The review observed that PSEs accumulative losses as a percentage to GDP increased from 1.7 percent (2012-13) to 2.3 percent (2015-16), however annual losses of PSEs declined from 0.4 percent (2013-14) to 0.2 percent (2015-16). Cumulative losses of Pakistan International Airlines (PIA), Pakistan Steel Mills (PSM) and Pakistan Railways have further increased but at a slower pace, however, their accumulation of overall annual losses has declined.
The review stressed that restructuring and attracting private sector participation in ailing PSEs will be important to restore their financial viability and reduce fiscal costs. Structural Benchmark (SBs) on privatization (solicitation of expressions of interests for the disinvestment of a major power generation company) was met. However, following labour tensions and political opposition, the authorities revisited in early 2016 their strategy for PSE reform, scaling back planned privatization transactions while continuing to seek private sector participation and implementing measures to contain PSE financial losses.
Several capital market transactions, one strategic sale, and the corporatisation of PIA have been completed, and significant preparatory work toward restructuring and seeking strategic private sector participation for a number of PSEs has been conducted. While legislation requires the government to maintain a majority of shares and management control of PIA, the authorities are committed to attract private sector participation in the company and finalise the transaction structure for a minority sale by end-2016, the review notes.
Following inconclusive discussions with a provincial government over a transfer of ownership, the authorities resumed, in July 2016, the privatization process for PSM and aimed to conclude the bidding process by end-June 2017. The review further notes that the government has solicited expressions of interest for the divestment of KAPCO, a major generation company (July 15, 2016 SB) and plan to finalize the transaction by March 2017. Furthermore, preparatory work has started to conduct an Initial Public Offering (IPO) for FESCO by February 2017, to be followed by IPOs for IESCO and LESCO by the end of FY 2016/17. The government expressed its commitment to seek strategic private sector participation in DISCOs in the medium term and has solicited expressions of interest for the divestment of Kot Addu Power Company (KAPCO), a major power generation company (July 15, 2016 SB).