KARACHI: The Pakistani government on Friday finalized the draft of the Pakistan Sovereign Wealth Fund (PSWF) for the better management of state assets, the finance ministry said.
A sovereign wealth fund is a state-owned investment fund comprising money generated by the government and often derived from a country’s surplus reserves.
The draft bill was reviewed at a meeting chaired by Finance Minister Ishaq Dar, who had announced the establishment of the fund in his budget speech last month.
“The meeting reviewed the draft bill for the establishment of Pakistan Sovereign Wealth Fund for optimal leveraging and better management of GoP (Government of Pakistan) assets in the country in line with international standards, policies and practices,” the finance ministry said in statement.
“The meeting deliberated upon technicalities involved, finalized the draft law and decided to send it to Ministry of Law and Justice for legal opinion and further necessary action.”
The establishment of the fund was authorized under the Public Finance Management Act 2019.
“Sovereign Wealth Funds are usually for managing excess liquidity in countries running budgetary surpluses. This is not the case for Pakistan,” Dr. Khaqan Najeeb, a former adviser to the Ministry of Finance, told Arab News on Saturday.
“The government is thinking of using the fund for better management and optimal leveraging of the assets already in the public domain. This has been thought of before as well in Pakistan following models of Khazana in Malaysia.
Though the PSWF bill is under legal vetting and finance ministry has not shared further details about its operations, financial experts expect it would operate on the paradigm of a management company.
“This is more like thinking along the lines of a management company improving return on state assets,” Najeeb said. “Maybe some public projects can be under this management structure but Pakistan should be looking more along the lines of divesting.”
Popular sources for such a fund are surplus reserves from state-owned natural resource revenues, trade surpluses, bank reserves that may accumulate from budgeting excesses, foreign currency operations, money from privatization, and governmental transfer payments.
SWFs have their own objectives, terms, risk tolerances, liability matches, and liquidity concerns. Depending on the assets and objectives, their risk management can range from very conservative to high.
