Pakistan required to keep SOEs under finance ministry oversight: IMF

Islamabad is discussing outsourcing operations of several state-owned assets to outside companies

KARACHI (Reuters/Web Desk) – The International Monetary Fund's (IMF) representative in Pakistan on Wednesday said that the reform process to which the government had agreed required the country to keep all state-owned enterprises (SOEs) under finance ministry oversight.

"Following through on the previously agreed 2021 triage reform process, and other governance and private sector reforms, is important to durably attract foreign investment," the IMF's Esther Perez Ruiz said in a statement to Reuters.

Read more: Pakistan: What lies ahead in post-IMF deal period?

Pakistan has been discussing outsourcing operations of several of its state owned assets to outside companies. In March, it kicked off outsourcing of operations and land assets at three major airports to be run under a public private partnership, a move to generate foreign exchange reserves for its ailing economy.

The IMF reached a staff-level pact with Pakistan in June on a $3 billion stand-by arrangement (SBA), a decision long awaited by the South Asian nation which had been teetering on the brink of default.

Perez Ruiz said in the statement that it was "premature to consider what will follow the current SBA, which runs through early 2024."

RUPEE GOES SOUTH

These comments came as the IMF has set tough condition for Pakistan under the latest agreement. One of them is the exchange rate for rupee as it is for the market to determine its price against the US dollar.

Read more: What Pakistan needs to do under the IMF programme

Hence, it is not a surprise that Pakistan saw its currency reaching a historic low in official exchange rate against the US dollar on Tuesday.

The trend has far-reaching consequences in the shape of expensive imports, further rise in inflation and cost of doing business, and higher food prices to say the least.

Unbridled free market and weaker currencies against the dollar is the corner of the IMF’s one size fits all solution – from Pakistan to Argentina and everyone in between. But it has always produced devastating consequences for the developing nations.

Hence, a combination of guaranteed weaker rupee and the monetary tightening [higher interest rate] as suggested by the world’s top lender has paralysed Pakistan’s economy.

So the slide in open market based upon demand is dragging the rupee down the slope as warned by those advocating a strong currency. They have been arguing inflation was triggered with the start of the process to weakening the rupee under the promise of boosting country’s export.

But the IMF conditions also include the energy sector – higher power and gas tariffs as well as jacking up the prices of petroleum prices.