Pakistan’s economy hamstrung by electricity shortages

ISLAMABAD: Pakistan must speed up reform of the energy sector and bring more women into the labour force if it wants to quicken economic growth that lags far behind regional peers, the World Bank’s country representative said on Monday.

The World Bank expects Pakistan’s economy to expand by 4.5 percent in 2016, missing the government’s 5.5 percent target and trailing behind other South Asian nations where growth is expected to average about 7 percent this year.

The bank sees 2017 growth edging up to 4.8 percent in Pakistan, a nation of 190 million people.

Experts say the economy needs to expand by at least 6 percent a year to absorb new entrants to the work force.

Illango Patchamuthu, the World Bank country director, said Pakistan had benefited from a collapse in global oil prices and tough fiscal measures by the government over the past few years to stabilise the economy.

But he urged faster reform in the energy sector, which has suffered decades of under-investment.

Businesses say frequent power outages hurt growth and investment.

“To me, the whole story around power reforms is still only half done,” Patchamuthu told Reuters in an interview.

He said Pakistan must tackle its so-called circular debt problem, which stems from unpaid government subsidies that build up until power plant owners cannot afford fuel.

It stands at about $3 billion.

The government expects its electricity rationing system of “load-shedding” to end by 2018 after it signed more than $30 billion in energy generation projects as part of the $46 billion China-Pakistan Economic Project.

But efforts to privatise a host of electricity distribution companies have stalled, as have other reforms.

Patchamuthu said the government has been focused on power generation, but it must also seek to improve distribution and upgrade ancient transmission systems.

“A lot more needs to be done in the next several years to build up the whole power infrastructure,” he said.

Patchamuthu said another way for Pakistan to significantly boost growth is reforming its male-dominated labour market, where women account for only 22 percent of the workforce.

“If Pakistan wants to get to 7-8 percent (growth) with structural reforms, they also have to much more in drawing women into the labour force,” he said.

Many Pakistani men object to women working and in 2014 Pakistan was ranked as the second worst nation in the world for gender equality after Yemen, according to the Global Gender Gap Report published by the World Economic Forum.

“There are social and cultural challenges,” Patchamuthu said.

“But if the women are skilled and they are given the right opportunities the economy is only going to bloom and blossom.”