New wave of IMF-imposed privatisation in the offing

By Abdul Khaliq (18 Nov 2023): With Islamabad already meeting the demand of raising the power and gas prices, the privatization of the State-Owned Enterprises (SOEs) remained a top agenda during the latest review of the $3 billion IMF stand-by arrangement[1]. Towards the conclusion of the first review for 2nd tranche of $700 million,Pakistan has agreed to bring four more state-owned enterprises (SOEs) in line with the financing and governance template of the newly approved SOE law[2]. These four state firms include the National Highway Authority (NHA), the Pakistan National Shipping Corporation (PNSC), the Pakistan Broadcasting Corporation (PBC), and the Pakistan Post[3]. Pertinent to mention IMF has demanded that 203 govt companies be removed from ministries and placed under the finance ministry as per the agreement[4].

Meanwhile Pakistan’s newly formed top investment body, Special Investment Facilitation Council (SIFC)[5] has promised to fast-track the privatization of state-owned enterprises (SOEs) under the immense pressure of the IMF. According to media reports the govt. is also discussing outsourcing operations of several of its state-owned assets to outside companies. In March 2023, Islamabad kicked off the outsourcing of operations and land assets at three major airports[6] to be run under a public-private partnership, a move to generate foreign exchange reserves for its ailing economy[7].

According to the Federal finance ministry, the IMF also wants early privatization of the Pakistan International Airlines (PIA), Pakistan Steel Mills (PSM), regasified liquefied natural gas (RLNG) power plants and state-owned electricity distribution companies during the current financial year.

Astonishingly, under the SOEs policy guidelines, the govt will not set up any new SOE in future unless required for strategic reasons or under an agreement with any country and gradually off-load most of the existing 200 entities. Under IMF agreement, for existing SOEs, the government has to devise a mechanism to gradually privatize or divest these firms as private-public partnerships. Each government division responsible for SOEs must develop a reform plan, including proposals such as listings, restructuring, mergers, public-private partnerships, and asset sales.[8]

Under the same policy, the Central Monitoring Unit (CMU) of the Finance Ministry would collect and update the financial results of all state firms by December 2023 to the satisfaction of the IMF.

Privatization is not a new phenomenon in Pakistan, under the gospel of market economy, the country has been aggressively pursuing the policy of market liberalization and privatization since 1991. During the 1990s after being hit by economic downturn, Pakistan was forced to adopt Structural Adjustment Program (SAP) under IMF to reform economy suffering from macroeconomic instability.

Pakistan, since then seems to have indulged in privatization binge under which plans have been set to sell off a number of profitable public sector institutions, without realizing the negative consequences on the socially marginalized classes. In the period between 1991 – 2006, public assets were plundered when Government of Pakistan sold out 160 state owned enterprises at through away prices. Shockingly out of which 130 privatized enterprises were collapsed[9]. During this period about 0.6 million workers were rendered jobless as a result of implementation of ruthless privatization and neo-liberal policies in Pakistan.

However, the roller coaster of privatization in Pakistan was suddenly halted when Supreme Court of Pakistan, through Suo moto notice, struck down the privatization of Pakistan Steel Mills in 2006[10].   But with the fresh pressure of the IMF, after 17 years of strategic pause, it appears a new wave of plundering of public assets is about to start in Pakistan.

 

Foot Notes

[1] This current $3-billion Stand-by Arrangement (SBA) is the twenty-third IMF program that a Pakistani government has ‘negotiated’ with the IMF.The release of this money was contingent upon the government taking the measures including: (1) removing all subsidies related to electricity, gas, and fuel; (2) raising the interest rate; (3) allowing the market to determine the exchange rate; and (4) restructuring SOEs. Pakistan had no choice but to comply with these conditions, with the inevitable result of more crippling inflation.

[2] The SOEs (Governance and Operations) Act of 2023, passed in February 2023

[3] https://epaper.dawn.com/DetailImage.php?StoryImage=17_11_2023_001_006

[4] The IMF has been pushing Pakistan to privatize state-owned enterprises (SOEs) since at least 1991. Despite privatizing 172 SOEs between 1991 and 2015[4], yielding $6.5 billion, the country was unable to solve either its persistent budget deficit or the issue of long-term growth.

[5] Special Investment Facilitation Council (SIFC), a hybrid civil-military government body constituted in June 23 to attract foreign investment in key economic sectors, particularly from Gulf nations.

[6] Jinnah International Airport Karachi, Allama Iqbal International Airport Lahore, and Islamabad International Airport 

[7] https://www.reuters.com/world/asia-pacific/pakistan-kicks-off-outsourcing-operations-assets-three-airports-2023-03-30/

[8] https://www.dawn.com/news/1788340/three-key-soes-being-moved-out-of-govt-control

[9] http://www.cadtm.org/Plundering-of-Public-Assets-in

[10] Gen. Mushraff had sold out the only steel mills of Pakistan to his cronies at a throw away prices of just Rs. 33 billion. Only the affiliated assets of PSM stand at Rs. 133 billion.

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