How poorly are Pakistan’s public-sector enterprises doing? The estimate of accumulated losses ranges from Rs1.2 billion to Rs1.6 trillion. At the lower end of the spectrum, this is equal to almost four percent of the country’s GDP. This is the estimate that the IMF has warned Pakistan of in its post-programme monitoring report of last week. The high losses remain a major concern for the fiscal stability of the country. What is known is that serious restructuring of PSEs has been put on the backburner for much of the current government’s tenure. The choice of restructuring itself is not a straightforward one. The government and IMF seem to see only one way out of the situation: privatisation. The reality, of course, is that this is not the only solution. Much of what goes for privatisation is state subsidies to private entities, which continue to add to public-sector expenditure. Proper fiscal management and policymaking are probably a better way out of this situation but that then is a question of the will of the government. Whatever solution is chosen, the appropriate commitment to implementing it is needed, unless we are comfortable with the bleeding of PSEs continuing as per norm.
The losses from this are eventually transferred onto the public. The IMF has already proposed an additional electricity surcharge to facilitate the cost of recovery of power sector losses. Similarly, it has expressed its concern over the state of PIA and the Pakistan Steel Mills. Some of these, of course, are strategic concerns. Both PIA and PSM were monuments to national development in the 1960s and 1970s. The poor state they are in today – after years and decades of poor planning – shows the real crisis of governance and management in the country. Nothing would make Pakistanis more proud of the state of the country’s economic management than these organisations being put back in shape through public-sector intervention. However, that does not seem to be coming true any time soon, with the government too not looking up to such a commitment. The fact that things have not moved an inch either way is what is the most alarming factor. But the IMF’s analysis too remains flawed in some key ways. Its claim that circular debt was brought to near zero in 2015/16 does not correspond with the recognition that the structural problem causing circular debt still remained intact. Paying off or parking loans somewhere else is not a solution. Pakistan needs a coherent policy, devised internally, to deal with public-sector losses. This is the only way out.