Business Recorder
Rising debt of SOEs

Rising debt of SOEs

The accumulation of debt of state-owned entities (SOEs) continues unabated and State Bank of Pakistan’s Statistical Bulletin March 2017 indicates that Rs 168.5 billion was added to this debt in one year – 2016 – giving a grand total of Rs 628 billion by December 2016. Disturbingly, the election manifesto of PML-N, released prior to the 2013 elections, had indicated a Rs 400 billion loss of SOEs in 2013 which implies that the losses have increased by Rs 228 billion after the completion of nearly four years of the 5-year tenure of the Sharif administration.

This increase makes a mockery of the commitment made by PML-N in its 2012 election manifesto which committed to three major reforms to turn the SOEs around. First, appointing independent and professional boards who, in turn, would appoint the Chief Executive Officers (CEOs) based entirely on merit. The boards have been largely appointed but there are continued executive interventions in the appointment of CEOs. In this context, it is relevant to note that while in opposition the PML-N had challenged the appointments made by the Zardari-led coalition government in the court and the apex court had ruled that a three-member committee of people of integrity be set up to short-list and appoint heads of autonomous state institutions. Prime Minister Nawaz Sharif did appoint three men of integrity during the first four months of his tenure; however, once they began to take appointment decisions at variance with the wishes of the executive their decisions were ignored leading to their resignations.

Secondly, the manifesto stated that the immediate task of the boards would be to plug the losses, end all kinds of political interference, assign quantifiable targets and monitor on a regular basis - all objectives that have clearly not been met given the rise in SOEs losses.

And finally, the manifesto committed that if elected the party would identify enterprises which need to be privatized and assign targets to the Privatization Commission to ensure completion of the privatization process within the assigned timeframe. This too has not been implemented partly because of sustained worker resistance supported by opposition parties, including the Pakistan People’s Party. More specifically, the manifesto claimed that PIA would be transformed into a profitable airline of the region – an objective far from being achieved given the SBP recent bulletin’s revelation that PIA’s debt has risen to Rs 103.23 billion. The manifesto also claimed that if elected the party would ensure improved operations of Pakistan Railways – one of the few SOEs that have received the budgeted allocations during the Sharif administration; however, the rise in the number of accidents is a serious matter of concern. The Minister for Railways has stated that provinces need to provide the safety features at rail crossings; however, even if that is a relevant argument yet a Minister for Railways cannot absolve himself of responsibility for a rise in the number of accidents. As matters stand today, the PML-N government has been engaged in privatizing profit-making entities and the proceeds are clearly being used for budget support. And Pakistan Steel Mills, in profit in 2007, has been non-operational for months and the government compelled to periodically release large sums of money to cover salaries on humanitarian grounds – a practice that continues to this day.

Ironically, the head of the Privatization Commission, one would have assumed a key ministry under the Sharif administration committed to privatization, was given the plum but largely ceremonial post of governor of Sindh with no replacement indicating the low priority attached to privatization by the government entering the final year in its tenure.

To conclude, it is extremely disheartening that the PML-N has so blatantly flouted its own manifesto promises and one can only hope that appropriate measures be taken to make good on what the party committed to its voters in 2013.

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