KARACHI: Pakistan’s $7 billion International Monetary Fund (IMF) bailout program remained on track despite delays in reforms tied to the country’s planned sovereign wealth fund, according to the lender’s latest review released this month, which described the missed benchmark as the result of extended technical consultations.
The reforms relate to the Pakistan Sovereign Wealth Fund (PSWF), a state-owned investment vehicle Islamabad hopes will help attract foreign investment and improve the management of some of the country’s largest public-sector companies. The IMF, however, has pushed Pakistan to narrow the fund’s powers and strengthen governance safeguards before it becomes operational.
Pakistan enacted the sovereign wealth fund law in 2023 as part of plans to consolidate state assets into a professionally managed holding structure modeled loosely on sovereign investment vehicles used by Gulf states and other countries. The fund was initially designed to hold stakes in several profitable state-owned enterprises and potentially raise financing through international partnerships.
“Five of six structural benchmarks were met, covering tax administration, governance, social support, energy sector sustainability, and investment zone reform,” the IMF said in its latest country report.
“The one missed benchmark, on Sovereign Wealth Fund law amendments, reflected the need for extensive technical consultations,” the lender added, saying draft amendments had now been finalized and would “shortly be submitted to parliament.”
The companies earmarked for the fund include Oil and Gas Development Company Limited (OGDCL), Pakistan Petroleum Limited (PPL), National Bank of Pakistan, Mari Energies Limited, Pakistan Development Fund, Government Holdings (Private) Limited and the Neelum-Jhelum Hydropower Company.
But the PSWF has yet to become operational after the IMF raised concerns over governance arrangements, borrowing powers and the fund’s authority to directly sell state assets or independently retain revenues. Under amendments negotiated with IMF staff, the fund’s role would be significantly narrowed.
“The execution of the SWF Act and any other action aimed at preparing the SWF for its operation will only be carried out after these amendments become law,” Pakistani authorities told the IMF last month in a memorandum of economic and financial policies.
The revised structure would limit the PSWF to operating as a holding company managing state-owned enterprises on behalf of the government while seeking to improve operational performance and attract foreign direct investment through co-investment partnerships. The IMF-backed amendments would also prohibit the fund from borrowing, taking on debt or using state assets as collateral.
Pakistan had committed under the IMF program to submit amendments to the sovereign wealth fund law to parliament by the end of March, but failed to meet the deadline as negotiations continued over the scope and powers of the fund.
Finance Minister Muhammad Aurangzeb acknowledged the delay in a Letter of Intent submitted to the IMF last month.
“Due to the need for extensive technical consultations, we missed the deadline for the SB (structural benchmark) on Sovereign Wealth Fund (SWF) governance,” Aurangzeb wrote.
“The draft law will soon be submitted to parliament,” he added.
The IMF said implementation of Pakistan’s broader reform agenda remained on track, citing what it described as “firm political ownership and institutional commitment.”
The IMF executive board earlier this month approved the third review of Pakistan’s Extended Fund Facility, unlocking a $1.32 billion tranche.
