Electricity Consumption and Economic Growth in Pakistan: An Empirical Analysis

Abstract

The study examines the impact of electricity consumption on economic growth in Pakistan from 1980 to 2015 using the autoregressive distributed lag co-integration test. The results confirm a long-term co-integration relationship between economic growth, electricity consumption, and trade. Empirical findings indicate that both electricity consumption and trade positively influence economic growth in the short and long run. This highlights the critical role of electricity in driving Pakistan’s economic development. The study emphasizes the need for significant investments in the power sector to sustain economic growth. Addressing energy supply constraints requires government efforts to enhance domestic energy production. Given Pakistan’s ongoing energy shortages, raising public awareness about energy efficiency is essential. Encouraging conservation and the adoption of alternative energy sources can mitigate energy supply challenges. Policymakers should implement strategies to improve electricity generation capacity and ensure a reliable power supply. Trade policies should also align with energy sector development to support sustainable economic expansion. The study suggests prioritizing infrastructure development, particularly in renewable energy projects, to diversify energy sources. A stable energy supply is necessary for industrial productivity, which directly impacts economic growth. By ensuring efficient electricity consumption and enhancing trade policies, Pakistan can strengthen its economic performance. The research provides valuable insights for policymakers to design effective strategies that integrate energy planning with economic growth objectives. Investing in sustainable energy infrastructure is crucial to overcoming power shortages and fostering long-term economic stability.