Despite doing the spadework, Pakistan breached a structural benchmark of approving a privatisation plan for 30 entities by end of September, which may force the International Monetary Fund (IMF) to upgrade the benchmark to a binding condition linked with a tranche.
Under the $6.7 billion three-year programme, Pakistan was supposed to develop and approve a reform strategy for public 30 sector enterprises (PSEs) out of the 65 shortlisted firms for privatisation. The IMF has declared this condition a structural benchmark that had to be met by September30, according to the IMF documents.
The IMF will take up the issue for discussion during the first post-programme review meeting, which is tentatively scheduled for the end of October, the sources in the finance ministry told The Express Tribune. The successful conclusion of the finance ministry’s visit will pave the way for release of the second tranche of about $547 million, due in December.
According to people having knowledge of IMF’s procedures, if a country fails to honour a structural benchmark, the IMF mission may upgrade it to a performance criterion whose violation will require a waiver from the executive board of the international lending agency. After the benchmark is upgraded to performance criterion, the country can only qualify for the next tranche by fulfilling the condition.
The Privatisation Commission and Economic Reforms Unit (ERU) of the Ministry of Finance has prepared a list of the over 30 firms that are planned to be placed in front of the Cabinet Committee on Privatisation (CCOP) for its approval. The CCOP is headed by Finance Minister Ishaq Dar.
However, the CCOP meeting could not be held as Dar, who also holds the portfolio of privatisation minister, was in New York to attend the United Nations General Assembly session. The economists and political pundits have criticised Dar for his New York visit, terming it unnecessary, particularly at a time when markets were getting nervous.
“The Privatisation Commission has prepared a plan for 30 firms, and we will receive an anticipatory approval of the finance minister in his capacity as chairman of the CCOP today,” said Rana Assad Amin spokesperson for the ministry of finance. To a question, he said the chairman CCOP has the powers to give anticipatory approvals.
However, Rules of Business, 1973 are silent on the issue of discretionary powers of the CCOP chairman. Only the chairman of the Executive Committee of National Economic Council (ECNEC) has such powers, which are considered against the spirit of democracy and transparency.
The Minister of State for Privatisation Engineer Khurram Dastgir was not available for comment.
“All loss-making entities will be improved through strategic partnerships and the government will retain the majority shares in all entities,” said Muhammad Zubair, chairman of the Board of Investment.
A four-pronged plan has been proposed to the CCOP for approval that talks about off-loading shares in the stock market, handing over management to the private sector, divestment and selling assets where necessary, according to sources.
Among the 30 firms, the government has proposed off-loading shares it holds in Oil and Gas Development Company, Pakistan Petroleum, Pakistan State Oil, Habib Bank and United Bank. The CCOP may decide either to handover management control of the National Insurance Company to the private sector or go for an initial public offering (IPO). Islamabad Electricity Supply Company, Gujranwala Electricity Supply Company and Pakistan International Airlines are proposed for strategic partnerships. While Pakistan Steel Mills is planned to be restructured.
Published in The Express Tribune, October 1st, 2013.