Loss-making PSM, PIA: complete the unfinished agenda, IMF tells govt

Privatization and restructuring of key loss-making Public Sector Enterprises (PSEs) have been largely on hold, said International Monetary Fund (IMF). The IMF staff level report "first post-program monitoring discussions" with Pakistan released on Thursday said that the combined accumulated losses by PSEs could eventually lead to a sizable demand for budgetary resources which now exceed Rs 1.2 trillion (4 percent of GDP) as privatization and restructuring of key loss-making PSEs have been largely on hold.
The report noted that financial losses by Pakistan International Airlines and Pakistan Steel Mills have continued to accrue, while the accumulation of new payment arrears of power distribution companies has reached Rs 193 billion (0.5 percent of GDP) since July 2016, with an accumulated stock of such arrears of Rs 514 billion (1.5 percent of GDP) by end-December 2017.
The Fund urged the government to complete the unfinished agenda of restructuring and privatizing of loss-making PSEs. While recognizing the difficulties of making substantive progress in this area during the remaining term of the current government, staff recommended continuing advancing the necessary preparatory work to enable swift progress once substantive reforms becomes feasible.
Over the medium term, quasi-fiscal losses and arrears by PSEs are expected to persist and the fiscal deficit will likely remain elevated, at around 5.8 percent of GDP, as growing interest expenditure and PSEs'' subsidy requirements would be counter-balanced by improvements in revenue collection, the report notes.