Pakistan moves to scale back reliance on Bretton Woods system
Pakistan on Friday formally approved buying 1.1% shares of non-Western New Development Bank (NDB) for $582 million in a move that will help the nation in the longer run to reduce reliance on the highly politicized West's Bretton Wood financial system.
The Economic Coordination Committee (ECC) of the Cabinet approved the purchase of the shares of the NDB, which is established by five-nations: Brazil, Russia, India, China and South Africa.
The ECC also approved to transfer the shares of power distribution companies (DISCOs) in the name of the President of Pakistan to prepare these entities for privatization.
Federal Minister for Finance Muhammad Aurangzeb chaired the ECC meeting.
The ECC approved Pakistan's membership in the NDB, established by BRICS member countries, according to a statement issued by the Ministry of Finance after the meeting.
It added that the ECC "endorsed the purchase of 5,882 capital shares in the NDB, amounting to $582 million, with USD 116 million as paid-up capital".
The 5,882 shares are equal to 1.09% of the total shareholding of the bank. Pakistan in May last year had shown the interest to join the NDB.
The government took the decision to join the new bank as part of its plans to reduce dependency on the World Bank (WB) and the International Monetary Fund (IMF), which give loans with political strings attached, according to the Pakistani authorities.
BRICS is promoting an alternate financial architecture, with the NDB and the Contingent Reserve Arrangement. The NDB has approved nearly 100 projects worth $33 billion during the past nine years.
The NDB membership is open to all members of the United Nations with such terms and conditions that are determined by a special majority of the Board of Governors.
The special majority is defined as an affirmative vote of four founding members concurrent with an affirmative vote of two-thirds of the total voting power of the bank.
Pakistan-India rivalry cannot deny Islamabad the membership of the NDB, as it plans to win the support of the four other members, said government sources.
Russia recently informed Pakistan that its name has been added to the list of prospective members of the NDB during the annual meeting of the Board of Governors at Johannesburg in 2024 and Pakistan is eligible to hold a subscription of 5,882 capital shares of the bank.
Transfer of DISCOS ownership
The Finance Ministry said the ECC also approved to transfer the shares of the power distribution companies in the name of the President of Pakistan.
The committee approved the transfer with the observation that the approval is subject to confirmation that the transfer will have no financial implications, it added.
The government remains at the infancy stage of privatizing the three DISCOsthe Faisalabad Electric Supply Company (Fesco), the Gujranwala Electric Power Company (Gepco), and the Islamabad Electric Supply Company (Iesco).
At the time of setting up DISCOs, it had been decided that the shares of these companies will be transferred from Wapda to the name of the President of Pakistan, after approval of the Government of Pakistan.
So far, only Islamabad, Lahore and Multan power distribution companies have partially completed the process of issuing the shares in the name of Wapda. But Wapda subsequently did not transfer these shares in the name of the President of Pakistan.
The World Bank has identified 13 steps that are needed before any DISCO can be sold, including transferring the ownership in the name of the President of Pakistan.
Other decisions
The ECC also approved the incorporation of an International Joint Trading Company in Singapore by the Pakistan State Oil (PSO) and the State Oil Company of Azerbaijan Republic (Socar). The committee instructed the Ministry of Petroleum to ensure due diligence regarding specific investment approvals, particularly equity injections, as well as timeline for operationalization of the company.
The ECC approved Rs27 billion worth supplementary grants for various projects, including Rs84 million for procurement of five transport vehicles for the President Secretariat. It approved Rs19.2 billion under the Finance Division for 133 schemes of the defunct Pakistan Public Works Department. The funds will now be transferred to respective ministries, divisions, and provincial governments.
The government had decided to close the Pakistan Public Works Department and transfer its projects and funds to other ministries, divisions and the provincial governments.
The ECC also approved Rs5.4 billion funds for the discretionary spending on parliamentarians' schemes in Sindh and Khyber Pakhtunkhwa (K-P). The Sindh province will get Rs4.3 billion and the remaining Rs1.1 billion will be given to parliamentarians from the K-P.
The ECC approved Rs1.9 billion in favor of NADRA for the erstwhile FATA project, ensuring the transition of 43 Citizen Facilitation Centers (CFCs) in the K-P. The allocation has been surrendered by the Economic Affairs Division and recorded under the Interior Division with no additional financial burden on the government, said the Finance Ministry.
It approved Rs500 million for the Ministry of National Health Services for the procurement of life-saving medicines and vaccines. The ECC directed the Ministry of Health to devise a structural solution for future payment of the subject pension.
The ECC approved Rs84 million for the President's Secretariat (Public) to replace outdated official transport, allowing for the procurement of two Hino Coaster mini-buses and three Toyota Hiace vans as part of a phased replacement plan.
The fleet of official vehicles of the President's Secretariat (Public) is very old and outdated. Majority of the staff cars and other operational vehicles are 12 to 30 years old resulting in exorbitant maintenance costs as well as difficulty in performing official duties for the Head of State. Out of a total of 47 authorized vehicles, 43 vehicles are due to be replaced over a period of three years.
The ECC also approved less than half a billion of rupee for the Digital Economy Enhancement Project (DEEP) under the Board of Investment (BoI) to facilitate the establishment of the Pakistan Business Portal (PBP), aimed at streamlining regulations, eliminating redundant laws, and providing a comprehensive digital platform for businesses.
The ECC approved a proposal from the Ministry of Commerce regarding the inclusion of new custom tariff codes for newly notified mandatory items of the Pakistan Standards and Quality Control Authority (PSQCA) in the Import Policy Order. The decision incorporates specific PVC and polymer-based products into the mandatory regulatory framework, ensuring compliance with Pakistan Standards.