Pakistan power sector crisis: How IPP debt and mismanagement broke the grid
Pakistan's power sector has descended into a deep fiscal crisis, leaving millions of consumers to shoulder soaring electricity bills amid widespread outages — the direct consequence of two decades of excessive borrowing, structurally flawed contracts, and financial mismanagement by successive governments, according to an analysis published in Geo News.
The IPP Model: Privatising Gains, Socialising Losses
At the heart of the crisis is Pakistan's Independent Power Producer (IPP) model, which, according to the Geo News article, violated nearly every condition of sound development finance. Take-or-pay contracts transferred demand risk from private investors to consumers. Sovereign guarantees shifted default risk from lenders to the state. Indexed tariffs moved currency and inflation risk from developers squarely onto electricity buyers.
As the article bluntly states:
