Policies go dumb and dumber

Business Recorder

6 days ago

The Government of Pakistan has recently allocated 2,000 MW of electricity to support Bitcoin mining and AI data centers. This move is said to be the first phase, suggesting that further allocations may follow. Without debating the merits or drawbacks of cryptocurrency mining or AI infrastructure, the key question is: Why is the government picking this sector as a 'winner' by offering preferential treatment?
This decision stands in stark contrast to the government's broader economic policy direction. Across the board, energy subsidies and preferential allocations—whether for electricity or gas—have been withdrawn from industrial sectors.
Exporters are no longer receiving energy at so-called regionally competitive rates, and industrial consumers are now penalized through levies on captive power plant gas usage. In a policy environment where no other sector is receiving energy advantages, why is crypto being singled out for special treatment?
Moreover, the government has approved the National Tariff Policy (NTP) 2025–30, which aims to eliminate import tariff protection for domestic industries over the next five years. These sectors will be expected to compete globally without the cushion of cheaper energy or other state support. If the manufacturing base must operate under pure market conditions, what makes crypto so economically magical that it deserves an unfair advantage?
Even in agriculture—a traditionally protected sector—the government is undertaking painful reforms. The wheat support price, once a pillar of rural stability, has been withdrawn for two consecutive years. The government is no longer choosing wheat as the staple crop to subsidize. If such a politically sensitive policy can be abandoned, what justifies elevating crypto as a protected sector?
Allocating 2,000 MW of electricity to crypto mining defies economic logic. This is not an argument against cryptocurrency mining or blockchain development. Legalizing crypto and forming the Pakistan Crypto Council (PCC) are positive steps. Pakistan should indeed regulate and integrate blockchain technology and digital assets into its financial system. The country should also foster an enabling environment for crypto mining and AI development on a level playing field.
However, the current approach lacks transparency. There is a veil of secrecy surrounding the energy allocation. Reports suggest that officials within the Power Division have raised concerns but have been silenced. There's no public clarity on the tariff rates being offered. While some reports claim that crypto and AI proponents requested power at 3 cents/kWh, the government is allegedly considering 5 cents/kWh. Regardless of the figure, it should be publicly disclosed, and similar incentives should be available to other industries to ensure fairness.
Choosing any sector as a 'winner' undermines the spirit of the structural reforms the government claims to be pursuing, especially under the guidance of the IMF. If fiscal incentives are indeed being extended to crypto ventures, why is there no objection from the IMF?