Pakistan plans $ 5 bn debt issue to switch lights on
ISLAMABAD: Pakistan’s new government plans to sell $ 5 billion in treasury bills to pay off a chain of debt choking the country’s power sector and its economy and boost electricity output by a quarter — all within its first 100 days in power.
Sharif said yesterday it was a “tragedy” that a country with a nuclear arsenal was crippled by chronic electricity shortages.
Years of mismanagement, underinvestment and corruption in the power sector have led to blackouts of up to 20 hours a day in the blistering heat of summer, when temperatures reach up to 50 Celsius (122 Fahrenheit).
Sharif vowed to build new power plants to tackle the problem, which acts as a huge drag on the economy — shaving up to four percent off GDP, according to the Planning Commission.
But he warned there would be no quick fix.
Sharif said it was shameful that the country struggled so badly just to keep the lights on.
“It’s a tragedy that a country with atomic weapons is deprived of electricity and has no electricity for even 20 hours a day. How can a country develop in such a situation?” he said.
Sharif said his government would build more dams to exploit Pakistan’s huge hydroelectric potential, as well as more coalfired power stations, and would seek help from allies China and Turkey.
He said foreign firms setting up power projects would be allowed to repatriate profits, but warned against expectations of a swift end to the crisis.
“Please do not expect that we will solve this energy problems in days,” he told an audience in the eastern city of Lahore.
“We will try our best and will use all our resources to solve this problem but you will have to show patience. I cannot give you an exact timeframe but I will struggle and will do my best.” The deepening power shortages have sparked violent protests and cost hundreds of thousands of jobs in a country already beset by high unemployment, a failing economy, widespread poverty, sectarian bloodshed and a Taleban insurgency.
Several key members of the incoming government’s energy team interviewed by Reuters over the past few days said that out of a long list of challenges ranging from lack of investment to electricity theft, plugging a 500 billion rupee ($ 5.08 billion) financing hole was the
It’s a tragedy that a country with atomic weapons is deprived of electricity and has no electricity for even 20 hours a day. How can a country develop in such a situation?
most pressing task.
Sources in the new administration said these funds would be raised through sales of 3-month, 6-month and 12-month treasury bills.
By breaking a vicious cycle of withheld payments running through the entire power-generation chain from end consumers to electricity distributors, power plants to refiners who can’t import enough oil because of unpaid fuel bills, the team hopes to bring immediate relief.
“In the first three months of our government, we plan to add 2,0003,000 megawatts to the national grid and at least 16,000 megawatts in the medium term,” said Khawaja Asif, who is due to take the energy portfolio in Sharif’s cabinet that will be sworn in on June 5.
Pakistan’s power sector now generates about 8,000 MW, with needs estimated at 15,000.
A “100-day roadmap” for the energy sector, due to be unveiled by Sharif on June 5, and made available to Reuters, also calls for an overhaul of a decades-old system of subsidies that is considered one of the root causes of the crisis.
“It makes no sense that you subsidize electricity at the same rate for the person who drives a Mercedes and the poor guy who rides a bicycle to work,” said Asif, who briefly served as minister for petroleum and natural resources in 2008 and headed a privatization body in a previous Sharif cabinet in the 1990s.
“People who can pay more for power will pay more. That will be the hallmark of our government’s energy policy.” That, alongside a promised push to tackle electricity theft and a growing mountain of unpaid electricity bills, can set the new government on a collision course with the country’s rich and influential elite.
The incoming government’s response is to pick competent managers to run power distribution companies and give them revenue and other performance targets.