The structural integrity of Pakistan’s economy is currently being tested by a dual crisis of unrelenting income inequality and a dysfunctional power sector that many leaders now describe as a form of national “oppression”. Punjab Governor Sardar Saleem Haider recently brought this issue into sharp focus, claiming that 42 Independent Power Producers (IPPs) are owned by the ruling elite, who are effectively “milking the nation” while electricity remains cheaper in neighboring Afghanistan and Bangladesh. This revelation highlights a systemic failure where the “digits of the computer may not count” the level of corruption embedded within power agreements. As the public struggles under the burden of some of the costliest electricity in the region, the state remains entangled in “Take or Pay” contracts, which mandate multi-billion rupee capacity payments to plants even when they do not produce a single unit of power.
The financial manifestation of this dysfunction is the ever-rising circular debt, which reached approximately Rs 1.689 trillion by the end of 2025 despite massive capital injections and commercial borrowing. This debt, which represents a net unfunded liability across the power supply chain, acts as a “menace” that increases electricity costs for the end-consumer and drains nearly 2.3% of the country’s GDP. While the government has attempted to manage this through a Circular Debt Management Plan, stock payments are often offset by system inefficiencies and non-recoveries, which added hundreds of billions of rupees to the debt stock in 2024 alone. The core of the problem remains underutilization; despite an installed capacity of over 45,000 MW, the system operates at a low utilization factor, leading to higher per-unit costs for a public already battered by inflation.
This energy crisis does not exist in a vacuum; it is a primary driver of Pakistan’s staggering wealth inequality. Research indicates that wealth inequality is twice as pronounced as income inequality, with the top 10% of households holding 60% of the total national wealth, while the bottom 60% share a mere 10%. The “elite capture” of the state ensures that $3 billion in annual subsidies for energy and agriculture disproportionately benefit large landowners and industrialists, with only 20% reaching small farmers or low-income households. Consequently, the inequality-adjusted Human Development Index (HDI) for Pakistan has declined by 33%, placing the country in the “low” human development category and ranking it 164th out of 193 nations.
The social friction caused by this disparity is exacerbated by the extravagant perks enjoyed by government officials while the middle class faces “petrol bombs” and astronomical utility bills. Outrage peaked following revelations that WAPDA officials were receiving thousands of free electricity units; for instance, Grade 20 to 22 officers were granted 1,300 free units per month, a burden ultimately borne by the inflation-hit public. While the government has moved to strip Grade 17-22 officials of these benefits as part of an emergency plan, the broader culture of “bribes for transfers and postings” continues to undermine institutional integrity.
To bridge these institutional fault lines, Pakistan must move beyond narrow poverty alleviation and address structural imbalances in governance. The current system suffers from a profound lack of transparency, where only 20% of federal budget data is available in accessible formats, fostering an environment where 30% of health and education budgets are diverted. Furthermore, over-centralization means that only 15% of public expenditure is managed locally, leaving rural areas—where 63% of the population resides—with significantly fewer resources, such as only 0.5 doctors per 1,000 people compared to 1.2 in urban centers.
The path forward requires a radical shift toward indigenous energy sources and progressive taxation. Shifting from thermal generation, which costs approximately Rs 25.6/kWh, to hydel power at Rs 3.8/kWh is essential for stabilizing tariffs. The government’s recent decision to terminate contracts with five IPPs and renegotiate others into “Take and Pay” models is a necessary first step that could save the national exchequer Rs 411 billion [38-40]. However, without digitizing tax systems to track elite evasion and establishing participatory councils to involve marginalized groups in policymaking, these reforms will remain incomplete. Addressing inequality in Pakistan is no longer just a policy choice; it is a societal imperative to ensure that the country’s future growth is shared by the many, rather than captured by the few.