Deal with friendly country eludes govt

ISLAMABAD:

Pakistan on Thursday hoped to finalise a deal for the sale of two power plants and minority stakes in listed companies to a friendly country within two weeks in a bid to shore up the fast-depleting foreign exchange reserves and to provide cushion to a sinking rupee.

Finance Minister Miftah Ismail addressed yet another news conference to calm markets. He was flanked by Minister for Defence Khawaja Asif.

However, Miftah admitted that there was “nothing concrete” so far on a deal with the United Arab Emirates for the sale of state assets.

Asif also distanced himself from the cabinet decision to give 150% executive allowance to a select group of bureaucrats, saying that living lavish lifestyles on public money should come to an end. He also said that the government should reduce its footprints.

“There is nothing concrete so far,” said Miftah Ismail while referring to the possible deal with the friendly country for the sale of power plants and stakes in the government companies.

His response came to a question whether he had any news to share, instead of just addressing pressers. But the finance minister hoped that the deal could be struck within days.

The deal’s size is estimated at around $2-2.5 billion, depending on the number of shares being offered to the UAE and the price of the two-LNG power plants. Markets may not stabilise, until Pakistan starts receiving inflows from the IMF and the bilateral creditors.

“The friendly countries have shown interest in acquiring stakes in government-listed companies but the move requires legislation that will be finalised within two days,” the defence Minister said. The federal cabinet on Thursday approved the government-to-government transactions Ordinance 2022 for paving the way for the sale of government assets to the UAE.

Asif, who chaired the cabinet committee that finalised the ordinance, said that some of the entities that are on the privatisation list for years could be sold to sovereign wealth fund of the friendly country. Both the ministers did not officially disclose the name of the UAE.

The Express Tribune had reported last month that the UAE had refused to offer cash to Pakistan and instead asked the government to sell its companies to raise funds.

Pakistan’s rupee has been constantly sinking, losing 7.5% or Rs16 of its value against the greenback in just four days. The central bank also reported on Thursday that during the week ended July 15, the SBP’s reserves decreased by another $389 million to $9.31 billion mainly due to external debt repayments.

But the finance minister said the currency market was now “under control”, and claimed that stability had returned following the government’s announcement that it intended to complete the remainder of its term.

Contrary to the finance minister’s claim, the US dollar continued gaining strength and the rupee fell to Rs226 in the interbank market.

The finance minister again blamed political turmoil for the free fall of the rupee. Ismail said one of the reasons for increased pressure on the rupee was the import bill.

However, he said imports for this month and the next would be lower due to measures taken by the SBP that would further reduce pressure on the rupee.

Ismail said there were sufficient fuel reserves for one to two months and fuel demand had seen a reduction as well, due to high prices, so pressure on the rupee would decrease.

“You will begin to see its effects by next week, but more importantly, from next month when the daily demand for the US dollar in banks will be less than its availability,” said finance minister.

Ismail said the economy was on the right track and all indicators, apart from the exchange rate, were positive. He reiterated that the PML-N had resolved to save the country from going bankrupt even at the cost of its political capital, and had taken difficult decisions without any regret.

A senior SBP official said a day earlier that people should stop using the word “default”, as there was no such possibility.

However, the markets were not ready to believe what the government ministers were saying and the Federation of Pakistan Chambers of Commerce and Industry demanded the government to cap the value of the dollar against the rupee.

“We cannot cap the dollar value”, said Ismail.

Khawaja Asif said that external factors had played a bigger role in the fall of the rupee. The defence minister said that the PML-N formed the government at the potential loss of its popularity, to prevent a “sure default” and took all the required difficult decisions.

Asif said the exchange rate issues would eventually resolve themselves while the effects of default could be “far more terrible”. “Pakistan’s economic safety is foremost and all other things, including politics, are secondary.”

The defence minister said that contrary to the public perception, the by-polls were still a success for the PML-N as its votes and seats had increased. “The PTI has also gained, but the seats were already with the PTI. If there has been any value addition to it, then that translated into seats, there is no doubt about that.”

Asif said that in contrast to the elections conducted under the PTI government, it was a matter of great respect for the PML-N that no one had raised rigging allegations about the by-elections.