The International Monetary Fund (IMF) has requested the federal government to abolish the Pakistan Sovereign Wealth Fund (PSWF) in exchange for a new loan.
The IMF argues that this step is crucial for transparency and accountability in overseeing seven profitable state-owned enterprises. According to the Express Tribune, the government had transferred ownership and assets of these enterprises to the PSWF via legislation, which now poses a significant hurdle in concluding a deal with the IMF.
The creditor has imposed a deadline of September 30, 2024, to repeal the Pakistan Sovereign Wealth Fund Act of 2023. A recent meeting between IMF Mission Chief Nathan Porter and finance ministry officials concluded without a resolution, as the IMF remains steadfast in its requirement. Pakistani authorities asked for additional time to provide a response but are likely to acquiesce in order to secure the bailout.
The IMF contended that Pakistan lacks the funds to invest in the Fund and would forfeit control over strategic assets. Instead of selling these assets, it recommended bolstering privatization laws.
The PSWF is not subject to the Privatisation Commission Ordinance, Public Procurement Regulatory Authority Ordinance, and the State-Owned Enterprises (SOE) Act, 2023. The IMF is troubled by these exemptions and finds no rationale for excluding the seven companies from the SOE Act. Finance ministry officials are confident that the government will maintain control through the boards even after selling stakes, disagreeing with the IMF’s request.
The Abu Dhabi Investment Authority (ADIA) assisted in formulating the PSWF legislation, wherein the federal government wholly owns the Fund and initially funds it through transfers of shares from state-owned enterprises (SOEs). Nonetheless, the Fund has not commenced operations.
