ISLAMABAD – Following a refusal by the International Monetary Fund (IMF) to revive the suspended $11.3 billion standby arrangement until economic reforms are implemented, the government has started looking at other options to meet its rising fiscal deficit.
An official source said that at present, the government was in a stable position, as exports were expected to increase to $22 billion and remittances of $10 billion were estimated during the current financial year. “With these earnings and having foreign exchange reserves of $17 billion, there is no immediate worry regarding the balance of payments, as the current account is under control. But having a fiscal deficit of 6 percent of GDP or more is a cause for worry,” he said.
The economic team, he said, had informed the government that mere expenditure cuts and austerity measures, would not suffice to curtail the fiscal deficit. They suggested that the privatisation programme for public sector enterprises (PSEs) would have to be vigorously pursued to survive in the long term. The IMF has also advised disposing of bleeding PSEs during the current financial year.
However, the source said, the political leadership was divided over privatisation, as it had promised workers of PSEs that it would not allow complete privatisation like those in the Musharraf era. The strategic privatisation envisioned on public private partnership mode had failed to take off in the last two years. “The presence of powerful worker unions in the PSEs, could force the government on back foot like the Postal Staff Union did in the privatisation case of the Pakistan Post Office,” he said.
Some of the ministers have suggested that the government should delay its privatisation plans until the next government and instead should focus on retrieving $800 million from United Arab Emirates owned Etisalat, which bought PTCL. They were of the opinion that resolution of the issues with Etisalat would help retrieve the dues, as well as pave the way for auctioning the third generation (3G) cellular licences , which are on hold since 2007.
When PTCL was sold to Etisalat in 2005, the government committed that it would not issue any new long distance international telephony licences. This condition becomes an impediment in holding auction for 3 new licences for 3G as only incumbent cellular operators could participate in the bidding. In the budget the government had anticipated earning Rs 60 billion by auctioning 3G licences. With the revival of the international telecom market, the source said, the new licences were estimated to contribute close to $1 billion.
Only the resolution of telecom issues would help generate $1.8 billion during the current fiscal year. “This would help attract further foreign direct investment in the stagnant telecom market and overall increase employment opportunities.” The source said that the Privatisation Commission (PC) had informed the government that $3 billion could be generated through the launch of convertible bonds for the three state owned oil and gas entities of OGDCL, PPL and PSO.
The commission set a deadline of March 2011 for launching convertible bonds worth $1 billion bonds for the Oil and Gas Development Company Limited (OGDCL) and $304 million for the Pakistan Petroleum Limited (PPL) by end of 2011 at the London Stock Exchange.
