Pakistan’s Energy Renaissance: Growth, Investment, And Challenges – OpEd
Pakistan’s economic landscape is undergoing a significant transformation, particularly within its energy sector, signaling a positive trajectory towards sustainable growth and enhanced energy security. Recent policy reforms and strategic investments have not only attracted substantial local and international interest but have also set the stage for a more resilient and self-reliant energy infrastructure.
In recent years, Pakistan has implemented pivotal amendments to its Petroleum Policy and introduced the Tight Gas Policy, offering enhanced incentives to investors. According to an Asian Development Bank (ADB) report, these reforms have been instrumental in attracting over $5 billion in investments from both local and international oil and gas exploration and production (E&P) firms. The primary objective of these policies is to boost domestic energy production, reduce reliance on imports, and create a more investor-friendly environment.
The government’s commitment to expanding infrastructure, revising gas prices, and ensuring financial stabilization has addressed longstanding challenges within the industry. Collaboration with global institutions, such as the World Bank, has further enhanced governance and resource allocation, positioning Pakistan as a competitive player in the global energy market. The Pakistani energy industry has also experienced a surge in investor optimism, particularly within the oil and gas sector. Over the past week, the industry has risen by 4.7%, with Mari Energies leading the charge at a 12% increase. The sector has posted an impressive 82% growth over the past year. Analysts expect annual earnings to grow by 4.3% over the next few years, a marked improvement from the previous annual decline of nearly 30%. This trend signals a shift in market sentiment, as the sector now trades above its three-year average price-to-earnings (PE) ratio of 3.3x, reflecting renewed confidence in Pakistan’s energy future.
Pakistan’s energy strategy has also focused on diversifying its energy mix by incorporating renewable energy sources. The Alternative and Renewable Energy Policy introduced in 2019 aims to increase the share of green energy to 20% by 2025 and 30% by 2030. ADB’s report highlights that this ambitious plan seeks to reduce the carbon footprint and greenhouse gas emissions, aligning with global sustainability goals. To encourage private sector participation, the government has planned to develop 24 new power projects, 22 of which will focus on renewable energy. Journalist Khurram Hussain, in his article endorsed this approach, stating that these projects are expected to add 7,460 MW to the national grid by 2032, significantly enhancing the country’s renewable energy capacity.
The energy sector’s revitalization is a cornerstone of Pakistan’s broader economic revival. The ADB projects Pakistan’s GDP growth at 2.4% in 2024 and 2.8% in 2025, indicating a steady recovery. Furthermore, inflation rates are forecasted to decrease from 23.4% in 2024 to 15.0% in 2025, reflecting improved economic stability. The “Uraan Pakistan” economic transformation plan, launched in 2024, aims to achieve sustainable, export-led 6% GDP growth by 2028. The World Economic Forum report notes that this initiative focuses on public-private partnerships, enhanced export competitiveness, and optimized public finances, underscoring the government’s commitment to long-term economic prosperity.
Despite these positive developments, challenges remain. The World Bank’s private finance arm and seven international development institutions have expressed concerns over the military-led renegotiation of wind and solar power contracts, arguing that it undermines investor confidence and future private investment by violating previously agreed terms. Additionally, Fitch Ratings warns that Pakistan faces significant external financing risks in 2025, with over $22 billion in external debt repayments. Implementing structural reforms, including fiscal consolidation and improving the business environment, is crucial to managing these financing needs and securing continuous support from international lenders.
Pakistan’s strategic partnerships have played a vital role in its economic resurgence. The World Bank has agreed to provide $20 billion over 10 years, starting in 2026, to invest in renewable energy, education and social sectors. A recent AP News report highlights that this partnership reflects the World Bank’s confidence in Pakistan’s economic resilience and potential. Furthermore, China and Pakistan have agreed to upgrade Pakistan’s railway network and further develop Gwadar port while also inviting Chinese investment in Pakistan’s offshore oil and gas sectors. A Reuters report states that this cooperation underscores the strategic importance of Gwadar port for connectivity and trade enhancing Pakistan’s role in regional commerce.
At the heart of these developments is the impact on the Pakistani populace. The influx of investments and the focus on renewable energy are expected to create employment opportunities, improve infrastructure and enhance the quality of life. As energy expert Dr. Gulfaraz Ahmed states that access to reliable and affordable energy is anticipated to empower communities, drive industrial growth and foster innovation. The government’s emphasis on public-private partnerships and community engagement ensures that the benefits of economic growth are inclusive and widespread. By prioritizing education and skill development, Pakistan aims to equip its workforce to meet the demands of a rapidly evolving energy sector, ensuring that the nation’s human capital is prepared to drive and sustain this economic transformation.
Pakistan’s energy sector is at the forefront of the country’s positive economic trajectory. Through strategic reforms, substantial investments and international collaborations, Pakistan is paving the way for a sustainable and secure energy future. While challenges persist, the nation’s commitment to addressing these issues head-on, coupled with a human-centric approach to development, positions Pakistan on a path toward resilience, prosperity and inclusive growth. As the nation continues to harness its potential, the synergy between policy initiatives, economic strategies and the collective aspirations of its people will be the driving force propelling Pakistan toward a brighter and more prosperous future.
