(Bloomberg) — For some people in Pakistan, electricity bills are higher than rent as tariff hikes and other reforms to meet IMF loan terms spark nationwide protests.
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In the South Asian country, where nearly half the population lives on less than $4 a day, electricity prices have risen 155 percent since 2021 after the government began raising industrial and retail tariffs to increase its chances of obtaining loans from the International Monetary Fund.
The energy sector has become an acute problem as Pakistan grapples with a chronic economic crisis. Inflation of around 12 percent – the highest in Asia – has eroded purchasing power and pushed electricity consumption to its lowest level in four years as people and businesses abandon the predominantly gas-powered national power grid in favor of installing solar panels.
The average price of electricity per unit for residential households rose 18 percent in July after the country secured a new $7 billion loan from the IMF. Many residents have since seen their electricity bills – normally a fraction of household expenses – exceed rents of $100 to $700 a month, says Samiullah Tariq, head of research at Pakistan Kuwait Investment Co.
Protests by citizens, business associations and opposition parties erupted across the country. Prime Minister Shehbaz Sharif then announced that he would provide 50 billion rupees ($180 million) in subsidies over the next three months to protect the poorest electricity consumers from the impact of rising electricity prices.
As part of the bailout package, Pakistan and the IMF have agreed to restore the viability of the energy sector, including cost cutting and the privatization of state-owned power distribution companies. Pakistan loses around 16 percent of the electricity it generates through theft and transmission and distribution losses, according to its electricity regulator.
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