IMF and SOEs

The IMF has touched on a pertinent issue. Even if we do not agree with many of its dictates, the point that we need to reform our economic base is quite a logical demand. One of the pestering issues of Pakistan’s growth dismay is that it has a plethora of sick units. These white elephants are eating away into the vitals of our resources, and are no less than a scourge. From steel mills to airlines and from cooperative units to ailing industries, we have a rotten battery where we keep on pumping in money to just keep them afloat. This has to change for good. And the IMF’s demand to address these liabilities through proper legislation, open to lenders’ inspection, is worth-considering.

The international lender, in a special chapter of a recent report on Pakistan’s economy, notes that the dead-wood categorised state-owned enterprises (SOEs) constitute around eight per cent of GDP, amounting to a staggering Rs5 trillion. This is an undesired liability and needs to be shunned. Thus, by making legislation and guarantees in this context as a precondition, the IMF may have transgressed its limits or in a way intervened in our sovereign limits, but it is a bitter fact and it needs to be addressed. The donor’s call for bringing in transparency and an audit in this regard by June, to manage these companies vibrantly, has come as another political riddle. The government has recently caved into a similar demand by bulldozing the autonomy legislation for the central bank, and is hardly out of rough waters.

Handling these toxic loss-making units is certainly a challenge. They are adversely impacting the economy and stealing away resources from potential allocations. The fact that non-financial commercial SOEs are to the tune of 44 per cent of GDP, and merely employ 0.7 per cent of employees, is no less a quagmire. Why retain them for name-sake? Time to either reform or shut them down. The lame duck 213 SOEs are in need of a legal, regulatory and policy framework. The Rs5 trillion or 14 per cent of GDP that goes down the drain must be stemmed. While listening to the IMF is often taken with a pinch of salt, this time it sounds to be exceptional.

Published in The Express Tribune, February 16^th, 2022.

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