Pakistan faces nationwide blackouts amid soaring energy costs

The Ukraine conflict has sent energy prices soaring, placing a strain on the finances of major energy importers

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Parts of Pakistan have been gripped by 12-hour blackouts amid globally soaring energy costs in the wake of the Ukraine war.

The country is suffering a shortage of Liquified Natural Gas, a key source of fuel for its power stations.

Prime Minister Shehbaz Sharif's government has been seeking a multi-billion-dollar bailout package from the International Monetary Fund, which has requested a stronger programme of reforms from the country.

Those funds, around $6 billion, are vital for Islamabad to pay for energy imports. Mr Sharif said the government must be prepared to pay any necessary price for LNG, despite the country's ongoing financial crisis.

The IMF has asked the government to draw down subsidies on energy and food, as well as reform taxation. A new electricity tariff scheme is also expected, and funds will not be released until the reform programme is agreed.

Pakistan’s energy strategy in recent years has focused on LNG for power stations, securing long-term supply agreements.

But the cost of LNG has soared, following a spike in global demand as Covid-19 lockdowns ended, a problem exacerbated by the Ukraine conflict that has sent oil and gas prices surging, as western governments and their allies curtail Russian energy exports.

As a result, wealthier countries, including Europe which is suffering major gas shortages, can afford to pay far higher prices than poorer countries, including Pakistan. Some LNG suppliers have subsequently cancelled their contracts with Pakistan, in favour of selling to Europe, despite Pakistan charging a 30 per cent cancellation fee for LNG contracts.

Amid the power shortages, Pakistan’s third-most populous province has decided to have a work-from-home policy on Fridays for employees. The latest move in a bid to save energy and avoid nationwide blackouts.

The step has been announced to save fuel and electricity, Taimur Khan Jhagra, the finance minister of the northwest Khyber Pakhtunkhwa, said in a video post on Twitter.

The measure follows the federal government’s decision earlier this month of ending Saturday as a workday and cutting the volume of fuel allocated to its employees by 40 per cent.

Updated: June 14, 2022, 1:16 PM
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