The International Monetary Fund (IMF) has urged Pakistan’s caretaker government to implement the terms of the $3 billion standby arrangement, emphasizing the need to reduce costs and expedite the privatization of public entities. The IMF has also called for the transfer of 203 government companies from line ministries to the finance ministry, as agreed upon in the pact.
In July, Pakistan secured a much-needed $3 billion short-term financial package from the IMF, providing a crucial lifeline to an economy on the verge of default. According to sources within the finance ministry, the IMF’s position is that the management of these government companies by line ministries hampers improvement efforts.
The IMF contends that governance issues have led to increased losses in the power sector, particularly among generation and distribution companies. The petroleum sector’s profitable oil and gas companies have also suffered significant losses, according to the IMF.
Furthermore, the IMF has pressed for the privatization of several key entities during the current fiscal year. These include Pakistan International Airlines (PIA), Pakistan Steel Mills (PSM), regasified liquefied natural gas (RLNG) power plants, and state-owned electricity distribution companies.
To address these demands, caretaker Finance Minister Dr. Shamshad Akhtar chaired a meeting of the Cabinet Committee on Privatization. During the meeting, it was decided to establish a technical committee to address obstacles hindering the privatization and restructuring of PIA.
The committee also directed the aviation ministry to collaborate with the Privatization Commission to develop a detailed action plan for PIA with a clear timeline.
A committee has also been formed to devise a plan to involve the private sector in the management of state-owned electricity distribution companies. The Finance Minister emphasized the importance of accelerating the privatization of loss-making state-owned enterprises (SOEs) to enhance efficiency, productivity, and overall revenues.
The IMF’s recommendations align with efforts to reform Pakistan’s state-owned enterprises and reduce the fiscal burden on the government. These measures are intended to promote economic stability and sustainability.