It Can Cost More to Power a House Than Rent It in Pakistan

(Bloomberg) -- Electricity bills have outpaced home rental rates for some people in Pakistan, as tariff increases and other reforms to comply with IMF loan conditions spark nationwide protests.

The South Asian nation — where nearly half the population survives on less than $4 a day — has seen electricity prices surge 155% since 2021, after the government started hiking industrial and retail rates to bolster its chances of securing loans from the International Monetary Fund. 

The energy sector has become an acute pain point as Pakistan grapples with chronic economic crisis. Inflation of around 12% — the highest in Asia — has eroded purchasing power and pushed electricity consumption to the lowest in four years as people and companies abandon the predominantly gas-powered national grid in favor of installing solar panels. 

The average per-unit electricity price for residential users rose 18% in July, when the country secured a new $7 billion loan from the IMF. Many residents have since seen electricity bills — typically a fraction of household expenses — surpass rents that range from $100 to $700 a month, said Samiullah Tariq, head of research at Pakistan Kuwait Investment Co. 

Protests by citizens, business groups and opposition political parties have spread across the country, prompting Prime Minister Shehbaz Sharif to announce a 50 billion rupees ($180 million) subsidy over the next three months to cushion the poorest electricity users from the blow of price hikes. 

Pakistan and the IMF have agreed to restore energy sector viability as part of the bailout program, which includes cost cuts and privatization of state-owned power distribution companies. Pakistan loses about 16% of the electricity it generates to theft, and transmission and distribution losses, according to its power regulator. 

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