Constraints Social Economic Development

Pakistan is facing a number of constraints in the path of social economic and political development. One of them is the ever- increasing inflationary pressure on the general public. This inflationary pressure created a social instability and misconception among the messes towards the Government. General public considers the government responsible for this inflation. Government gave the blunt gift of inflation, unemployment, terrorism and energy crisis to the public. The government offended the masses. Some economists argue that such type of increase in prices was never seen before the regime of Musharaf. The prices of essential domestic commodities have touched the psychological boundaries. The fixed income employees and creditors are affected by this inflation.

The second factor responsible for current power crises is the unprecedented surge in the price of furnace oil in 2007-08. The price of furnace oil (fuel for power generation) increased of 118 percent in just one year. Such a massive increase in the price of furnace oil also increased the cost of power-generation by WAPDA and the lPPs. The government did not allow a corresponding rise in the price of electricity and decided to provide subsidy through the budget. Because of the financial difficulties the government could not pay the subsidy to WAPDA and the KESC in time, and subsequently they could not pay the bills to the IPPs. The lPPs could not pay in time to the oil refineries which, in turn, slowed the import of furnace oil. As part of the circular debt, WAPDA and KESC owe to the IPPs over Rs60 billion and Rs7 billion, respectively. Since the surge in oil prices in 2007-08 was the root cause of the aggravation of circular debt, the collapse. in oil prices in 2008-09 could have been used to eliminate this menace. Instead, the government earned Rs129 billion through the Petroleum Development Levy (PDL) and treated this as non-tax revenue. This money could have been used to eliminate the circular debt.