly difficult to sympathize with Pakistan. The country’s biggest creditor, China, has them in a bind where they refuse to renegotiate loan terms with them. On the other hand, the IMF is imposing stringent conditions stating that the nation is in no position to pay the creditors back and should focus solely on generating revenue and cutting costs within the country. Even with energy consumption, the Sharif government has expanded the capacity of electricity production through contracts with China’s independent energy producers, promising them returns on their loans that were difficult to achieve even at that stage.
Sympathy for Pakistan on the global stage continues to remain unfound because the changes in governance over the past 15 years have not been ideal for its international image. That is to say, political parties are stuck in a tussle of power politics which has greatly shifted attention away from more pressing issues. Even the Imran Khan-led government, which was supposedly bringing progress and justice to the country, failed to establish economic and social stability even after winning a plurality of the vote in the 2018 elections. This is exacerbated by the military authorities that still maintain most, if not all, of the control over the institutions of the country. The armed forces and their efforts to remain relevant to the political scene with pre-election rigging, anti-Indian propaganda, and nationalistic media censorship prominently contribute to the worsening socio-political conditions of the country.
The failing nation seems ripe for a situation similar to what happened in Sri Lanka last year, where the masses stormed the President’s house and defied his absolute authority following months of protest against the current economic crisis and the government that led to it. A people-led revolution needs to come with the nation standing up to the military of Pakistan and properly defining the political responsibilities of the stakeholders where the only role of the army should be to fend off attacks on the borders rather than controlling the narratives within them.
Looking at the crisis from a historical perspective, many struggling democracies or states in their formative years, such as Pakistan right now, have had to undergo civil uprisings against authoritarian institutions within their country. Some may argue that South Asia has already gone through such events before 1947, with wars and movements against British colonialism. But for Pakistan, the British left them with yet another plague entrenched in their democracy in the form of its armed forces. As the military maintains its control, it also hinders the country’s progress toward financial independence.
India and Bangladesh, products of the 20th-Century’s construction of nation-states, much like Pakistan, are doing much better in terms of economic growth, democratic progression, and social reforms. The difference, as it must be pointed out, is the uninterrupted autonomy of the civilian government across the three branches of power: executive, legislative and judiciary. The argument can be made that executive power has solely rested in the hands of the military in Pakistan, an aspect that has prevailed over 75 years of Pakistan’s history, with almost half of it coming through direct military control or commander dictatorships.
The only way out of Pakistan’s fiscal meltdown is to resume the IMF programming that has remained suspended since November of last year. Finance Minister Ishaq Dar has been stubborn in removing the artificial limits placed on the exchange rate while also not doing much in terms of reducing the trade deficit that is draining the reserves of Pakistan. Even if these reforms are implemented tomorrow, it might turn out to be too little, too late, and an even greater bailout with deferred returns from the IMF and other international organizations might turn out to be the best and only route in the end.
Abdullah Yusuf is a Contributing Writer. Email him at feedback@thegazelle.org
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