- Balloons as government dithers
The State Bank of Pakistan has revealed in figures released on Saturday that both domestic and foreign debt owed by Public Sector Enterprises (PSEs) has ballooned. PSE debt has gone from Rs 1.4 trillion to Rs 2.1 trillion, all told, with an external debt component of Rs 654.4 billion, up from Rs 324.4 billion, in the course of the last fiscal year. Servicing this debt is a drain on the federal budget, and has naturally attracted the attention of the International Monetary Fund. Apart from other measures, the present IMF programme includes commitments about PSEs, such as privatising seven companies, something it has not been moving on.
The report tries to throws some blame on the PML-N government, but the fact of the matter remains that now even the problems blamed on them are the responsibility of the PTI government by now. The report says that the previous government did not eliminate the circular debt owed to the oil companies for power generation. The fact is that the circular debt persists despite the PTI being in office for a year.
The PTI can also be faulted for not knowing its own mind. One of the companies initially placed on the list of PSEs up for privatisation was the Pakistan Steel Mills, but then it was taken off. There have been murmurs about improving corporate governance under government ownership, but this has clearly not happened, and it seems that the only way out is to be privatisation. There is a clear need to stop the bleeding. Not only will this debt act as a burden on the exchequer but will also reduce the proceeds of privatisation. And while selling the family silver may be necessary because its maintenance can no longer be afforded, it does not make sense to obtain anything less than a fair price. It should not be forgotten that, to take an example, the Steel Mills will be accompanied by substantial real estate with an intrinsic value of its own, while PIA has a number of aircraft which are relatively new, which had been obtained while trying to turn around the airline while under government control.
