IMF Wants Pakistan to Abolish Its Sovereign Wealth Fund for New Loan

The International Monetary Fund (IMF) has demanded the federal government to eliminate Pakistan Sovereign Wealth Fund (PSWF) for a new loan. The IMF insists this move is necessary for transparency and accountability in managing seven profitable state-owned firms. The government had transferred ownership and assets of these firms to the PSWF through an Act of Parliament, which now stands as a major obstacle in finalizing an agreement with the IMF, reported Express Tribune. The lender has set a September 30, 2024, deadline to cancel the Pakistan Sovereign Wealth Fund Act 2023. A recent meeting between IMF Mission Chief Nathan Porter and finance ministry officials ended without resolution, with the IMF firm on its demand. Pakistani authorities requested more time to respond, but may ultimately comply to secure the bailout. The IMF argued that Pakistan lacks the capital to invest in the Fund and would lose control over strategic assets. It recommended strengthening privatization laws instead of selling these assets. The PSWF is exempt from the Privatisation Commission Ordinance, Public Procurement Regulatory Authority Ordinance, and the State-Owned Enterprises (SOE) Act, 2023. The IMF is concerned about these exemptions and sees no justification for keeping the seven companies outside the SOE Act. Finance ministry officials believe the government will retain control through the boards even after selling stakes, opposing the IMF’s demand. The Abu Dhabi Investment Authority (ADIA) helped draft the PSWF law, with the federal government fully owning the Fund and providing initial capital through SOE share transfers. However, the Fund is not yet operational.