Ahmad Nawaz
Pakistan today faces a crisis so deep and corrosive that it has come to define the political and economic identity of the state. At the heart of this crisis lies the monstrous circular debt, a figure so enormous that it overshadows national ambition, drains sovereignty, and forces elected leaders to travel the world with empty hands and desperate appeals. The latest IMF Governance and Corruption Diagnostic Assessment delivers a stark reminder that this disaster is not accidental but engineered through years of misgovernance, political interference, and institutional decay.
The IMF report reads less like a fiscal analysis and more like an autopsy of a state that has repeatedly failed itself. It exposes a truth long whispered within Pakistan: the energy crisis is not a policy miscalculation or administrative oversight. It is a manufactured breakdown. The report identifies political appointments, compromised regulators, unchecked subsidies, and state capture as the driving forces that have pushed the power and gas sectors to the brink of collapse. The tragedy is that these practices have become normalized, leaving little space for accountability or reform.
The rot begins with the institutions designed to safeguard public interest. Key positions in NEPRA and OGRA—institutions meant to regulate the energy sector—are often filled not through merit but through connections. Extensions are granted as political favors, and regulatory leadership becomes an echo chamber of loyalty rather than expertise. When the guardians themselves become part of the problem, the system loses its ability to self-correct. This weakening of oversight has paved the way for unrestrained inefficiencies and corrupt practices.
According to the IMF, more than one trillion rupees in direct bailouts were poured into the Power and Petroleum Divisions over three fiscal years. These funds did not strengthen infrastructure or reform governance. Instead, they merely slowed the bleeding of a system crippled by theft, leakages, and mismanagement. Supplementary grants, bypassing parliamentary oversight, further eroded transparency. In FY 2023–24, every rupee of these grants went into the energy sector, creating what the IMF describes as a parallel, unaccountable budget.
At the center of this dysfunction are state-owned enterprises, the DISCOs and gas utilities that continue to accumulate losses despite staggering revenues. Their operations have become playgrounds for political influence, where large defaulters enjoy uninterrupted supply and immunity from consequences. The circular debt grows because distributors cannot collect dues, generators remain unpaid, and fuel suppliers are left in arrears. It is a vicious cycle, one that punishes honest consumers while rewarding powerful freeloaders.
The crisis deepens further when examining the internal erosion of regulatory bodies. In OGRA, a single individual may hold two critical positions—Member Oil and Member Gas—creating dangerous conflicts of interest and hollowing out the checks and balances essential for fair oversight. NEPRA’s tariff-setting process remains hostage to political pressure, with prices manipulated to appease voters rather than reflect economic realities. These distortions not only worsen the debt crisis but also undermine investor confidence and stall energy sector modernization.
Adding to this chaos is the extraordinary volume of government guarantees—now at 3.4 trillion rupees—largely extended to the power sector. These guarantees represent ticking fiscal time bombs that threaten to engulf public finances. At any moment, they may be called in, triggering yet another cycle of emergency borrowing. This dependency on external lenders has weakened national autonomy and reinforced Pakistan’s reputation as a perpetual bailout case.
The IMF also points cautiously to the Special Investment Facilitation Council, warning that its broad immunities could create new avenues for rent-seeking unless transparency mechanisms are rigorously enforced. Pakistan’s enthusiasm for new administrative structures often masks a resistance to real reform. Without accountability, even well-intended bodies risk becoming extensions of the same flawed governance that has long plagued the energy sector.
Reform, then, is not merely a policy choice—it is a test of national courage. Pakistan must confront the entrenched networks of privilege that profit from the dysfunction. Ending political interference, empowering regulators, enforcing payments, restructuring state-owned enterprises, and rationalizing tariffs are not optional steps. They are existential necessities. The circular debt is a symptom of deeper governance failure, one that affects everything from education and healthcare to national security and international credibility.
For Pakistan, the moment is decisive. The IMF has provided a clear diagnosis, but the cure requires political will, institutional integrity, and a willingness to dismantle the culture of impunity that shields the powerful. True reform begins with acknowledging that NEPRA and OGRA must be restructured and depoliticized. Technology-driven oversight, even through artificial intelligence, could provide a cleaner, more transparent alternative to human discretion. Only through such bold measures can Pakistan redirect its economic trajectory and reclaim its dignity.
