A recent Bloomberg report reveals that Pakistan is facing the highest inflation rate in its region.
The report explains that the Pakistani government has had to raise energy prices significantly to secure a new programme from the International Monetary Fund (IMF).
Although inflation has decreased somewhat, electricity bills have risen sharply, now often surpassing household rent. This increase in power tariffs, aimed at meeting IMF conditions and implementing required reforms, has led to widespread protests across the country.
Bloomberg’s report shows that since 2021, electricity prices in Pakistan have soared by 155 per cent. This surge followed the government’s decision to raise both industrial and retail electricity rates to improve the chances of obtaining IMF loans.
The rising energy costs have worsened the country’s economic crisis, with inflation around 12 per cent—the highest in Asia—reducing people’s purchasing power and leading to a drop in electricity usage as individuals and businesses turn to solar power.
In July, following the approval of a $7 billion IMF loan, the average residential electricity price increased by 18 per cent. Many residents now find their electricity bills exceeding their monthly rent, which ranges from $100 to $700, according to Samiullah Tariq, head of research at Pakistan Kuwait Investment Co.
In response to growing public frustration, Prime Minister Shehbaz Sharif has announced a Rs50 billion ($180 million) subsidy over the next three months to help low-income households cope with the higher energy costs.
The IMF programme is focused on improving Pakistan’s energy sector through cost reductions and the privatisation of state-owned power companies. The power regulator estimates that Pakistan loses about 16 per cent of its electricity due to theft and inefficiencies in its transmission and distribution systems.
The Bloomberg report underscores the severity of Pakistan’s economic challenges and the urgent need for effective solutions in its energy sector.
