ISLAMABAD: While Pakistan is already under tight monetary vigilance of the International Monetary Fund (IMF) to fulfil certain prerequisites for smooth financial inflows, the World Bank (WB) has voiced concerns over the country’s approach to privatising its state-owned entities (SOEs)
The bank, in its Public Expenditure Review 2023, specifically addressed the Inter-Governmental Commercial Transactions Act 2022, that permits the government to offer SOE shares to foreign governments.
The global lender highlighted the adverse impacts of judicial activism, political instability, sale of K-Electric and ignored Sarmaya-i-Pakistan model.
It says the government must look into looming litigation in divestments to foreign states under government-to-government contracts.
The WB advised public offerings through stock exchanges followed by privatisation under the transparent oversight of a special joint committee of the parliament.
The profitability of SOEs in Pakistan has been declining and turning into losses for about a decade, the bank further says. “The profitability of state SOEs is the lowest in the South Asian Region as their aggregate profit at 0.8pc of GDP in 2014 turned into losses worth 0.4pc of GDP in 2020.”
The WB further points out that the incorporation of Sarmaya-i-Pakistan Limited (SPL) by the PTI government in 2019 with the mandate to take management control of all SOEs and revamp or privatise them further delayed the process.
“The SPL actually was never launched,” the bank further says.
Showing concern over the performance of K-Electric even after privatisation, the WB says tariff hikes, weak financial management, governance structure, operational and commercial inefficiencies, and unscheduled load-shedding resulted in public demonstrations against the company that supplies to Karachi district.
The IFI advised the caretaker government to make public offering of SOEs shares and restructure power distribution companies (Discos), especially those making losses.
