Zafar Iqbal
Blue passports, issued to government officials, senators and members of parliament for official travel, offer fast-track access to visas and smoother entry abroad. While these privileges may be justified for state business, they sit uneasily with the daily reality faced by ordinary Pakistanis, who struggle to secure visas even to countries considered friendly. From Muslim states with historic ties to trade partners and security allies, Pakistani citizens routinely face humiliating delays and rejections. One might reasonably expect the state to focus its diplomatic energy on easing these barriers for its people rather than expanding conveniences for a small governing elite.
Against this backdrop of unequal access and opportunity, the government has announced a reduction in electricity tariffs for industry. Power Minister Awais Leghari recently said industrial tariffs would be cut by Rs 4.04 per unit under a special prime ministerial relief package. The reduction is expected to come through lower wheeling charges, bringing industrial electricity costs down to around 11 to 11.5 cents per unit. While this is a welcome move for manufacturers under severe cost pressure, the rate remains higher than those faced by Pakistan’s regional competitors.
In India, industrial electricity prices vary by state and range between 3 and 9 cents per unit. China’s high-voltage industrial tariffs hover around 8.4 to 8.8 cents per unit, again depending on region and usage. Pakistan, however, continues to enforce a uniform tariff across the country. This policy has required enormous subsidies year after year, with more than one trillion rupees allocated in the current budget alone. These subsidies have squeezed fiscal space and contributed directly to chronic economic stress.
Compounding the problem are flawed contracts with Independent Power Producers (IPPs). These agreements guarantee capacity payments regardless of how much electricity is actually purchased, while profits are repatriated in dollars. The result is a system where inefficiency is rewarded and risk is socialised, leaving consumers and taxpayers to pick up the bill.
Even K-Electric, privatised two decades ago, continues to receive substantial public subsidies. This year, it is budgeted to receive around Rs 125 billion, largely because of the uniform tariff policy. This raises serious questions about the logic of privatising additional distribution companies under the same flawed framework. If private operators continue to rely on state subsidies, the promised efficiency gains of privatisation remain doubtful.
The government’s push for renewable energy, while well-intentioned and framed as a response to climate change, has also added to capacity payment obligations. Instead of reducing systemic costs, the way renewables have been integrated has increased financial pressure on the power sector.
To manage the mounting circular debt, the government has borrowed Rs 1.25 trillion from commercial banks. This move effectively shifts the cost of inefficiencies onto consumers through higher charges in the future. Under its agreement with the IMF, Pakistan has committed to full-cost recovery in the power sector. If interest rates remain at the current 10.5 percent and do not fall as projected, the government may be forced to increase the Debt Service Surcharge, potentially undoing the recently announced tariff relief.
These realities underline the urgent need for deep, structural reforms in the power sector. Temporary relief packages offer breathing space but cannot substitute for a comprehensive overhaul aimed at efficiency, transparency and long-term sustainability.
Beyond energy, the broader economic picture is equally troubling. Export earnings, which are preferable to external borrowing, have been declining as a source of foreign exchange. Pakistan’s exports remain heavily concentrated in primary goods and low value-added textiles. While GSP Plus status boosted textile exports after 2014, the recent India–European Union free trade agreement is likely to erode this advantage significantly.
Remittances have now overtaken exports as the country’s largest source of foreign exchange. In late 2025, monthly remittance inflows consistently exceeded export earnings, even as imports rose faster than exports, widening the trade deficit. This trend highlights the need for a dual strategy: boosting value-added exports while creating incentives for higher and more stable remittance inflows.
Ultimately, it remains unclear whether the government has fully aligned its relief measures with IMF commitments. The sustainability of these measures will depend not only on global fuel prices but also on meaningful improvements in power sector performance. At the same time, Pakistan must reassess its industrial base and invest in future-oriented sectors, including advanced manufacturing and artificial intelligence, if it hopes to compete in an increasingly technology-driven global economy.
