Pakistan's Energy Crisis: How Political Mismanagement Created a "Crime Scene"

The latest Governance and Corruption Diagnostic Assessment: Pakistan (November 2025) paints a troubling picture of how the country’s power and gas sectors have been dragged into deep debt because of political patronage, weak oversight, and decades of mismanagement.

At the centre of the crisis is Pakistan’s circular debt -- a massive financial burden that has grown so large it now threatens the country’s economic stability.

The IMF says this debt is not the result of bad luck or global conditions, but the outcome of decisions made by those in power.

According to the report, the energy sector has become a “crime scene” where political connections often matter more than competence.

The IMF highlights how the leadership of key regulators like NEPRA and OGRA is frequently chosen based on connections rather than merit.

Instead of bringing in new talent, extensions are often granted repeatedly, especially in OGRA, allowing the same officials to continue without accountability.

In some cases, one official holds two top posts at the same time, weakening checks and balances and undermining the very purpose of regulation.

The government’s use of supplementary grants -- funds released outside the regular budget -- has also raised alarms.

The IMF notes that in 2023–24, every rupee of these extra funds went to the power and petroleum sectors.

In earlier years, too, a large share of supplementary spending supported the same troubled sectors.

The report warns that such spending bypasses Parliament and weakens financial discipline.

The country’s state-owned enterprises (SOEs), including electricity distribution companies (DISCOs) and gas companies, are another major source of losses.

Despite earning over 13 trillion rupees in revenue, federal SOEs reported a net loss of 30 billion rupees in 2024.

The IMF says these losses are driven not only by inefficiency but also by widespread theft and political interference.

Powerful groups often use electricity and gas without paying for it, confident that the government will absorb the losses.

Pakistan’s growing stock of government guarantees -- now at 3.4 trillion rupees, mostly linked to the power sector -- is also a serious concern.

These guarantees are potential liabilities that could become immediate obligations if state-owned companies fail to pay their dues.

The IMF warns that such risks leave the government vulnerable and increase the chances of future bailouts.

Even the Special Investment Facilitation Council (SIFC), which the government promotes as a key reform body, receives a cautious mention in the report.

The IMF says its broad powers and immunity could lead to misuse unless transparency is ensured.

- IANS