Introduction:

Energy crisis is defined as price rise of the energy resources or a great shortfall in the supply of the resources of energy. Usually it is referred to shortage of electricity, oil, natural gas, and other natural resources. Where the globalization has changed the world entirely, it emerged many issues but energy received significant attention from researchers. The demand for energy is increasing rapidly in this globalizing world with respect to supply; resultantly crisis for energy has emerged. Most of the countries are facing shortage of energy and consequently it is severely affecting the economic growth and social transformation. There are numerous views and ideas that potentially make linkage between energy and economic growth. Energy is considered as a backbone of any economy and plays an important role in the socio-economic development of a country. If there is not sufficient energy, industrialization will not take place, it is crucial for running industries and output units, for residual and commercial use and for transportation, etc. As expansion in energy is expected to result higher growth similarly its shortage may hold back the growth process. In short, economy is vital for running all the resources and energy crisis directly influence all the sectors of economy such as agriculture sector, industrial sector, unemployment, poverty, lower GDP and higher inflation. Unfortunately, Pakistan is facing worst energy crisis in its history. Like other developing countries Pakistan is also an energy intensive growing economy, and as in most other non-oil producing countries its energy needs are met by large quantities of imports. Pakistan energy’s infrastructure is not well developed and said to be managed poorly. Despite of population growth, economic growth and increased demand during the past decades, no serious efforts were made for the generation of energy. Moreover electricity theft and transmission losses due to outdated infrastructure have worsened the situation.

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Objective:

The main objective of the study is to find out the extent of energy crisis impact on economic growth of Pakistan.

Literature Review:

Global Perspective:

Article 1: For India and Indonesia, unidirectional Granger causality is found in the short run, while for Thailand and Philippines there is bidirectional causality that runs from energy to income. Energy, income and prices were mutually casual for Thailand and Philippines. (Asafu-Adjaye, 2000).

Article 2: There is positive impact on economic growth by electricity consumption and bidirectional causality is found between electricity consumption and economic growth. It shows that greater electricity consumption leads to higher economic growth and similarly higher economic growth raise electricity consumption (Bayar, 2014).

Article 3: Using error correction model and Granger non-causality tests, empirical results shows that in Pakistan case there runs unidirectional Grangers causality from coal to GDP, GDP to total energy consumption & GDP to electricity consumption. In case of Bangladesh and Sri lanka, unidirectional causality runs from GDP to electricity consumption, there is causal direction from petroleum to GDP in case of Nepal. While no causality was found in case of India (Asghar, 2008).

Article 4: Using integration tests on the panel data for ten Latin American countries, results show that for all the countries taken in sample, bidirectional causality exist between energy consumption and GDP. For further studies human capital, physical capital and labor can be included in variables as these are also important factors (Campo & Sarmiento, 2013).