As the Pakistan government struggles to pay debts owed to Chinese electricity providers, they must endure daily blackouts. Amid an economic crisis, life and business have become more arduous.
According to Nikkei Asia, while some areas in Pakistan endure 8 hours of power cut per day, the worst-hit areas only have 6 hours of available electricity.
A primary contributor to the severe shortages results from the country’s debts owed to China that was set up under the China-Pakistan Economic Corridor (CPEC). Some energy projects sponsored by China have halted their production because the Pakistani government still owes its creditors 300 billion rupees (1.5 billion dollars) in back payments.
The power crisis is expected to decrease production in the South Asian country, which has been in turmoil for months.
Ahmed Naeem Salik, a research fellow at the Institute of Strategic Studies Islamabad, said Pakistan’s goods manufacturing industry in Sialkot, especially the textile industry in Faisalabad, was severely affected by power disruptions.
He added that Pakistani businesses now find it more difficult to compete internationally due to the recent spike in energy prices. This makes exports much more challenging when the nation is struggling with declining foreign exchange reserves.
Umar Nadeem, the head of advisory at Islamabad consulting company Tabadlab, expected that those with lesser income would be the most vulnerable, as they are still subject to more than 13% inflation.
Nadeem told the outlet, “Disruptions in electricity supply and a corresponding drop in income levels will make coping with the rising costs even more difficult.”
Before the fallout, Chinese loans were thought to turn Pakistan’s recurring electricity shortage into a massive capacity surplus. Soon, power plant loans became a financial burden the South Asian country could not afford.
Pakistan is currently looking for a package bailout from the International Monetary Fund. The IMF, meanwhile, is asking for the government to renegotiate its terms agreements with the Chinese power producers before paying the 300 billion rupees.