If Pakistan Can Keeps its Promises to IMF, Economy Might Improve

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The government of Pakistan needs to abide with its promises to the IMF and other international funding agencies and implement economic reforms, including privatization of State Owned Enterprises (SoEs).

Finance Minister Muhammad Aurangzeb’s recent reaffirmation that the process of disinvestment of the loss-making national carrier, Pakistan International Airline (PIA) will be concluded by the end of June will help reinforce confidence in the government’s commitment to privatisation.

During his visit to Washington for the Spring IMF meetings, at a press conference, Mr Aurangzeb also stated that Pakistan’s three main airports —Islamabad, Lahore, and Karachi — were next on the list of privatisation. “We expect the bids for PIA to come in the next two to three weeks, and by the end of June or early July, we can move it to the investors.”

However, as an editorial in Dawn noted, Pakistan’s officials have yet to elaborate “if the authorities have a clear privatisation roadmap beyond the sale of PIA and the outsourcing of airports. The current initiative on the privatisation of the national carrier and airports is understood to have been taken under the military-backed Special Investment Facilitation Council to hand over these assets to investors from friendly Gulf countries, probably in government-to-government deals.”

As the Editorial remarked, “this has generated an impression that the civil and military authorities are in a hurry to disinvest these assets for raising a few billion dollars to ease pressure on the current account and budget. While taxpayers can no longer afford to finance the state-owned resource guzzlers, the hasty pursuit of privatisation, especially PIA, might cast serious doubts over the process even if these transactions are not challenged in the courts. Multilateral lenders like the World Bank have also cautioned against the perils of a chaotic privatisation process, advising the authorities to pursue disinvestment of these assets in a planned and structured manner through a revamped privatisation commission staffed with “able professionals who can prepare a financial model for each entity to be privatised”.

Dawn cautioned, “Transparency and full disclosure in such transactions is crucial for inspiring public confidence in the process and avoiding complications or legal challenges for investors. This should also help the authorities fetch better prices for these assets.”

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Author: Adam Ahmad