The coming review of the IMF of its $7.7 billion Extended Fund Facility package may well focus more on State-Owned Enterprises, for while the government has managed to achieve the primary balance through higher revenue collection and fiscal adjustments, Pakistan’s public debt has surged both in absolute terms, to more than $80.5 billion, as well as a percentage of the GDP, to over 70 percent. This means that the country will face greater difficulty servicing this debt, which is the primary goal of the IMF. As an important part of government revenue goes to fund the losses of the SOEs, this seems an easy target for the IMF.
Instead of questioning its basic economics, the IMF would like to go after the failures to privatize, and thus stemming the losses it has to pay for, as well as amending the laws governing the SOEs it still has, and which will be governed by the Sovereign Wealth Fund, itself needing amendments to its Act. The amendments to the acts governing NABP, Exim Bank, WAPDA and Pakistan Railways are all pending. The concerned ministries and departments have all been given deadlines for year-end or early next year, but in view of the review, which is to begin on September 30, the government now wants the legislation ready sooner. As for privatizations, not only is PIA to go again on the block by year-end, but so are some of the electricity distribution companies. Though their sale will certainly create an atmosphere of compliance with the IMF, the PIA experience last year, when the sale failed to go through, means that the privatizations are hardly a done deal.
It is almost as if the IMF realizes that it will not be profitable to focus on areas which are flood-affected, and to concentrate on areas where the government cannot bring the floods as any sort of reason or excuse. However, though the primary balance has been achieved, the accumulation of more debt shows that the formula is not working, that the country is still in the debt trap. This implies that borrowing from the IMF, while an emergency measure, a go-to response to crisis, is not the solution. The problem seems to be a rapacious misuse of resources. The state is not really poor, it only seems so, because the burdens put on it exceed its capacity.
