Proposed law on state enterprises – Journal
WITH the IMF preparing to keep a strict eye on every dollar it plans to give Pakistan under its recently resumed $6 billion program, it looks like the PTI government has its work cut out for it. Can anyone blame the global lender for being so suspicious of Islamabad’s commitment to agreed reforms under its funding package? Pakistan has entered into 13 IMF programs since 1988 – the current bailout package signed in 2019 being the last – to deal with its repeated currency crises. Most programs were abruptly abandoned mid-term without implementing agreed actions.
The PTI government is no exception. He tried to scrap the program in April last year to pursue rapid growth to bring “relief” to Pakistanis who are facing rising living costs and unemployment. His return to the IMF, which was preceded by the execution of five “prior actions”, including the withdrawal of major tax exemptions and the granting of absolute independence to the central bank, left many wondering whether the government can maintain the reform momentum after the funding facility ends in September as the country enters election mode. It’s no surprise that the Washington-based lender has tied future funding of $3 billion under the program to implementing more actions and meeting targets.
That political expediency has prevented successive governments from addressing the fundamental structural challenges facing the country’s economy is evident in the fact that no administration, military or civilian, has attempted to fix state-owned enterprises. – which have represented an enormous financial burden for the Treasury – despite having been on the agenda of almost all IMF programs over the past three decades. However, things could be different this time. The IMF has linked the continuation of its program to the parliamentary approval of a new law on public enterprises, already presented to the National Assembly last year, by the end of June. The bill does not suggest anything radical. Yet, if approved and implemented in letter and spirit, it would pave the way for transparent management and, ultimately, the divestment or privatization of most public enterprises whose commitments conditions at almost 8% of GDP entail considerable fiscal costs and a risk for the country’s debt sustainability. Progress on public enterprise reforms should reduce contingent liability risks and improve the business environment. PTI policymakers should have realized from their experience of the last few months the need for sustained progress on the public enterprise sector, energy and fiscal reforms – with or without the IMF – and reducing the footprint of the government. report on the economy to stabilize the economy, improve domestic productivity and maintain a faster growth rate. The government’s commitment to sticking to the economic reform agenda beyond the IMF program will determine whether its successor will have to turn to the lender of last resort for another bailout.
Posted in Dawn, February 16, 2022