Food and Energy Shortages Stoke Inflation, Anxiety in Pakistan

Pakistan's economic recovery efforts could be further complicated in the long term by widespread energy shortages, according to some analysts. Blackouts occur several times a day even in some of the most affluent areas of major cities. Late last week, more than 15 million people were plunged into darkness for hours in Karachi, Pakistan's largest city and its main commercial hub. The blackout was caused by a dispute between the private electric utility and the government-owned utility administration over payments.

From Karachi to Islamabad, meanwhile, the rattle of backup diesel generators has become the theme song of nearly every commercial enterprise that can afford one. That tune is unlikely to change while demand for power continues to outpace supply from the country's overburdened energy infrastructure.

"For the next two to three years this will be a serious problem. It will be very dramatic for the economy because factories will have to shut down. It is certainly affecting business," said Kaiser Bengali, an independent economist based in Karachi. "It has become a shortage economy here. Everything is short."

Power shortages have crippled many factories and textile manufacturers across the country and shut down dozens of mills, exacerbating the problem of flour shortages.

Riazula Khan, owner of the Khan Flour Mill on the outskirts of the garrison city of Rawalpindi, said electricity prices for his family-owned mill have nearly doubled in the last year.

A recent supply of government-subsidized wheat has offset some of the mill's overhead, Khan said. But the mill has been plagued by constant power outages in the last year. Over two days last month, the power went out 28 times, he said.

"We are not getting any profits for our business because everything has increased," Khan said. "The price of electricity has gone up, the price of labor has gone up, the price of transport has gone up."

Shah, the finance minister, acknowledges that consumer demand for electricity has far outpaced supply in recent years. The government has extended electricity to about 56,000 rural villages under Musharraf's direction, but it has had difficulty keeping pace with the growing sophistication of Pakistan's energy consumers.

"The assumption was that everyone in these villages would have a light bulb and a fan, but what happened was that everyone wanted a washing machine and a television," Shah said. "It's true that for the consumer there is a shortage, but it can be managed."