Another loan for the energy sector

Pakistan recently requested the Asian Development Bank (ADB) to double its loan for energy sector reforms, taking the amount from $400 million to $800 million. Finance Minister Ishaq Dar made the request to the ADB country director and it was agreed that instead of a $200-million tranche coming in 2017 and 2018, the size would be doubled to $400 million each. The additional debt comes on the back of figures released by the State Bank of Pakistan that stated the country’s total external debt standing at a whopping $73 billion with GDP growth nowhere near to withstand the increase. It also highlights growing dependency of economic managers on taking loans to implement reforms, in which slow progress, ironically, makes the entire exercise seem like a waste.



Of course, like every loan, it comes with conditions. Pakistan has committed to reduce subsidies, fast-track privatisation and run the power sector on a commercial basis. Barring reducing subsidies — aided by the fall in international prices of crude oil — the country has failed to reform the power sector. Mr Dar boasts of having increased tax revenue by over 50 per cent in the last three years. He should also look at the increase in domestic, as well as external, debt during the period. Someone needs to question as to what has the country actually achieved in the name of power sector reforms in the last three years when it has saved on subsidies, cost of power generation, oil import bill, increasing tax rates and revenue, withholding refunds, inflating collection and getting billions from the IMF, the World Bank and the ADB. The answer is clear; very little. Privatisation hit a snag because power distribution companies didn’t allow for it. Protests happened on a grand scale and the government stepped back. LNG import may have started but reforms within the sector have been lacking. Healthcare and education remain on the back seat even as debt for future generations rises. Tax rates continue to rise and the centre’s interference in provincial tax matters continues to increase. Mr Dar may have said the country doesn’t need the IMF, but dependence on international lenders continues to exist — more so than before.

Published in The Express Tribune, September 12^th, 2016.

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