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Expensive electricity
Federal Minister for Energy, Owais Leghari, recently stated that the high cost of electricity in Pakistan is not due to Independent Power Producers (IPPs) but rather because of expensive loans. He further added that while the agreements with private power plants cannot be annulled, reforms in the power sector could potentially lower electricity prices. However, the Minister’s assertion is not easily digestible. In a country like Pakistan, where electricity is among the most expensive in the region, absolving IPPs of responsibility seems oversimplified.
Experts and analysts consistently highlight that high electricity costs in Pakistan are closely tied to Independent Power Producers (IPPs). Although electricity production costs in Pakistan are comparable to those in other regional countries, capacity payments and fuel over-invoicing significantly inflate prices. This situation necessitates a thorough investigation into private power plants to ensure they are meeting their contractual obligations. If they are, the government must address the findings of high-level committees that have recommended revisiting agreements with certain IPPs due to the unjustified benefits they receive.
The recent surge in electricity prices has caused a public outcry, with citizens and industrialists voicing their concerns. In response, the Prime Minister formed a task force to audit IPPs, likely intending to gather recommendations for making the power sector financially and operationally sustainable.
This task force was also expected to review measures to reduce capacity payments. However, it remains unclear what became of this task force. Given the Energy Minister’s vigorous defence of the IPPs, it seems futile to wait for the task force’s recommendations. While the government may maintain its agreements with the private power plants, transparency must be ensured within these contracts.
GULAB UMID
Turbat
Dollar vs gold: Battle for value
Gold prices surged past $2,450 per ounce in Q2 2024, driven by the rapid decline of the US dollar. The dollar’s fall—due to the Federal Reserve’s accommodative monetary policy, rising national debt, and inflation concerns—has led investors to seek refuge in safe-haven assets like gold.
Gold’s long-standing role as a hedge against inflation, currency instability, and geopolitical risks has only strengthened as the dollar continues to weaken. Bloomberg reports that the dollar shed 8-10% of its value over the past year, primarily due to the Fed’s dovish stance on interest rates. This policy shift has spurred increased gold investments as investors turn to more stable assets.
In addition to anticipated rate cuts and global tensions, central banks—particularly China’s—have been key drivers behind the surge in gold prices. In 2023, central banks purchased 1,037 tonnes of gold, a trend that remains strong in 2024. The first quarter alone saw net purchases reach 290 tonnes, marking the fourth-strongest quarter since this buying spree began in 2022. Notably, this exceeds J.P. Morgan’s annual estimate of 850 tonnes for 2024 by 36%.
The US national debt, now exceeding $35 trillion, poses a growing threat to the economy and the dollar’s value. As debt climbs, investor confidence wanes, prompting concerns over a potential sell-off that could further depress the currency’s value.
The COVID-19 pandemic has also played a critical role in the dollar’s decline, reducing demand and accelerating shifts toward digital currencies and alternative assets, further eroding its dominance. As the dollar weakens, inflationary pressures rise. Although a weaker dollar raises import costs and commodity prices, it could also enhance US export competitiveness, potentially supporting economic growth.
M ZAMIR ASSADI
China
Moving abroad
The point I want to highlight today is that it’s disheartening to see young Pakistanis prioritizing moving abroad over contributing to their country’s betterment. We were once hailed as the “warriors of the future,” but instead of fighting for Pakistan’s progress, we’re seeking opportunities elsewhere.
We’re trying to escape the challenges facing our nation, rather than confronting and resolving them. Pakistan’s development should be our collective responsibility.
We should strive to make our country a place where we can take pride in our achievements and be recognized globally for our contributions. Our forefathers fought tirelessly to free our land from colonial rule now it’s our turn to fight for its prosperity.
AMNAH NISAR
Lahore
