ISLAMABAD - The government is working to establish Pakistan Sovereign Fund to take control of all public sector entities (PSEs) which are on active privatisation list including Pakistan International Airlines (PIA), Pakistan Steel Mills (PSM) and others.

The government would establish Pakistan Sovereign Fund or Wealth Fund to run the PSEs including PIA, PSM and others. As per plan, these PSEs would be run by appointing and empowering non-political and autonomous boards instead of concerned ministries. The idea of a wealth fund is modelled on the concept of Khazanah in Malaysia, which is a sovereign wealth fund of the government. It holds and manages selected commercial assets of the government and undertakes strategic investments on behalf of the nation.

Sources informed that Privatization Commission today (Tuesday) would discuss the privatization policy of the incumbent government including establishing a special Fund. Federal Minister Mian Muhammad Somroo would chair the meeting. They further informed that meeting may review to transfer PSEs, which would be transferred to Pakistan Sovereign Fund or Wealth Fund. In the first phase, the government may transfer PIA, PSM, all power distribution companies (Discos) and all thermal power generation companies (Gencos).

The loss-making PSEs are giving financial losses worth billions of rupees every year. The previous PML-N government had privatized only profitable PSEs. The last government had completed the privatization of 5 PSEs out of 26 transactions initiated, which had generated $1.124 billion. The privatization of five PSEs included United Bank Limited, Pakistan Petroleum Limited, Allied Bank Limited, Habib Bank Limited and National Power Construction Company.

The combined accumulated losses by these PSEs now exceed Rs1.2 trillion (4 percent of GDP), which could eventually lead to sizable demand for budgetary resources, according to the estimates of IMF. “Privatization and restructuring of key loss-making PSEs have been largely on hold. Meanwhile, financial losses by the state-owned airline and steel mill have continued to accrue,” the IMF noted in its report issued sometime back.

The PML-N government had started the privatization of Pakistan International Airline (PIA), Pakistan Steel Mills and power distribution companies (Discos). Pakistan had given several commitments with IMF to privatize PSEs but could not honour it. Under a condition of the IMF, Faisalabad Electric Supply Company (Fesco) was required to be privatised by June, 2016. Lahore and Islamabad power distribution companies along with northern and Jamshoro power generation companies were scheduled to be privatised by September 2016. Similarly, the government had also missed the deadline of privatization of PIA and PSM. The government had halted the multibillion-dollar privatization of all power distribution and generation companies (Discos and Gencos) due to the pressure of political parties and workers unions. However, the new government is now working on fresh privatization policy.