News Desk
Pakistan’s long‑running power crisis stems from deep structural failures in planning, financing and risk allocation, not from a shortage of generation capacity . The analysis shows that decades of debt‑driven expansion, flawed contracts and weak institutions created a system where the public absorbed losses while private actors secured guaranteed returns .
The article explains that Pakistan borrowed heavily to build power plants, but the financing model transferred nearly all risks to consumers and the state. Take‑or‑pay contracts shifted demand risk to the public . Sovereign guarantees shifted default risk to the government . Indexed tariffs shifted currency and inflation risk to electricity buyers . These arrangements ensured profits for developers while exposing the public to rising tariffs and circular debt .
The report notes that Pakistan now pays for capacity as if plants operate near full utilisation, even though thermal plants run below 45 percent . This mismatch has pushed circular debt to historic levels, turning the sector into one of the country’s largest fiscal liabilities .
The article highlights major projects that illustrate the problem. The Neelum‑Jhelum hydropower plant, financed at about USD 2.7 billion, failed due to geological issues and now sits idle while debt servicing continues . RLNG plants built to address gas shortages created a new dependency on imported fuel, leaving nearly 6,000 MW of capacity producing only around 500 MW during the 2026 Strait of Hormuz disruption . Capacity payments continued despite minimal output .
The analysis argues that Pakistan repeated the same mistakes across multiple investment cycles, from the 1994 Power Policy to post‑2014 RLNG and hydel expansion . The outcome remained the same: stranded assets, rising tariffs, circular debt and renewed load‑shedding .
The article proposes three pillars for reform. Grid modernisation should prioritise transmission and distribution upgrades to reduce losses and improve reliability . Decentralisation should support rooftop solar, battery storage and distributed generation, which proved more resilient during recent disruptions . Capacity rationalisation should renegotiate contracts, convert baseload plants to flexible operation and retire uneconomic assets .
The analysis concludes that Pakistan’s crisis is not accidental. It is the result of a political economy that rewards capacity expansion and debt accumulation while socialising losses across millions of consumers . The path forward requires shifting investment toward the grid, distributed energy and disciplined management of existing liabilities .
