Impact of Renewable Energy and Financial Development on Economic Growth of Pakistan

Abstract

This study analyzes how the consumption of renewable energy and financial development affect the economic growth of Pakistan between 1990 and 2023. The analysis results indicate that both renewable energy and financial development have the positive and statistically significant impacts on the economic growth of the country. The consumption of renewable energy was identified to have a greater influence on growth than financial development, which implies that the significance of the availability of reliable and sustainable energy supply is core to the stability of the economy and the productivity of the sector. The results indicate that as a nation, Pakistan has, in the past, relied on imported fossil fuels, which have helped to create an energy shortage, inflation and fluctuating industrial production. With the growth in the use of renewable forms of energy, there are beneficial effects to the economy in the form of lower fuel import prices, increased energy supply, and assistance to the agricultural, industrial, and service sectors. Likewise, monetary growth encourages the availability of credit, investment conditions, corporate growth, and employment. Nevertheless, it can fully be exploited to its advantage only in a situation when energy supply is predictable to facilitate productive activity. Hence renewable energy and financial development cannot be regarded as separate forces but as mutually supporting and complementary ones in sustainable economic development.