Debt generators: the case of energy subsidies

Klaus Enders

Chapter 12 in The Sustainability of Asia’s Debt, 2022, pp 317-341 from Edward Elgar Publishing

Abstract: The chapter explores how energy policy has contributed to public (and external) debt during 2000-2019. Like many other developing countries, Pakistan and Sri Lanka have at times heavily subsidized energy, especially electricity for households, and kept production and distribution of energy largely with inefficient state-owned enterprises. As a result, frequent power outages in Pakistan have reduced growth, energy subsidies have made in both countries a sizable contribution to the primary deficit, and the assumption of energy-SOE debt by the government has been sizable in Pakistan and occurred also in Sri Lanka. Thus, energy policy has contributed substantially to debt, notably in Pakistan (a quarter of public debt at the end of 2019). Given the difficult outlook for debt sustainability and the prospect of low fuel prices post-COVID-19 pandemic, the case for moving to a fully market-based energy policy has never been stronger.

Keywords: Asian Studies; Development Studies; Economics and Finance (search for similar items in EconPapers)
Date: 2022
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