By Ali Raza
While the Government has in set for more than two years now, it has largely been unable to set its course on the path to growth. On the other hand, as a recent Government announcement revealed, Pakistan International Airlines and Steel Mills will be privatised sooner than later.
According to the Privatisation Commission Chairman Mohammad Zubair, the government stands committed to completing the privatisation transaction by March next year. “PIA’s transaction structure will be formalised within a month and shared with the Ministry of Law for vetting.”
“The government had faced certain legal obstacles in finalising the transaction structure, which have now been resolved,” added the Chairman. He did not comment on whether the government would offer 26% stakes to a strategic investor or sell majority shares.
Under the IMF programme, the government is bound to sell at least 26% shares of PIA to a strategic investor. But it is facing resistance from opposition parties, particularly the Pakistan Peoples Party (PPP), which is opposed to the privatisation of PIA and Pakistan Steel Mills (PSM). PIA Employees Union has also been staging anti-privatisation protests.
On the other hand, the IMF’s latest review documents, recently revealed, show a renewed emphasis on the need for privatising national assets due to Pakistan Government’s failure in boost them up. The document tells that the government is still struggling to implement its privatisation agenda and restructure public-sector enterprises, still talking about a plan to reduce the circular debt while relying on power surcharges to meet debt-service costs, still debating the passage of amendments to upgrade the Anti Money Laundering Act, and still making promises to pass legislation to enhance central bank independence.
Although this review document reads much like the earlier one, what it does talk about for the first time is Pak-China Economic Corridor. Significantly, the Fund has poured a bucket of cold water on the expectation that implementation of the CPEC projects will drive growth. “Any demand-driven economic expansion as a result of project implementation is expected to be limited,” the report says, since investment is likely to be offset by higher imports.
Contrary to these assertions, earlier in July, the IMF had noted that that significant further economic progress in Pakistan was within reach as real GDP was expected to grow by more than 4 per cent during this and next fiscal year. The fiscal deficit, it was noted, would further decline to 4.3pc of GDP in 2015-16 and that macroeconomic stabilisation in the country was expected to be well under way; while the threat of a crisis was thought to have significantly receded.
However, what is the most common element noted in both reports is weak tax-base of Pakistan’s economy. If it continues to stay so, projects like China-Pakistan Economic Corridor might fail to trigger expected economic growth. As it stands, with only one more year left to go for the programme, the impression is that the government is still struggling with the structural reform agenda.
Some successes have indeed been scored, like the interest rate corridor implemented by the State Bank or the legislation for the Credit Information Bureau; but these, in a sense, are the low-hanging fruit. The real test comes with the mammoth privatisations, and broadening of the tax base, and in those areas the successes have yet to come.
