“We are looking at (other) options (also) including raising money from the Pakistani diaspora, new sukuk [Islamic] bonds and requesting Saudi Arabia to defer our oil payments”
AUG 3, 2018 (BE2C2 Report): The PTI-led coalition setup at the Center will place all of Pakistan’s state-owned companies into a special fund to be managed at arm’s length from the government soon after taking office, his proposed finance minister Asad Umar told Financial Times, in a first step towards mass privatization.
Umar said that one of the first acts of the new government would be to move some of the country’s biggest companies, including its national airline PIA, away from government control.
The plan to remove government control from about 200 companies would prepare the ground for an eventual bailout by the IMF, one of several options Asad Umar said were being looked at as the country battles a foreign currency crisis.
“[The] corporations will all be put in a wealth fund, which will be led by people from the private sector. We plan to transfer government owned companies under the control of the wealth fund within our first 100 days,” he said.
The fund’s job, he said, would be to cut the companies’ losses and debts before deciding which can be privatized and which will take longer to restructure. He mentioned PIA (Pakistan International Airlines), which has total liabilities of Rs406bn ($3.3bn), as one company where the debt burden needed to be reduced.
The other humongous sick unit is the Pakistan Steel with accumulated losses exceeding Rs230 billion (US$1.92 billion) and climbing.
The comments are the first time Asad Umar has spoken about his proposed economic program since Imran Khan’s Pakistan Tehreek-e-Insaf won last month’s election.
Umar, the former chief executive of the Pakistani conglomerate Engro, was Khan’s shadow finance minister in opposition.
Mr Umar said the new government would have to formulate a plan immediately after taking office.
“We will have weeks, not months,” he said. “You have to be decisive and move fast. Right now, we’re looking at all options.”
Civil servants have already drawn up plans for the country to approach the IMF for a loan of up to $12bn, which would be the country’s 13th bailout from the fund and its largest ever.
The last time Pakistan went to the IMF, Islamabad agreed to earmark 68 companies for privatization, including PIA, in return for a loan of $6.7bn. But the process stalled after the government sold stakes in a few profitmaking companies and let others stall under political pressure from PPP and PTI.
Pakistani officials hope the PTI’s plan for a new fund will help persuade the IMF that it is serious about privatizing state-owned companies — though geopolitical concerns might still get in the way of agreeing a bailout — a possibility PKonweb hinted at in its last report.
Earlier this week, Mike Pompeo, US secretary of state, warned that IMF money should not be used to bail out unsustainable loans made by Beijing as part of China’s plans to spend $60bn upgrading Pakistan’s infrastructure.
Islamabad expects that if it takes out an IMF loan it will have to publish full details of the terms of the Chinese loans — something Beijing has so far refused to do.
Mr Umar said he did not believe Mr Pompeo’s concerns would present a hurdle to an eventual IMF program. “Right now, no option, including the IMF, can be ruled out,” he said, adding: “Mike Pompeo’s statement was more about China than Pakistan.”
But he said he was also looking at several alternatives to shore up the country’s dwindling foreign exchange reserves. Many investors and analysts see a bailout from China or the IMF as inevitable, according to Bloomberg.
“We are looking at (other) options (also) including raising money from the Pakistani diaspora, new sukuk [Islamic] bonds and requesting Saudi Arabia to defer our oil payments,” he said. PKonweb reported earlier that the incoming government is keeping all options open.