IMF's strict conditions, promise to limit sovereign wealth fund powers

Pakistan has assured the IMF that the powers of the Sovereign Wealth Fund to directly sell state-owned enterprises, borrow and retain income will be withdrawn. The government has promised that the fund will not be activated until the parliament approves these amendments. This matter has become serious because the Ministry of Finance has once again failed to present the amendments in the parliament on time, on which the IMF has imposed strict conditions.

Under the new proposed amendments, the Sovereign Wealth Fund will be limited to just a holding company that will take over the management of government-owned enterprises and focus on improving their performance. The fund will not be able to sell any state assets directly, but the privatization process will be transparent and competitive in accordance with international standards. In addition, the fund will transfer all its income to the government and will not be allowed to borrow or provide any kind of financial guarantee. Appointments to the fund’s board and advisory committee will also be made under a merit-based and transparent procedure.

The situation on the privatization front is not satisfactory. Apart from the privatization of PIA, no significant progress has been made, and the process of private sector involvement in some electricity distribution companies is also delayed, which has become a cause of concern for the IMF.