Pakistan Mulls Share Sales by 15 Firms to Meet IMF Demands

Pakistan plans to shortlist as many as 15 state-run companies for stake sales as Prime Minister Nawaz Sharif seeks to trim losses and raise cash to meet terms of a $6.6 billion loan from the International Monetary Fund.

The government may sell as much as 10 percent of its stakes in National Bank of Pakistan, Habib Bank Ltd., United Bank Ltd., Oil & Gas Development Corp., and Pakistan Petroleum Ltd. within the next 12 months, Privatization Minister Khurram Dastgir Khan said in an interview. It also seeks to sell stakes in national carrier Pakistan International Airlines Corp. and Pakistan Steel Mills Corp. to strategic investors, he said.

“We want to do these privatizations very lawfully and transparently,” Khan said in Islamabad yesterday. “That will attract foreign investors, and they would realize that Pakistan is not just energy crisis and extremism. There are parts of the economy which are still humming.”

Sharif, who took power in June, last month won IMF support for his efforts to revive an economy crippled by chronic energy shortages and a Taliban insurgency. His government is pushing forward with a delayed plan to privatize more than 60 public sector enterprises, which Khan said are costing tax payers nearly $5.5 billion per year in subsidies and losses.

‘Massive Drain’

“It’s a massive drain on the exchequer,” he said. “It’s severely impairing our ability to invest in health and education.”

Pakistan’s budget deficit touched a two-decade high of 8.8 percent in the fiscal year ended June 30. The government now spends 20 percent of its 3.985 trillion rupees ($38 billion) federal budget on health and education, compared with 16 percent on its military.

“They look serious this time,” Sayem Ali, an economist at Standard Chartered Plc, said in a phone interview from Karachi. “Share sales through the stock market should be the easiest thing to do. There is enough demand for these blue-chip companies.”

At the same time, overhauling more bloated businesses will require tough political decisions, Ali said.

About 350,000 workers are employed in state-owned companies, Khan said. “We will try to protect the interests of employees,” he said, adding that the airline and steel companies are “heavily loaded” with workers.

Financial Advisers

The companies Khan named for privatization account for about a third of the Karachi Stock Exchange Index’s market value, according to data compiled by Bloomberg. Khan did not specify the other companies, saying the list is still being completed and would be submitted to a cabinet committee later this month.

The government will seek bids in the next two months for financial advisers who will recommend how to structure the deals, Khan said.

For Pakistan International Airlines, authorities are considering a plan that would split it into international and domestic units, Khan said. Another option is to keep those operations under one roof while spinning out departments such as hotel management into separate companies, he said. The airline needs 3 billion rupees a month to run its operations, he said.

“It’s a tough sale due to its accumulated losses,” Khan said. “But it has certain crown jewels. It has landing rights at all the major airports. If you go buying them today, you have to pay millions of dollars. The crisis is that we don’t have enough aircraft to service those destinations.”

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