The International Monetary Fund (IMF) has finally thrown in the towel and admitted that Pakistan’s multibillion-dollar privatisation programme has ‘faced setbacks’, missing an opportunity to stop hemorrhaging in the power, industry and aviation sectors.
“There are a number of setbacks on the privatisation front ….and the situation is fluid,” admitted Harald Finger, the Washington-based chief of the IMF mission in Pakistan, on Friday. He was responding to a question while addressing the media in Islamabad via audio-conferencing.
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Finger’s statement raises speculation that the $6.2 billion programme IMF signed in September 2013 was a political programme that the fund continued despite the government’s failure to implement critical reforms on privatisation, energy and taxation fronts. IMF has already disbursed $5.5 billion and the country has nothing on stake to lose now.
However, Finger voiced hope that the ongoing dialogue between government and the various stakeholders might result into a consensus on dealing with loss making enterprises.
The privatisation of Pakistan International Airlines (PIA), Pakistan Steel Mills (PSM), Faisalabad Electricity Supply Company (Fesco), Lahore Electricity Supply Company (Lesco) and Islamabad Electricity Supply Company (Iesco) were at a much advanced stage but has now been put at the backburner. Instead of pushing the government to privatise these entities, the IMF has now started discussing alternate plans to reduce losses.
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“Existing plans for reduction of the stock of power sector arrears rest on these privatisations, staff underlined the need to review these plans and, if necessary, identify an alternative strategy to reduce the existing stock of arrears,” states the tenth review report of IMF released on Friday.
To a question, Finger said privatisation of power distribution companies, like other public sector enterprises, hit setbacks earlier this year. He admitted that Fesco is unlikely to be privatised in June this year.
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Finger emphasised that reforms implementation should continue after September – the last month of the three-year programme. However, after September IMF will not have the carrot of billions of dollars to convince the government to sell these entities.
To a question about whether any entity might be privatised till September this year, Finger repeated that the ‘situation is fluid’. The report stated that the government has committed to notify the multi-year tariffs for all the three power distribution companies that are at advanced stage of privatisation by end of this month.
The defeated IMF said that as a mitigating measure, Pakistan has proposed to tighten the indicative targets for arrears accumulation for end-March 2016 and end-June 2016 to further contain the build-up of the stock of circular debt during the remainder of the program, and to tighten the fiscal deficit target by the amount of any overruns on arrears accumulation.
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Finger said that there was some progress on the energy sector front. He said bill collection has improved and line losses have reduced but there will be still accumulation of circular debt in the remainder period of this fiscal year.
Published in The Express Tribune, April 2nd, 2016.
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