Prime Minister Shehbaz Sharif on Tuesday announced privatisation of all the state-owned enterprises (SOEs) barring those which are strategic in nature and said all the entities would be disposed of notwithstanding being profitable or lossmaking. 

Shehbaz reiterated his stated position that the government was meant to formulate policies friendly to investment and businesses, not to run businesses, while extending facilities and removing the hurdles to provide a smooth playing field. 

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The remarks came as privatisation is one of the main conditions set by the International Monetary Fund (IMF) and its team is currently in Islamabad for talks about the a new assistance programme under which Pakistan hopes to secure a bigger and longer deal – $6 billion to $8 billion over a period of three to four years.

Read more: Talks start to secure IMF programme, agreement reached on budget targets

He was chairing a meeting where the authorities concerned presented the Privatisation Roadmap 2024-29 and briefed him on the progress made in the process.

The sitting was convened to review the affairs related to the Ministry of Privatisation and the Privatisation.

During the briefing, the officials said the prequalification for the PIA privatisation would be completed by the end of current month, adding that consultations were on about disposing of Roosevelt Hotel owned by the national flag carrier and located in New York.

On the other hand, the privatisation of the First Women Bank – established in 1988 during the first tenure of the then prime minister Benazir Bhutto – would be a government-to-government transaction with the United Arab Emirates, they said.

The government currently owns around 80 per cent shares of the First Women Bank while the remaining belongs to different commercial banks.

Meanwhile, the power distribution companies are also on the list while the lossmaking SOEs would be the first to be privatised, said the officials who added that a prequalified panel of experts was being inducted in the Privatisation Commission to run the process swiftly.

Shehbaz said privatisation would helping saving the money of taxpayers which was going to help improve the services.

At the same time, he said transparency must be ensured in the privatisation process and ordered all the federal ministries to carry out the required work and extend full cooperation to the Privatisation Commission.

He also directed the officials to live telecast the bidding process and other stages of PIA privatisation on TV and ensure the same in the case of other SOEs.

Despite the fact that an overwhelming majority in Pakistan is facing a cost of living crisis, the International Monetary Fund (IMF) has demanded an increase in basic electricity tariff which, it says, essential to control rising circular debt.

At the same time, the Washington-based financial institution is unhappy with malfunctioning in trace and track system (TTS) designed to curb tax evasion, as boosting revenue collection and expanding tax base remains its primary focus.

Read more: Talks start to secure IMF programme, agreement reached on budget targets

The demand to go basic tariff hike comes after the two sides opened talks for a new IMF programme which is considered essential for economic stability of Pakistan.

SUBSIDY CUTS

It is said that the IMF wants to keep the power sector circular debt at Rs2,300 billion and gradual implementation of subsidy cuts – the measures that must be part of the next budget for 2024-25.

According to the IMF, one-third of the total subsidy Rs976bn reserved for the current fiscal year has been extended by January 2024.

The federal government must end the subsidy to the tune Rs249bn given under the head of tariff differential and other categories, it says and is also calling for another gradual cut in an amount of Rs125bn reserved for arrears and fines.

Read more: Improve tax collection or we will need another IMF package: Aurangzeb

As per the calculations made by the IMF, the subsidy cuts will help maintaining circular debt ceiling at Rs2,300bn while curbing power theft is also essential to achieving the goal.

However, the focus on energy sector efficiency means the lender is also demanding digitalization of all the organisations.

TAX EVASION

On the other hand, the IMF is also unhappy over the failure to introduce an effective TTS, as the visiting team held talks with the Federal Board of Revenue (FBR) top officials on subjects like tax structure and administration.

It is important to note that Prime Minister Shehbaz Sharif and Finance Minister Muhammad Aurangzeb have repeatedly described the FBR digitalisation a top priority to stop the leakages and control corruption.

Read more: No backtracking on tax net expansion: Aurangzeb

Last week, Shehbaz ordered a stern action against the FBR officials, including its former chairman Dr Muhammad Ashfaq Ahmed, allegedly involved in the installation of botched TTS in various industries, on the basis of an inquiry report.

And now, the FBR shared the same document with the IMF, sources say and added that the Washington-based lender has given a deadline to implement the system in five main sector and fully install it during the next financial year.

The sources say both sides have agreed to expand tax base and stop tax evasion, as a plan would be submitted to the IMF to cover the revenue shortfall.

Pakistan should focus on expanding tax net instead of raising the tax rates, says the Citigroup, as the move will also help curbing inflation – a suggestion that comes at a time when the International Monetary Fund (IMF) is again pressing the government hard to go for subsidy cuts and hiking energy tariffs.

Read more: Power basic tariff hike is one of the IMF demands

The suggestion comes as the tax-to-GDP ratio in Pakistan is just around 9 per cent – one of the worst in the world – and the incumbent government has repeated vowed to increase the ratio to 15pc in next four to five years.

In fact, the Citibank has endorsed the viewpoint that increasing direct or indirect taxes only fuels inflation by increasing the cost of doing business as well as the cost of living as being experienced in the country.

In a latest report, the Citibank has also predicted that the size of a new IMF programme sought by Pakistan will be $8 billion covering a period of four years.

The forecast shows that Islamabad is set to get what it wants – a bigger and longer package to bring stability to a fragile economy and ensure introduction of long-term policies. It was Finance Minister Muhammad Aurangzeb who had first expressed the desire for such a deal.

There is also a good news for industrialists and other businesses as the Citibank has predicted that the State Bank of Pakistan (SBP) will start the rate cut cycle next month – a scenario for which the market has been clamouring for months.

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In fact, there has been a strong opposition to the interest hikes that led to the current level of 22pc – a record in Pakistan’s history – with an argument that the rate hikes would paralyse the economy and it has actually happened.

The SBP had last increased the interest rates to 22pc in June last year and decided to maintain the same since then despite a visible decline in inflation.

With the consumer price index (CPI) dipping to 17.6pc in April – a trend witnessed for the fourth consecutive months, Aurangzeb too had hinted last week that the rate cuts would be introduced in the coming months.

The next meeting of the central bank’s Monetary Policy Committee (MPC) is scheduled for June 10, with the Citibank saying that the SBP would have a clear vision before making the decision.

As far as foreign investment is concerned, it is mentioned in the report that a decision about the Saudi investment would be announced soon.

Earlier, a delegation of investors and businessmen from Saudi Arabia visited Pakistan, expressing their interest in a diverse set of fields, ranging from energy and minerals to human resources and agriculture.

Now it is expected that Crown Prince Mohammed bin Salman will visit in the coming weeks and the two countries are in touch to final the dates for this purpose.