ENERGY COSTS AND ECONOMIC PERFORMANCE: EVIDENCE FROM ELECTRICITY TARIFFS AND LOSSES IN PAKISTAN

Abstract

The aim of this study to find the impact of real electricity tariffs and transmission losses on economic growth in Pakistan. The study uses annual time series data from 2001 to 2025 which has been collected from the website of National Electric Power Regulatory Authority (NEPRA) and World Development Indicator. Both short-run and long-run relationships among the variables are analyzed by using the Autoregressive Distributed Lag (ARDL) bounds testing technique. F-Statistics confirms the overall goodness of fit of the model and stationarity level of the data is analyzed by Augmented Dickey-Fuller (ADF) test. GDP growth is the dependent variable, while real electricity tariff, transmission losses, inflation, real interest rate, and exchange rate are the independent variables for the analysis. A long-run cointegrating relationship among the variables is the results. Transmission losses and real electricity tariff have a negative and significant impact on GDP growth. Inflation and real interest also negatively affect the economic growth. Policy recommendations include infrastructure investment for reducing transmission losses, introducing and implementing proper electricity tariffs, and sustaining macroeconomic stability and steadiness.