VZCZCXRO4767
RR RUEHBI RUEHLH RUEHPW
DE RUEHIL #0069 0041330
ZNR UUUUU ZZH
R 041330Z JAN 08
FM AMEMBASSY ISLAMABAD
TO RUEHC/SECSTATE WASHDC 4227
INFO RUCPDOC/USDOC WASHDC
RUEHNE/AMEMBASSY NEW DELHI 2598
RUEHBUL/AMEMBASSY KABUL 8006
RUEHBI/AMCONSUL MUMBAI 3734
RUEHLH/AMCONSUL LAHORE 4508
RUEHKP/AMCONSUL KARACHI 8568
RUEHPW/AMCONSUL PESHAWAR 3142
RUEAIIA/CIA WASHDC
RUMICEA/USCENTCOM INTEL CEN MACDILL AFB FL
RHMFISS/CDR USCENTCOM MACDILL AFB FL
RHEHNSC/NSC WASHDC

UNCLAS ISLAMABAD 000069 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ETRD ENRG EINV PREL PK PBTS EAGR PGOV
SUBJECT: ECONOMIC ELECTION ISSUES; LOAD-SHEDDING AND WHEAT SHORTAGE 
 
 
¶1.  SUMMARY:  Against the backdrop of the Bhutto assassination, 
recent civil unrest, and the upcoming elections, Pakistan now 
confronts power shortages and increasing domestic wheat prices. 
There are signs that the electricity shortage may abate by the end 
of January, but eight hours per day of "load-shedding" dominates the 
news.  More analysis of both these issues will be provided in 
septel.  We expect increasing criticism of the government.  END 
SUMMARY 
 
¶2.  The GOP announced Jan 3 countrywide, eight-hour a day 
load-shedding (the temporary halt in electricity production by power 
plants) would continue until Jan 25.  According to National Power 
Control Center, Pakistan's total demand for electricity is 12000 MW 
and the country currently only produces 7500 MW, falling 38% short. 
The primary reason for the shortage was maintenance repairs on 
hydroelectric plants, causing a 25% deficit.  Political unrest and 
cold weather added another 13% deficit to the problem.  Independent 
Power Producers (IPPs) say they have two to five days stock of fuel 
left on hand which may complicate the problem.  Maintenance is 
expected to end on hydroelectric facilities Jan 31 and power plants 
will stock up on fuel throughout this month, which may reduce the 
power deficit to as little as 14-22 percent of total demand. 
 
¶3.  Domestic wheat prices have risen dramatically in recent months, 
increasing fifty percent in the Northwest Frontier Province alone. 
Pakistan needs to produce over 23 million metric tons of wheat per 
year to be self sufficient.  Although the country produced a record 
23.5 million metric tons of wheat in 2006, cross border trade and 
smuggling pushed Pakistan's wheat stockpile below the 23 million 
metric mark, prompting price increases.  2007 wheat production fell 
below 23 million metric tons, causing a further spike in the 
domestic cost of wheat. 
 
¶4.  The cost of domestic flour has traditionally been half that of 
imported flour, in part because of the GOP's domestic wheat support 
program.  Pakistan's "issue price", the amount paid by millers to 
purchase government-owned wheat stocks, is less than USD 200 per 
ton, compared with USD 260 in India and an average world price close 
to USD 500 per ton.  As a result of the price differential, exports 
have increased.  The GOP could reduce domestic demand and discourage 
smuggling by raising the official wheat "issue price".  With general 
elections scheduled for Feb 18, governments -- both federal and 
provincial -- are eager to bring down the cost of basic commodities 
and are unlikely to raise the wheat issue price.  High food prices 
are frequently cited in polls as the middle and lower classes' 
primary concern. 
 
¶5.  COMMENT:  While neither economic issue has reached a crisis 
stage, the issues may play out heavily during the next six weeks of 
campaigning before the elections Feb 18.  We will continue to 
monitor the situations as they develop.  More will be reported on 
both the energy and wheat issues in a SEPTEL.  END COMMENT. 
 
 
PATTERSON