The Impact of Electricity Shortages on Sectoral GDP in Pakistan

Abstract

Ensuring a consistent energy supply is a significant challenge for Pakistan, severely impacting its economy due to persistent energy crises. This study examines the effects of electricity shortages on the sectoral GDP, focusing on the agriculture, industrial, and services sectors from 1991 to 2019. Using the ordinary least square method for empirical analysis, the study reveals that electricity shortages have a detrimental impact on all three sectors. Specifically, the agricultural sector's output is inversely affected by electricity shortages, meaning that reduced electricity availability leads to decreased agricultural productivity. Similarly, the industrial sector suffers from reduced output due to electricity shortages, highlighting the sector's dependency on a stable power supply. Furthermore, electricity load-shedding significantly hampers the services sector's output. The findings indicate that electricity shortages not only disrupt current economic activities but also pose substantial risks for future economic growth. The agriculture sector, being highly reliant on consistent power for irrigation and machinery, experiences direct negative impacts, which can lead to lower crop yields and reduced agricultural productivity. In the industrial sector, electricity shortages can halt production lines, increase operational costs, and reduce overall industrial output, thereby weakening one of the economy’s critical pillars. The services sector, which includes essential services such as banking, education, and healthcare, also suffers due to power outages, leading to inefficiencies and lower productivity. This study underscores the need for a comprehensive energy policy that addresses the root causes of electricity shortages and aims to provide a stable and reliable energy supply. Such a policy should focus on sustainable energy solutions, including the development of renewable energy sources such as solar, wind, and hydroelectric power, to reduce dependency on traditional fossil fuels. Additionally, improving the existing energy infrastructure, enhancing energy efficiency, and implementing better energy management practices are crucial steps toward mitigating the adverse effects of electricity shortages. Moreover, the study highlights the importance of strategic investments in energy infrastructure and the adoption of modern technologies to enhance the efficiency of power generation and distribution. Policymakers are urged to prioritize energy sector reforms that can support the growth of agriculture, industry, and services sectors, thereby boosting overall economic growth. Ensuring a reliable energy supply is not only vital for sustaining domestic output but also for accelerating economic growth, which can lead to improved living standards for the people of Pakistan.