Punishing good behaviour

There are times when it seems that the structure of Pakistan’s political economy operates on the principle of “no good deed should go unpunished”. We have stated many times that one of the biggest reasons for the chronic energy crisis in the country is that those who pay their bills on time are punished by being forced to pay for those who steal their electricity and gas. The government’s assurances to the International Monetary Fund (IMF) that it will force those law-abiding consumers to pay the cost of clearing the energy sector’s circular debt — about half of which is caused by the cost of theft — only serves to further cement those perverse incentives.



We understand why the IMF would make this demand. After all, at the end of the day, the Fund is a lending institution and it wants to ensure that its borrower has the ability to pay it back. What we fail to understand is why the government decided to give in to that demand. This method will not solve the problem, since the unchecked theft will mean that circular debt will simply keep reappearing after every cycle of being paid off. But perhaps, more damagingly, the continuation of the policy of letting the corrupt go free and making the law-abiding pay up will only serve to further ingrain the already deeply held cynicism that Pakistanis have about the inherent injustice of our governance system.

The Nawaz Administration started off with great promise of reforming the energy sector. But beyond privatisation, the government does not seem to have any ideas about how to solve the problem. Privatisation will help in some circumstances, but not in others. The bulk of the energy sector is state-owned and is likely to remain so for the foreseeable future and there are massive problems at every stage of the energy chain. Adhoc measures like clearing circular debt using five-year bonds and then raising electricity bills is not called a solution. It is called kicking the can five years down the road.

Need we remind Finance Minister Ishaq Dar that this is exactly what his predecessor Shaukat Tarin did in 2009. That did not turn out to be a lasting solution and neither will this.

Published in The Express Tribune, March 31^st, 2014.

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