The International Monetary Fund (IMF) and the Asian Development Bank (ADB) have expressed concerns over the delay in the evaluation of Pakistan's loss-making state-owned enterprises (SOEs), according to reports released on Friday. This evaluation is part of the $3 billion Stand-By Arrangement (SBA) programme from the Central Monitoring Unit (CMU) and was due by the end of December 2023.
The IMF had previously advised the operationalisation of the recently ratified SOE law into a policy defining ownership arrangements and roles within federal governments by the end of November 2023. The financial institution also pushed for amendments to four selected SOEs' Acts, specifically those concerning the National Highway Authority, Pakistan Post, Pakistan National Shipping Corporation, and Pakistan Broadcasting Corporation, for a thorough application of this new law.
The CMU, which was formed in September 2022 to enhance SOEs' oversight and analysis, is yet to be fully operational due to pending staff recruitment. The unit's inaugural report as per the new SOEs law is also awaited.
In early 2023, the IMF called for immediate enactment of the new SOE law, progress on a new ownership policy, amendments to SOE-dedicated Acts, full operationalisation of the CMU, shrinkage in state footprint, and regular audits of key SOEs. The IMF and ADB have also stressed on gradually reducing the state's footprint, including the divestment of two LNG-based power plants, one development finance institution, and one small public bank.
A new SOE law came into effect in December 2022 designed to ensure that SOE operations are commercially oriented. This law defines criteria for categorizing an SOE as commercial and strengthens oversight and ownership arrangements.
Despite these efforts, a World Bank report reveals that Pakistan's SOEs have been in a net loss since the financial year 2014-15, with losses increasing each year. As of the financial year 2018, Pakistan recorded Rs286 billion in net losses incurred by SOEs.
Based on the March 2021 SOE Triage, Pakistan's SOEs consumed more than Rs458 billion in public funds annually just to stay afloat. Their combined loans and guarantees rose to nearly 10 percent of GDP or Rs5.4 trillion, up from 3.1 percent of GDP in 2016. However, most of the top 10 loss-making entities have not been included in the privatization list. Entities like PIA, Pakistan Railways, Pakistan Post along with most of the DISCOs and GENCOs are expected to be privatized in the “next phase”.
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