Experts seek to redesign energy sector and shift to solar energy to save forex-Press Release

Experts seek to redesign energy sector and shift to solar energy to save forex

ISLAMABAD (June 22, 2022): Experts at a seminar called for redesigning of energy sector immediately and shift to solar and wind power at household level so as to save the foreign reserves of the country which are now depleting to an alarming level.

The seminar titled: ‘Energy Prices, Budget 2022-23, and IMF: Analysis and Perspective,’ was organized by Sustainable Development Policy Institute (SDPI).

Dr Khaqan Najeeb, the Senior Economist and Public Policy Expert, asserted that Pakistan’s ability to complete the IMF’s 7th Review is crucial for securing $1 billion and ensuring its access to other creditors and friendly countries. The success of an IMF-backed programme hinges on the team’s preparation and the arguments they present during the review.

On the budget side, he hoped, there is a scope for higher collection of Rs 7,800 by Federal Board of Revenue (FBR) through compliance and tackling tax evasion. “It is also important to minimize the level of levies on energy sector to minimize the impact on inflation, he said, adding that on energy side, a redesigning of the sector is needed on urgent basis, as it may help find a way forward of staggering and passing the new tariffs – both in electricity and gas.

Moreover, Dr Najeeb said, key economic decisions must not be derived by short-term political goals, which may not ensure sustainable development and growth. Pakistan has been facing a perpetual human resources crisis as its public sector is highly rigid and there is a little room for hiring new talent at different levels of management, which prevents new experts and knowledge from entering the system, he mainatined.

Dr Abid Qaiyum Suleri, the SDPI Executive Director, said there is a high political polarization in the country and we see a complete change of narratives of our political leadership when in opposition and when in government that has led Pakistan to lose its credibility. “If we want a stable government, we need to make a statutory mechanism, which can bring consensus on economic issues of the country.”

He suggested that all the political parties and stakeholders should be the part of broader consultations on national economy as political uncertainty is affecting the overall economic situation of Pakistan. “Economic security is the pillar of our National Security Policy, thus we have to deal with this non-traditional security threat through a collective national response,” Dr Suleri said and expressed his dismay over the loss of clarity and credibility for securing the IMF deal. 

Shahbaz Rana, a senior journalist and economic analyst, said that the inflation rate (around 13-14%) forecast by the central bank is very low and is likely to reach at least 17%. Referring to a study by a Jhon Hopkin University’s researcher, he said, the inflation rate might be over 30 per cent keeping in view the current economic conditions, ‘but our own numbers do not reflect the ground realities’. He said that the federal budget 2022-23 does not depict the true picture of our country and has ignored the harsh realities of our economy. He opined that the successive governments design and implement policies based on their political agendas, which further worsens the situation due to the conflict between civil-military leadership.

Khalid Mustafa, a senior journalist energy sector analyst, said that from energy to all other sectors of economy, things have become difficult for Pakistan to manage. He added that our policies were not made to cater to the issues we are faced with, but they are reflective of the fact that there is a human resources deficit in these critical sectors.

He said energy, commodity and fiscal sectors of Pakistan have become unsustainable and now are on the verge of default. Similarly, Rs 2.5 trillion circular debt has made the energy sector unsustainable, he said, adding that the capacity payments will reach Rs1.4 trillion in the next fiscal year, which are currently around Rs 800 billion.

Mr Mustafa went on to say that the CPEC-linked energy projects are dependent on imported fuel, therefore, with the increase in fuel prices in the international market, we are left with only $8.9 billion reserves, which can cover only two weeks of imports. “The main reason behind excessive loadshedding in the country is the shortage of foreign reserves and our inability to finance the imported fuel.” He suggested to depend more on indigenous fuel for power generation like Thar coal. “We must preserve energy by closing markets at 6:00 pm rather than 9:00 pm. It is high time to completely shift towards renewable energy sources such as wind and solar,” he proposed.

Kaleeq Kiani, a senior journalist and energy sector analyst, said that the our national level electricity losses are around 18-19%, which are passed on to the consumers but in the end, they are made the part of circular debt. “The current circular debt is around Rs 2.5 trillion, he said, adding that even if we complete all the targets from consumer side, the circular debt will be around 3.2 or 3.3 trillion at the end. He further said that increase in energy and gas prices, petrol levy and reduced fuel subsidy will put a burden of Rs 5,000 billion on consumers.

Mr Kiani expressed his concerns that the social protection scemes like BISP cover 30% of the population living below the poverty-line, but the population just above 30% is the one who will bear the shock and drop to below poverty-line. He further said that the government has announced solar scheme for the households consuming 200 units per month, but it didn’t give any incentive to avail this scheme. “People don’t have the capacity to repay the debt, therefore, all these subsidies need to be reverted.” He proposed the government to install the solar system itself for the consumers and fix a tariff amount which they will pay against this subsidy.

He warned that if not efficiently managed, the current economic crisis and inflation can push an additional 20% of the population below the poverty-line in the near future.

In his concluding remarks, Dr Shaukat Hameed Khan, the former member of Planning Commission, asserted that our bureaucrats, in their capacity as the public servants, must resist pressure from the political decision makers, if their policies do not align with the long-term goals and national interest.  He further said that the policies should not be driven by political agendas, but sincere efforts are required to promote sustainable development for the betterment of people. He added that we need to enhance job opportunities especially in power sector by imparting relevant trainings and skills to our workforce, as it is very important to draw foreign investment in the sector.