The long-awaited winter energy crisis has finally hit…but it wasn’t in Europe after all. On Monday, almost the entirety of Pakistan was left without power when a misguided energy saving strategy by the government backfired. Runaway inflation, a severely weakened currency, and rapidly emptying foreign exchange reserves have left Pakistan on the brink of economic collapse. The country of 230 million people is plagued by overdue energy payments, and was seeking to cut costs by lowering energy use when the plan went off the rails, leaving people across the country without power or water for more than 12 hours.
Pakistani officials had planned to save on energy costs by turning off electricity across the country overnight. Nighttime has the lowest usage hours for energy in Pakistan, where winters are relatively mild. The problem came when technicians tried to reboot the electric system in the morning, and found out that the infrastructure wasn’t capable of booting up the entire nation’s energy grid all at once. Major cities, including the capital city of Islamabad, as well as smaller cities and towns across the country were left in the dark for 15 hours on Monday, lasting into the night.
“As an economic measure, we temporarily shut down our power generation systems” Sunday night, Energy Minister Khurram Dastgir told local media. He went on to explain that when engineers tried to turn the systems back on, a “fluctuation in voltage” occurred, which “forced engineers to shut down the power grid” stations altogether.
Millions of people were left without drinking water as electric-powered pumps failed. While some schools and hospitals were able to turn to backup generators, many were left without power entirely throughout the day. Pakistani authorities went as far as deploying additional police at markets around the country as the sun went down, for extra security in the darkness.
This isn’t the first time that Pakistan has suffered from widespread blackouts. Reporting from the Associated Press noted that Monday’s outage was “ reminiscent of a massive blackout that occurred almost exactly two years ago, in January 2021, attributed at the time to a technical fault in Pakistan’s power generation and distribution system.” This week’s blackout has catalyzed pre-existing nationwide distrust of the government’s tactics and capacities, and stoked fears and outrage about the government’s handling of the nation’s economic crisis.
A significant energy shortage is one of the main drivers of the nation’s current economic crisis. Pakistan’s high level of dependence on imports of foreign fossil fuels to keep the lights on has left the country “acutely vulnerable to to hikes in global oil and gas prices.” This has led to devastating consequences for the cash-strapped country as the energy war between Europe and Russia has caused widespread market volatility and driven energy costs up to painful levels.
According to the Asian Development Bank, Pakistan imports “nearly a third of its energy resources in the form of oil, coal, and liquefied natural gas (LNG).” Pakistan’s own Dawn Newspaper slammed the government this week for its ‘self-inflicted’ economic crisis based on “unsustainable energy policies — price and availability — coupled with constant currency volatility,” which it says “have kept the country’s export potential capped.”
Indeed, experts say that the nation has barely enough left in its coffers for one more month of crucial energy and fuel imports. The International Monetary Fund (IMF) is currently discussing how to mitigate the crisis unfolding in Pakistan, starting with softening some conditions for a proposed $6 billion bailout, which the government fears will only fuel inflation. It would come on the heels of another $1.1 billion in IMF aid given to Islamabad in August. “Since then,” Associated Press reports, “discussions between the two parties have oscillated due to Pakistan’s reluctance to impose new tax measures.”
While there has been no shortage of mismanagement on the part of the Pakistani government, this problem is not just a Pakistani problem. Far from it. Economists and development experts have been warning for months that Europe would not be the real victim of the European energy crisis. Rather, it is the import-dependent and cash-poor countries in the developing world that will suffer the most. The International Energy Agency cautioned that as Europe has managed to stay afloat through a mild winter, for the rest of the world, the crisis is just beginning. Following in Pakistan’s footsteps, oil-importing nations in Africa, Asia and Latin America will be extremely hard-hit, as fuel prices continue to batter their relatively weak currencies.
By Haley Zaremba for Oilprice.com
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