How moving to Karachi may be wrecking Pakistan’s economy

October 23, 2018

Karachi’s streets are hardly paved with gold, but people still want to move to this mega-city because they feel it has a better standard of living. For some people, it can mean a job, or education, or healthcare. But in Pakistan this urbanization trend, in Karachi or elsewhere, can, oddly enough be also putting a bigger burden on the economy.

People think a growing urban population (more people living in cities) is a sign of a growing economy. However, this may not always be the case; this urbanization means we need more energy. As people move out of villages into cities, their lifestyles will change. Walking or using horse-driven carts will be replaced by riding in cars and motorcycles. This, combined with the cost of transporting food across large distances from villages to cities means more fuel will be consumed. As their income increases, people will also want to spend more on utilities such as gas and electricity.

Pakistan is facing a balance-of-payment crisis, meaning we import more than we export and we do not have the money to pay for them. Our biggest import is petroleum products, used for transportation and generating electricity. More people in cities means more people driving cars (or taking public transport) and more electricity being used. These increasing demands mean more petroleum products being imported.

The problem with importing more petroleum products is that the price for these products tends to change–a lot. So much so, that from 2001 till today, we see that an increase or decrease in international crude oil prices has always been accompanied by an increase or decrease in what we are spending on imports.

Generally, an increase in urbanization and consumption of oil is attributed to economic growth. However, this may not be the case in Pakistan as exports have not been increasing at the same pace as imports. What further adds to this is the fact that we’re importing less machinery now. This machinery includes equipment that is used in the textile, construction, power generation and telecom industries.

In line with global trends, our reliance on energy for economic growth is slowly going down. This is measured using an economic indicator called ‘energy intensity’. This global trend is due to the development of new, more efficient technologies that consume less energy. Experts say that our energy intensity is not decreasing as fast as it should be.

Our reliance on imported petroleum products will only increase as more people move to cities. However, steps are being taken by the government to reduce our dependence on these imports. Right now, almost 49% of our electricity is produced from imported resources, which is a significant improvement from a few years ago. This percentage is expected to go down after the Thar Coal Project becomes operational. The introduction of mass transit systems within cities such as the Metro Bus in Lahore and the BRT in Karachi should decrease our fuel consumption as less people will be inclined to use private transport. ​