World Bank flags concerns over privatisation approach

ISLAMABAD: The World Bank has raised concerns over Pakistan’s approach to privatising its state-owned entities (SOEs) and highlighted the adverse impacts of judicial activism, political nuisance, sale of K-Electric and what it called the botched Sarmaya-i-Pakistan model. The financial institution cautioned the government of looming litigation in divestments to foreign states under government-to-government contracts and instead advised public offerings through stock exchanges followed by privatisation under the transparent oversight of a special joint committee of the parliament. In its Public Expenditure Review 2023, the bank specifically addressed the Inter-Governmental Commercial Transactions Act 2022, which allows the government to offer SOE shares to foreign governments. Such a move, the bank warned, could lead to litigation, raise questions about transparency and full disclosure and may slow down the privatisation process further. The bank pointed out that the profitability of SOEs in Pakistan had been declining and turning into losses for about a decade. Things have come to a stage that now “the profitability of Pakistan’s federal SOEs is the lowest in the South Asian Region” as their aggregate profit at 0.8pc of GDP in 2014 turned into losses worth 0.4pc of GDP in 2020 and growing, thus becoming a major driver of fiscal deficit and source of substantial fiscal risk.