KARACHI: Pakistan’s energy plan puts the country’s power system at risk of being locked into expensive long-term overcapacity, a recent study shows.
The National Transmission and Despatch Company (NTDC), state-owned power transmission under the Ministry of Energy, announced its long-term power plan, the Indicative Generation Capacity Expansion Plan 2047 (IGCEP), in April 2020. It considers significantly increased use of hydroelectric power and domestic coal power and reduced reliance on imported fossil fuels.
“The Pakistan government’s principle of affordability cannot be met if the power system is locked into long-term overcapacity — capacity payments to plants lying idle are already an issue and would become even more unsustainable if more overcapacity is locked in,” Simon Nicholas, expert with the Institute of Energy Economics and Financial Analysis (IEEFA), said during the report’s online launch on Thursday.
According to the report, IGCEP’s power demand growth forecasts are “too high” when overcapacity in the power sector is already an issue that is getting worse amid COVID-19 economic downturn.
IGCEP’s forecasts assume that Pakistan’s gross domestic product (GDP) growth would increase from 4 percent in 2020 to 5.5 percent by 2025 and remain at that level until 2047. It also forecasts power generation of 68,246 MW by 2047. The current installed electricity generation capacity is 37,402 MW, according to the Pakistan Economic Survey 2019-20.
“By focusing on large additions of hydro and domestic coal power, the IGCEP plans for very significant levels of stranded assets by overestimating power demand growth and including the addition of more LNG-fired power capacity despite modelling that it effectively won’t be utilized at all by 2047,” the study reads as it also criticizes the plan’s declining contribution of renewables.
While IGCEP includes additions of renewable energy to meet the government’s renewables target by 2030, renewable energy is neglected in its model after 2030.
“The overall contribution of renewables to power capacity drops from 31 percent in 2030 to 23 percent in 2047 according to the model. Modelling declining contribution from renewables post-2030 makes the IGCEP look very out of touch with current power trends,” the IEEFA report observes.
Pakistan has excellent renewable energy resources — wind and solar — which are already the cheapest source of new power generation and will be even cheaper throughout the 2030s and 2040s. IGCEP, however, instead of utilizing these sources to reduce reliance on fossil fuel imports, focuses on more expensive domestic coal-fired power, the study’s authors said, as they concluded that the Pakistani government’s assertions that the power plan is based on the principles of sustainability and affordability have “largely failed to live up to the principles.”
Study shows Pakistan's power plan 'unsustainable'
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Study shows Pakistan's power plan 'unsustainable'
- Pakistan’s long-term power plan, IGCEP, considers significantly increased use of domestic coal power to reduce reliance on imported fossil fuels
- Contribution of renewables under IGCEP drops from 31 percent in 2030 to 23 percent in 2047
IMF says has made ‘considerable progress’ as Pakistan funding talks continue
- Discussions covered the impact of the Middle East conflict on Pakistan, balance of payments and external financing needs
- Pakistan’s program implementation under a $7 billion program remained broadly aligned with authorities’ commitments, IMF says
KARACHI: The International Monetary Fund (IMF) has made “considerable progress” in talks with Pakistan over its funding facilities, the Fund said late Wednesday, adding that discussions will continue in the coming days.
The IMF mission, led by Iva Petrova, had started talks with Pakistani officials on the third review of a $7 billion Extended Fund Facility (EFF) multi-year program and for the second review of the $1.4 billion Resilience and Sustainability Facility (RSF) from Feb. 25 to Mar. 11, according to the IMF.
The mission observed that Pakistan’s program implementation under the EFF remained broadly aligned with the authorities’ commitments through end-Feb., with both sides making progress on policies, including fiscal consolidation, a sufficiently tight monetary policy and advancing energy sector reforms.
“While considerable progress was made in the discussions, these will continue in the coming days, including to more fully assess the impact of recent global developments on Pakistan’s economy and the EFF-supported program,” the IMF quoted Petrova as saying.
Both EFF, secured in Sept. 2024, and the RSF, secured in May 2025, are key programs crucial for stabilizing Pakistan’s fragile economy. The IMF team was in the country to assess fiscal performance, energy-sector reforms, and external financing needs before approving the next disbursement.
The ongoing IMF engagement is seen as vital for Pakistan as geopolitical tensions and rising global oil prices pose renewed risks for its economic recovery.
The IMF mission observed that Islamabad paid “particular attention” to deepening structural reforms and made “good progress” in the implementation of their agenda to strengthen climate resilience, including through the completion of reform measures under the RSF.
“Discussions also covered the impact of the conflict in the Middle East on Pakistan’s economic outlook, the balance of payments and external financing needs amid volatile and rising energy prices and tighter global financial conditions,” Petrova said, adding:
“The IMF team and the authorities will continue these discussions with a view to conclude them in the coming days.”
